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binve (< 20)

Riots, Austerity and Unemployment

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August 10, 2011 – Comments (8)

You really should read this post by Bill Mitchell: I blame the British government for the riots - http://bilbo.economicoutlook.net/blog/?p=15605. I think the commentary at the beginning of the post represents a very valid viewpoint (opinion), but I think the econonmic analysis in the middle of the post looking at the relationships between austerity and civil unrest and linking it back to unemployment is extremely useful.

This is a complex issue with a lot of points of view, but this post tackles it from a data standpoint, which I think is very useful (and uncommmon).

I will highlight a section out of the end of the post that I think is particularly good, but I would encourage you strongly to read the whole post:

Emphasis mine.

Ultimately, I consider one of the advantages of full employment to be a more coherent society where everyone has a chance to demonstrate their potential in various ways. One of the costs of unemployment is the denial of potential. While mostly these costs are borne by the individual and their families, when particular conditions are coincident you get social unrest which sometimes escalates into riots and more.

The reason I blame the British government (the sequence of them) is that they have embraced a neo-liberal philosophy (and enacted it) which denies any state responsibility for full employment. Further in embracing the mainstream view that budget deficits are essentially bad and that fiscal austerity is necessary they have denied the macroeconomy the aggregate demand necessary to generate enough jobs.

The government always chooses the unemployment rate. After all the private spending decisions have been made which determine a particular demand for labour, the government can either fill the spending gap to make sure the remaining jobs are provided (in relation to the willing labour force) or leave the workers unemployed. The government always has that choice and always has the financial (fiscal) capacity to provide the jobs. Unemployment is a sign that the state has not spent enough in any particular period.

Then you overlay that macroeconomic policy failure with all the rest of the inequalities that exist in a demand-constrained economy and the result is that a selective cohort (not just black in this case but definitely youth – these riots are about age not race) bears the brunt of unemployment and the lack of hope that it brings.

I also heard an interesting radio program on the way to the airport this morning that noted that we don’t attribute the same degree of hatred to the Wall Street bankers who stole, lied and were opportunistic in the extreme and have caused more damage than these riots by a factor of some X.

8 Comments – Post Your Own

#1) On August 10, 2011 at 4:08 PM, motleyanimal (98.01) wrote:

Saw an interesting news item yesterday. There was an entire block of stores that were looted by youths. All except one, a book store.

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#2) On August 10, 2011 at 4:11 PM, TMFBlacknGold (99.41) wrote:

I'm only 21. What's a book store?

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#3) On August 10, 2011 at 4:14 PM, soycapital (< 20) wrote:

Things are getting kind of dicey, I would not be too surprised to see this kind of stuff happen here if economic issues keep going the the way they are.

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#4) On August 10, 2011 at 4:25 PM, Frankydontfailme (27.53) wrote:

99.9% percent chance it happens here.

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#5) On August 10, 2011 at 5:24 PM, TMFBlacknGold (99.41) wrote:

I don't think it would be a bad thing. I'm not one to support the destruction of innocent people's livelihoods (stores, businesses), but maybe it will help get the message across to our "leaders".

There have been a lot of polls showing the general population's distrust of government lately. However, poll numbers just don't get tossed around by politicians unless it helps their cause. You won't hear anyone in Congress talking about their 14% approval rating.

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#6) On August 10, 2011 at 5:47 PM, leohaas (93.97) wrote:

Yup. In the past, it was lack of food that put people in riot mode. In modern society, it is unemployment. And there can be no doubt that austerity will lead to an increase in unemployment in the short run.

"The reason I blame the British government (the sequence of them) is that they have embraced a neo-liberal philosophy (and enacted it) which denies any state responsibility for full employment."

Notice the word "liberal" in this context. In the US, it means the exact opposite! Here, we would not associate any kind of liberal philosophy with austerity...

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#7) On August 10, 2011 at 5:55 PM, TDRH (99.86) wrote:

In truth I am not as worried about looting by teenagers.   What we need to worry about is the soldiers returning from the wars.   The economy needs to produce jobs to assimilate them back in to society.   A smash a grab teenager mob is one thing, someone trained to use an assault rifle in an urban environment  is another. 

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#8) On August 10, 2011 at 7:26 PM, ChrisGraley (32.25) wrote:

It's their debt that got them into this trouble in the first place!

We're spending money like crazy and not creating any new jobs.

When we do figure out a way to create new jobs, wages will not be able to keep up with inflation and the economy will deflate once again and each time that it does, it gets harder to print our way out of it and the resulting inflation makes it even harder on the working stiff.

 

 

 

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