It’s currently very trendy in Italy to blame Angela Merkel, Mario Monti, and austerity measures for the current recession. This column argues that while the severity of the downturn is clearly a cyclical phenomenon, the inability of the country to grow out of it is the legacy of more than a decade of a lack of reforms in credit, product and labour markets. This lack of reform has suffocated innovation and productivity growth, resulting in wage dynamics that are completely decoupled from labour productivity and demand conditions.Read more ›
Post Tagged with: "productivity"
In recent months, we have seen a precipitous drop in Chinese trade growth. This comes from both the export and the import side. What’s happening? A large part of it is wages. As I indicated two years ago in a post on the Lewis Turning Point, China has already sucked a large portion of the labour out of its countryside villages. And that has buoyed wage growth. However, while the external account is deteriorating, import growth is shrinking along with export growth. So, it is not that the Chinese are buying more stuff from abroad and foreigners are buying less in China. It’s that demand is slowing globally, even in China. Here’s the problem domestically then: malinvestment and financial repression. This article explains why.Read more ›
Nouriel Roubini writes that the current “muddle through” approach to the eurozone (EZ) crisis is not a stable disequilibrium; rather, it is an unstable disequilibrium. Either the member states move from this disequilibrium toward a broader fiscal, economic and political union that resolves the fundamental problems of divergence (both economic, fiscal and in terms of competitiveness) within the union or the system will move first toward disorderly debt workouts and eventually even break-up, with weaker members departing. Over a five-year horizon, the odds of a break-up are at least one-third.Read more ›