Links. Labour flows, short-termism, retired bankers and the proposed EU fiscal board
1) Why is German unemployment relatively low? Partly, because of a steady increase in jobs. But also because people left the labour force. According to a new Eurostat study about worker flows in 11 EU countries, it was also because of:
“the decrease of the flows from inactivity into unemployment in Germany, whose contributions to keeping unemployment low were relatively important. In contrast, in the rest of the countries, the contribution of (increased) flows from inactivity into unemployment and (decreased) flows from inactivity into employment was towards pushing the unemployment rate up, while the (decreased) flows from unemployment into inactivity contributed to increasing the unemployment rate (except in Portugal).”
Translated: in many country the response to rising unemployment was to increase the labour force, despite the decline in available jobs. In Germany, the opposite happened. And oh, are Austrians right and do crises lead to ‘cleansing’, i.e. a purge of unproductive, outdated companies? Nope: “we examine if the crisis has led to some employment reallocation across sectors, finding that, so far, there is no clear evidence in favor of cleansing effects“. The whole thing shows that high unemployment, contrary to classical ideas, does not spur economic development.
2) In German, from Die Zeit: a horrifying portrait of retired Deutsche Bank managers who are fading away together, in a mock office in an ally next to the official Deutsche Bank building. Most striking: the lack of independent thinking.
3) Josh Mason argues thoroughly that ‘short termism’ and the decline of investment (properly accounted) contributes to secular stagnation, inequality and all that in the USA:
Before the 1970s, American corporations consistently paid out around 50 percent of their profits to shareholders, retaining the remainder for reinvestment in the company. However, over the past 30 years, shareholder payouts have averaged 90 percent of reported profits. In recent years, including 2014, total payouts have been greater than total profits. This is largely due to buybacks—corporations’ purchases of their own shares—which were almost nonexistent before the 1980s but now account for nearly half of corporations’ payouts to shareholders…. over the past generation, there has been a revival of the notion that shareholders are the primary stakeholders, and that creating value for shareholders is the sole legitimate objective for management. This change in the self-conception of management evolved hand in hand with developments in law, ideology, and the structure of financial markets that have increased the power of shareholders to enforce their demands on managers. Higher payouts are one of the central demands of these empowered shareholders.
4) Box 5 of the new Economic Bulletin of the ECB, titled ‘The creation of a European fiscal board’, shows additional evidence of what I consider to be a technocratic coup and grab for power in the EU: another push for more independence and power.