>
> On Jan 7, 2009, at 9:31 PM, SA wrote:
>
>> Doug Henwood wrote:
>>
>>>
>>> On Jan 7, 2009, at 8:54 PM, SA wrote:
>>>
>>>> Sorry for digging this up from the archives, but I just want to put
>>>> this on record: I think Roubini is crazy if he thinks unemployment
>>>> will peak at 9%. I would be shocked if it didn't get into
>>>> double-digits.
>>>
>>> The latest from Reinhart & Rogoff:
>>>
>>> <http://www.economics.harvard.edu/faculty/rogoff/files/Aftermath.pdf>
>>>
>>> says you're probably right. An average of 7 point increase in
>>> unemployment in the wake of financial crises, which would take us to
>>> about 11.5%.
>>
>> And among the countries in that average, developed countries actually
>> had bigger jumps than the developing countries (e.g., Sweden and
>> Finland 1991).
>
> R&R point out that the "developing" countries, particularly those in
> Asia, recovered more quickly than the "developed" ones, and speculate
> that greater labor market "flexibility" (i.e., employer freedom to cut
> wages and speed up the line) and the lack of a social safety net in
> the poorer countries are responsible. In that sense, the U.S. may be
> closer to developing Asia than Scandinavia.
I find that argument bullshit, especially because of the particular developed countries in the sample: Sweden and Finland both have highly centralized wage bargaining systems. Centralization of wage bargaining permits flexibility in the face of shocks just as much as liberal labor markets do. In fact, wage flexibility is often depicted as a U-shaped function of labor-market centralization: Very decentralized labor markets, like the US-UK, and very centralized systems, like Sweden and Austria, do best. Intermediate systems, like France and Italy, do worst. The Swedish LO union federation isn't exactly known for a Trotskyite penchant for making impossible demands or refusing to cooperate with employers in a crisis.
SA