Sunday, August 15, 2010

Why Didn't We Think Of This?

Germany had its best economic performance since reunification during the past quarter.  If the country's growth rate continues over the entire year, Germany's economy will grow nearly 9 percent according to the New York Times.

The NYT reports that German officials believe that "they handled the financial crisis and the painful recession that followed it far better than the United States. . . ."  I'll leave that claim for pundits to sort out in the short term and for historians to sort out in the long term.

The German response differed from the rest of Europe's and the United States' response in several ways,  One major difference is that during the crisis Germany vastly expanded "a program paying to keep workers employed, rather than dealing with them once they lost their jobs . . . ." 

So, instead of paying money for people to have a job that consists of looking for work, spend the money to help people remain productive.  The idea of keeping people working instead of paying them to look for work makes a lot of sense especially with the pernicious effects of long term unemployment.

The March 2010 Atlantic Monthly asserts "[a]ll available evidence suggests that long bouts of unemployment—particularly male unemployment—. . . enfeeble the jobless and warp their families . . . ."  More disturbingly, the same article reports that "among teenagers, . . ., even the narrowest measure of unemployment stood at roughly 27 percent."  The article concludes that if unemployment continues at its current rates, "it is likely to warp our politics, our culture, and the character of our society for years."

Further, CNNMoney.com reports "worker productivity fell 0.9% in the second quarter."  That drop is "the first decline in eighteen months." The article contends that the drop "may be a sign that employees have finally gotten to the point where they are simply stretched too thin."

So far government stimulus money seems to have helped executives get big bonuses; it has produces frazzled workers who are happy to have jobs and fearful of losing them, and put a generation of young workers at risk. Given the political climate, it seems unlikely that additional stimulus money will be appropriated.

American leaders had one chance to respond to the economic disaster properly.  It seems they preferred to look backward and take care of their corporate paymasters instead of using common sense.

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