Greece on a collision course with creditors after vowing not to slash pensions

[Evie]

Provided the companies making the car don't decide "welp, people are used to and willing to pay this price for cars already, so why don't we just pocket the difference and give it to our shareholders?"

Which, I've noticed, tend to be the result distressingly often.

That said, the argument being made was not about the JOBS moving out of the country, but about the employees moving out to take new jobs off-country, leaving room for someone else to take the job. Which I argued is not actually a gain in terms of actual economy, since you end up with a slight drop in consumers (one employed consumer + one unemployed marginal consumer become one employed consumer), no net gain (and possibly a drop) in terms of the number and wealth of gainfully employed (a loss because an employee with more experience may be able to command a greater pay than a freshly hired one).

 

[Flying Pig]

It will, on a grand scale - worldwide, we've now got one person more being productive, and one person fewer being unemployed - which should be reflected eventually in lower costs for imports or higher prices for exports. The market moves people into where they can make the most profit: any restriction on free movement means that somewhere there is the capacity to produce that isn't being used.

 

[Evie]

Yes, clearly a country should be complimented for running economic policy that weaken or stagnate its economy, because they benefit other countries.

Sadly, as we're dealing with such issues as national debt, and national budget, it's the national economic picture we need to consider. Not the worldwide one.

 

[Oerdin]

I broadly agree at least with educated and productive people. The big problem is when you have migrants who have no hope of ever getting a decent job and who's entire plan is to shop for the country which has the best social benefits. It does happen all to often and then they are just economic dead weight on the host country. So, yes, migration needs to have some limits to prevent welfare shopping.

 

[Flying Pig]

Yes, clearly a country should be complimented for running economic policy that weaken or stagnate its economy, because they benefit other countries.

Sadly, as we're dealing with such issues as national debt, and national budget, it's the national economic picture we need to consider. Not the worldwide one.

Most of the time, though, they're one and the same. The classic argument for protectionism, for example, is that the car makers in Detroit would lose their jobs if they competed freely with the car makers in Tokyo. That's true: however, everyone else would then get cheaper or better cars, because (by definition) the side that wins in business competition is the one that can provide the same goods cheaper, or better goods for the same price. That creates more demand for more things, so those car makers can (this is where it gets a little theoretical) find jobs catering to the demand, and because we're now dealing with an efficient market, the total GDP of the US will have gone up. There are a few cases where this doesn't work, but nearly all of them apply best to third-world countries with economies dominated by single products.

Oerdin: in nearly all countries, there are limits to the benefits that you can claim in your first few years living there. What's bizarre, however, is that there are also usually restrictions on the jobs you can hold.

 

[Evie]

I'm well aware of the theory and dogma behind globalizing the economy. The theory is not unsound in and of itself - provided a large enough portion of the population retain enough income to benefit from those lowered prices and better good.

I'm also aware that the job losses, hitting extensively the middle class, lead to dwindling job opportunities in vast sector of the economy, and increased competition for those jobs. This in turn allow the working conditions of those people to deteriorate, as employers are able to demand more in return for those jobs (which is the entire history of the evolution of the job market the past thirty years or so - cutting back on employees rights and stagnating purchasing power. Those who can shift to other sectors of the economy, where the increased pressure from an increased labor supply also result in stagnating (or often worsening) conditions. Young adults looking for their first job are hit especially hard, as they have to compete with people who have previous work experience while they have little. This allow employers to demand unpaid internships and the ilk, and so on and so forth. None of which actually helps the economy.

Meanwhile, globalization also pretty much forces government to cut down corporate tax in answer to the corporate blackmail threat of packing up and heading for another country. This in turn force them to slash spending (or run deficits). The slashed spending translate into, yet more job losses, and yet more increased competition and stagnating work conditions in certain sectors. (not even getting into welfare cut here) It also make services less accessible, starting with the education that is often useful if not necessary to escape the crowded job market at the bottom and actually get to some of those jobs where one might benefit from the globalization.

In short, the theory is sound, but it's being done on the dogmatic belief that globalization can only be good, rather than with the careful consideration and safeguards that any economic policy requires.

As it is currently being run, globalization is more a manifestation of its adherent's absolute faith in the cult of the invisible hand than sound policy making.

"Fire them all. The Invisible Hand will know Its own."

