Meanwhile, in Europe…18. Jobs, jobs, jobs?
from Merijn Knibbe
Recently, Eurostat published new data on unemployment – which is stuck at an unacceptable 10%. Large differences hide behind this average. Unemployment in Austria is 3,7% (and falling). Unemployment in Spain is 21,2% (and rising). One of the remarkable aspects of EU unemployment is a fast decline of (still double-digit) unemployment in the Baltics (Estonia, Latvia, Lithuania). Between the second quarter of 2011 and the second quarter of 2010, Estonian unemployment fell with 5,1% – which is, in a historical as well as in a comparative perspective, staggering. Do neo-liberal policies work after all? Remember, the Baltics are neo-liberal prodigies who pursued ruthless austerity policies. Do neo-liberal economists finally know how to shape societies and did they earn their badge as ‘social engineers’? Are crises good, after all, and do we only have to endure some short years of pain to live happily ever after (or at least to pay our creditors forever after)?
Hmmm. There is more to this than meets the eye. Lithuanian emigration in 2010 was as staggering as its fall in unemployment. Not less than 2,4% of the population left the country – which alone might cause unemployment to drop with somewhere between 3,5 and 4,5%. Don’t misunderstand me – that’s a good thing. But it’s not really in line with the purpose of neo-liberal policies, which are after all are focused on increasing the surplus on the current account which to enable these countries to pay back their rotten debts. And when people leave these countries in droves that will become of course more difficult! But neo-liberal policies should at least create jobs which lower unemployment, according to their engineers. Do they? Look for yourself (graph 1, to get rid of seasonal fluctuations I used a four quarter moving average):
Graph 1. Jobs around the Baltic, Indices, 2003-IV = 100, 4 qtr mov. av.
The difference between Iceland (which like the Baltic states experienced a severe crisis but which did not respond with internal devaluation but with ‘external devaluation’ is large. The difference with Poland, which did not have a credit fuelled boom in the first place, is staggering. The conclusion is clear: neo-liberal policies destroy jobs to an extent that they destroy entire economies – when this forces people to leave their friends and families and head to Sweden and Germany, this is (in a Baltic perspective) not really ‘creative destruction’ but destructive destruction. All progress made since about 2002 is reversed – and very little of this lost ground has been regained. While Poland (which devaluated for some time) did not lose in the first place. And the same for Sweden. (poor, poor mister Anders Aslund, the main cheerleader for Baltic Austerity – his native Sweden which, according to him, should use shock therapy to get rid of its welfare state does so much better than any other country in Europe…).
This economies are of course very small. How is the rest of the EU doing (graph 2, which includes the first quarter of 2011)?
What does this tell us? The elephant in the room: the crisis is far from over. For the individual regions/countries:
* Greater Germany (Euro, surpluses on the current account, technological advanced economies i.e. Germany, Austria, the Netherlands, Belgium, Finland and, yes (though it does not have the Euro, the Czech Republic) does not do well.
* France, Italy (like the countries above, but with persistent deficits on the current account) do about the same – but job growth up till 2008 was quite a bit lower.
* the UK (floating currency, large deficit on the current account, tries to be a technological advanced economy, tries to imitate the USA) does worse
* the Austeristians (GIPS and Denmark with its overvalued exchange rate and its sacrosanct Europeg) do very bad – and still continue to do so.
* the transition countries (except for the countries above, i.e. Romania, Hungary, Slovakia, Slovenia, Bulgaria): crisis.
The increase in the number of jobs before 2008 signal that labor markets worked well enough to create millions of jobs – if there is demand. ‘Structural policies’(education, training, those kind of things) are of course important. But at this moment these won’t help to bring down unemployment – the car does not need to be polished, it needs gasoline. Where this fuel will come from, in a time of private leveraging and public Austerity is not too clear. (“Geheimtip”: which large recently unified country located in the centre of Europe is the only European country were consumer debt did not increase during the last twenty years or so? Where did unemployment fall and production increase? Which country had destabilising surpluses on the current account and might have a government surplus in 2012? German wages have to increase).
P.S. – the Estonian migration data as published by Eurostat can’t be right: they are extremely stable over the last years (and therewith not to be trusted), out of line with the other Baltics, showing a (very small) net immigration and not consistent with data on employment and unemployment.