Tuesday, June 19, 2012

Greece

The Greeks voted for horrible pain over terrible pain, with no real idea of which would be worse.

The big problem for the Greek people is unemployment. The unemployment rate reached 22.6 percent for the March 2012 quarter. However, for youth the rate is 52.7 percent. The female rate is 60.4 percent.

More than a million people are not working, and consequently not producing. This is a huge burden any economy.

A massive number of jobs need to be created, but in all the debate about sovereign debt, commentators have been lost sight of this problem.

In thinking about this problem, we must remember a fundamental principle.

  • Government cannot create jobs
  • Employers create jobs
Where are the employers who will create a million jobs in Greece?

The Greek government cannot do it. Public service jobs have been padded for years, so jobs will be disappearing, not being created. (In tough times, it is cheaper to pay the unemployment rate than to public service salaries to people who have not real work to do).

The European Central Bank cannot create jobs in Greece.
Angela Merkel cannot create jobs in Greece.
Barack Obama cannot create jobs in Greece.

Greece needs employers to create a million on jobs. I do not know where these employers will come from.

7 comments:

Genghis7777 said...

Manufacturers will locate there if the conditions are right.

China did it: Millions of jobs have been created over the last 10 years.

The sheer need to compete with millions of others for a living in China creates a strong work ethic.

The impression I get is a culture that has gone soft. Can the Greeks rediscover their work ethic?

Anonymous said...

I agree with you there Genghis. Also, the German government created jobs for the makers of smaller cars like Opel and VW with the 'cash for clunkers' deal. Employers will not invest in countries where the government policies do not play in their favour. It is for this reason that governments CAN produce jobs.

Anonymous said...

May be mere semantics, but IMVHO governments do not create jobs - they simply reallocate them in a less optimal/efficient manner than would otherwise exist in the undistorted market.

Thoughts?

No King But God

Ron McK said...

A government can create jobs by becoming an employer.

The problem in Greece is that the government is already employing more people than it needs. Therefore, as you say it can only create jobs that would be a sub-optimal use of resources.

Anonymous said...

I thought it belonged to basic knowledge that a government's economic policy can influence the creation of jobs. Of course it is employers who provide jobs directly, but where do the employers come from?

For example a government says that to start a business you must pay a very large fee first and then your business will be heavily taxed, chances are that large employers will look elsewhere to invest and small employers will not even get off the ground.

Imagine if the Greek government made it less economically viable for eg. an appliance manufacturer to exist than it is in Germany. The manager will ask himself the question: Why produce in Greece (which is not known for it's high quality products) when we can make them in Germany for cheaper and much better?

However, if the government makes it more business friendly then employers will happily invest and provide jobs.

The power to create an atmosphere that promotes people starting businesses and investing in the country lies in the hand of the politicians.

Anonymous said...

BE,

To the extent that a government employer uses forcibly extracted tax dollars to pay such employees, is it fair to say that those jobs were not created so much as taxed out of the private sector and reallocated by the government employer into the public sector?

Anon,

I think we agree in principle and merely differ in our emphasis. Of course governments have the power to influence job creation. But so does any bandit. I find it difficult to say that by stealing, killing, and generally forcibly interfering with the affairs of others less than the other bandits do, one has thereby created jobs.

What do you all think?

No King But God

Anonymous said...

My understanding is that Greece got itself into the pickle it is in now due to lying about official economic statistics to keep within monetary union guidelines. This was discovered in 2010, and combined with the credit crunch led to a crisis in international confidence in Greece.

Between 2004 and 2008 the unemployment rate steadily dropped from 10.5% to 7.7%. Then it began rising to 12.5% in 2010 and is now at 22.6%. The serious rise coincided with the revelations of corruption.

Greece was then audited and they discovered that the debt was huge. To prevent Greece from going bankrupt, the EU provided a bailout with strict austerity measures as a condition. They were to do this to get government spending back in control.

To my understanding there was no talk of raising taxes, only of getting government spending back in check.

Then it was discovered that the initial bailout was not big enough. So another bailout with more austerity measures was put forward. Merkel is urging Greece to save, save, save instead of spend.

However, the Greek people are not happy with government spending being cut back. Part of this reason is that retirement age (currently at 58) might go up.

Recent elections have resulted in a power struggle between parties that want to accept the austerity measures and those that do not.

It is by and large a political problem that the Greeks have: Government spending got out of control via corruption and skirting checks and balances.

Therefore a political solution is required.