 

[Archbob]

Other needed information:

• Average pension received
• Percent of pensions paid out below the poverty line
• Percent of population over 65
• Exact definition of "pension"

The Wall Street Journal, those bleeding hearts, acknowledges that the Greek pension system is not that generous. Greece pays a huge percentage of its GDP to its pensioners, but per pensioner, Greek pensions are on the stingy side, less than the eurozone average.

Greek pension payments average €883 per month (down from €1350 in 2009.) 45% receive pensions that are below the poverty line (€665.) It also has extremely high unemployment(26%) - particularly youth unemployment (50%) - so those pensions often have to support nominally working-age family as well.

Greece has a higher percentage of elderly (over 20%) than any Eurozone country except Italy (#2 on our list of "irresponsible" pensioners) and Germany (a gigantic economy that can "responsibly" absorb pension payouts.) As a smaller economy with a demographic slant toward the elderly, Greece will of necessity spend a greater percent of GDP on paying for social services than a large economy with a young workforce.

I also read some time back (can't find the reference) that "pension" in Greece has traditionally been a catchall phrase for most social benefits, including disability and unemployment schemes. This artificially inflated the apparent size of the Greek pension obligations significantly, whereas countries with more clearly delineated social benefits regimes can more readily isolate "pension" expenditures from associated issues.

Greece's pension burden is further compounded by inefficiencies and redundancies in social benefits administration. In 2008, when this mess began, Greece had 133 separately administered public pension funds. This has been greatly consolidated, but not totally overhauled.

Whether or not Greece is salvageable, in or out of the euro, is beyond my ken, but arguments over whether or not to cut pension payments have nothing to do "overly generous" pensions.

You have to take out Luxembourg when calculating averages. An ultra-rich city-state isn't a real country when it comes to these measures.

 

[FriendlyFire]

So yeah, "austerity worked" seems strikingly like a myth to me.

It worked well for Germany in 1933
The Germans could deflate the Euro by spending euromonies on Autobhans and Panzers again.

 

[Archbob]

It worked well for Germany in 1933
The Germans could deflate the Euro by spending euromonies on Autobhans and Panzers again.

Hi, it all works when you have 100% employment because everyone is getting ready to conquer the world.

 

[Flying Pig]

And, in the case of 1933, because you refuse to count women, the disabled, ethnic minorities, homosexuals and anyone else you don't like in the employment figures.

Oda: I think you've slightly confused the idea that a free market is good in the sense that it is the only way to avoid having productive capacity sitting unused, and the idea that it is 'good for everyone' in the sense that everyone is better off with fewer regulations. For example, it makes perfect sense (in my view) to ban unpaid internships, which will result in some productive capacity being untapped - effectively, charging everyone in the form of higher prices for the things they want to buy, or lower prices for the things they want to sell abroad, or lower quality of the things they want to buy, or fewer jobs available - but is worth it, because it makes us all slightly poorer but society slightly fairer. In the same way, it's absolutely acceptable for the government to mandate a minumum wage, or acceptable working conditions, or mandatory holidays, and so on. I'd come back and say that the history of governments' attitudes to the job market for the last thirty years has been the realisation that the market does not regulate itself to be kind to workers. Measures such as the minimum wage have a similar distorting effect to tariffs and corporation taxes, but they also hit the problems directly - in fact, if you look at modern economics, it's often argued that they improve productivity, because the people setting wages don't always realise the degree to which better pay and conditions lead to better productivity, or are too incompetent or idle to put them into place unless pushed.

 

[Evie]

Strangely, the legal changes I see my side of the world the past few decades has more tended toward undermining a number of employer-side protections. Minimal wages stuck trailing far below cost of living and inflation, more restrictions on unions (thus less bargaining power to employees), and so on and so forth. Slashing left and right at unemployment safety nets thus making the job market even more competitive on the employee side, thus further driving individual bargaining power down, etc, etc.

All of which adds up to giving less and less power to the employee side of the employee-employer relation.

I agree a free market is generally good with safeguards (as is globalization) - we seem to be largely in agreement there. It's however my observation that those safeguards are unsufficient at present, and with globalization they're growing less and less sufficient every step of the way. I also agree that minimum wages, etc, help the economy. No question from me there.

I question trickle-down logic in a globalized world a great deal more, given that the people who get more money in trickle-down logic are people with far more opportunity to take it out of the local economy. Even the global economy, though that's rarer (Hoarding, etc).