Re: investment and unemployment

[GGard97342@xxxxxx]

In a message dated 10/04/2000 15:31:57 GMT Daylight Time,
Adam.Stokes@xxxxxxxxxxx writes:

> Very pertinant anecdote Geoff.
>  In retrospect I would probably revisit my point 2) with regards to union
>  power. I suspect that the insider-outsider model would still hold in a
>  deflationary environment, and unions would therefore still maintain a level
>  of 'market' power, even if competition in the product market was scaled
>  back, giving employers a level of monopsony power.  However, if a
persistent
>  deflationary environment somehow resulted in major industrial restructuring
>  (either through structural cost shifts through innovation or otherwise, or
>  demand shifts from, for example, deflationary-induced income
redistribution)
>  then the dynamic between employer and employee would likely change.  This
is
>  probably what is happening in sectors such as banking and finance where
>  there is/has been a push towards part-time and casual labour and
outsourcing
>  of 'non-core' business, as well as a push towards non-personal customer
>  service (phone and computer banking, ATM's etc.). Just an excuse to reduce
>  labour costs really.
>
>  (got off the track a little didn't I. Sorry!)
>
>  Regards
>  AS

Correct, though, Adam.

It all fits with what I have said in other postings. Any reduction in costs
has to be compensated for by new investment financed by new credit creation,
or there is no overall benefit to the community from increased efficiency.

The Keynesian view must surely be that reduced costs means reduced return to
the factors of production. If the labour is more poorly rewarded then its
purchasing power is reduced and Say's Law  will rule that the economy will
decline.

The whole key is credit creation, the message at the heart of Gunnar
Tómasson's recent posting

"5.  World employment and output cannot attain - and be maintained at -
satisfactory and sustainable level without a satisfactory and sustainable
financial arrangements at both national and international levels."

Gunnar's remarks are so pithy that their deep significance may escape some
readers. I am well used to them as we have been corresponding for 12 years.

Geoffrey