tag:blogger.com,1999:blog-8732662769765511163.post8807517242306905816..comments2023-07-31T11:06:29.485+02:00Comments on Transition: Euro-zone collapse? Most unlikelyD. Mario Nutihttp://www.blogger.com/profile/17319653816487296802noreply@blogger.comBlogger8125tag:blogger.com,1999:blog-8732662769765511163.post-3432303702747075202011-03-28T21:49:42.801+02:002011-03-28T21:49:42.801+02:00Well challenged. In fairness, it is a conjecture. ...Well challenged. In fairness, it is a conjecture. A reasoned conjecture but not an established fact.<br /><br />Lower wages lower current and prospective running costs, and therefore raise profitability, of any investment project - other things being equal. <br /><br />But as a result of lower wages two things are not equal: 1) there may be lower investment per unit of new output capacity as a result of substitution by cheaper labour inputs; 2) there may be lower investment due to lower consumption demand if this is not offset by higher net exports. The overall net effect on investment - which I conjecture to be positive, mostly on the strength of recurring lower wages over time, is actually uncertain.D. Mario Nutihttps://www.blogger.com/profile/17319653816487296802noreply@blogger.comtag:blogger.com,1999:blog-8732662769765511163.post-45958518120300801902011-03-28T19:46:32.287+02:002011-03-28T19:46:32.287+02:00"the positive stimulus of lower wages on ... ..."the positive stimulus of lower wages on ... investment". Is this an established fact or just a conjecture?Thomasnoreply@blogger.comtag:blogger.com,1999:blog-8732662769765511163.post-41837264450504023062011-03-27T21:56:03.369+02:002011-03-27T21:56:03.369+02:00All I am saying, Carmen, is that a Euro-zone membe...All I am saying, Carmen, is that a Euro-zone member state wishing that it could raise competitiveness through devaluation - which it can't do as it could with a national currency - can achieve the same result with internal devaluation. <br /><br />Both external and internal devaluation involve a fall in real wages. Both are just as likely to work or not to work, depending on the net balance of the positive stimulus of lower wages on net exports and investment, and their negative impact on consumption. <br /><br />It is not cynical to consider the sheer possibility that wage restraint might work; in the latest crisis it certainly worked in Latvia and Estonia. And a lower bound to the wage level is given by efficiency wages anyway. All in the context of the feasibility of external versus internal devaluation.<br /> <br />Of course there may or may not be better ways of raising competitiveness, for instance through greater competition or innovative investment (which I did mention in my post) or enhanced entrepreneurship. But this is beside the point.D. Mario Nutihttps://www.blogger.com/profile/17319653816487296802noreply@blogger.comtag:blogger.com,1999:blog-8732662769765511163.post-75635589738762324862011-03-27T21:47:00.542+02:002011-03-27T21:47:00.542+02:00I am astonished to read in your blog: "compet...I am astonished to read in your blog: "competitiveness could be improved in many other ways if this is what a country wanted (“domestic devaluation” via wage restraint,...".<br /><br />I think it is really cynical to see "wage restraint" as an adjustment mechanism. Clearly economists are lost in their world far away from reality: how much "wage restraint"? would near 0 wages do, if needed? or would negative wages be even better? does one need a wage to live? Can you see around you what "wage restraint" really means?Carmennoreply@blogger.comtag:blogger.com,1999:blog-8732662769765511163.post-2650722242897804662011-03-26T05:19:55.385+01:002011-03-26T05:19:55.385+01:00Please edit: "to date thus far has failed.&qu...Please edit: "to date thus far has failed."Jacob Richterhttps://www.blogger.com/profile/13595821621256547971noreply@blogger.comtag:blogger.com,1999:blog-8732662769765511163.post-36545638938012475302011-03-26T05:19:10.304+01:002011-03-26T05:19:10.304+01:00All macro-economic accounting to date thus far. T...All macro-economic accounting to date thus far. The GDP model fails to measure productive labour vs. unproductive labour (luxury goods, finance, mass advertising, etc.). While the Material Product System also tracks physical units in the economy, it too obscures the extent of unproductive labour (Soviet defense spending).<br /><br />There needs to be a macro-economic accounting model that clearly distinguishes between the productive and unproductive sectors of the economy, but of course there needs to be renewed debate on what exactly can be productive (public school teachers) and what can be unproductive (private-sector arms manufacturers for things like military exports).Jacob Richterhttps://www.blogger.com/profile/13595821621256547971noreply@blogger.comtag:blogger.com,1999:blog-8732662769765511163.post-87770176030634098962011-03-17T19:27:25.772+01:002011-03-17T19:27:25.772+01:00I agree, Marcello, thanks.
By the way, today'...I agree, Marcello, thanks. <br /><br />By the way, today's SPIEGEL ONLINE publishes an article entitled "Off the Mark - Why Ditching the Euro Would Be a Bad Idea" by Sven Böll.<br /><br />The article recognises that "Even before the current crisis, many Germans dreamed of ditching the<br />euro and re-embracing their beloved deutsche mark. In a five-part series, SPIEGEL ONLINE responds to the myths surrounding the euro vs. deutsche mark debate -- and shows why they are all wrong."<br /><br />http://www.spiegel.de/international/europe/0,1518,751483,00.html#ref=nlintD. Mario Nutihttps://www.blogger.com/profile/17319653816487296802noreply@blogger.comtag:blogger.com,1999:blog-8732662769765511163.post-88302873018062444762011-03-14T11:47:02.874+01:002011-03-14T11:47:02.874+01:00I would add that German industry is the terminal o...I would add that German industry is the terminal of a production structure that embraces the whole of Europe, and not only Europe. The Italian case is well known: our small engineering firms produce components for the Germans, but this concerns the Belgians and the French, and perhaps to a lesser extent the British. To break up the Euro would generate a strong dislocation in these relations, would make them harder to manage, and generate great uncertainties. Why should Germany break up a system that is centered on her, and that has brought her to the highest export levels possible in the circumstances? And I believe that even at a political level the interests of German industry – including the Unions – are much stronger than those of banks, that in Germany have never been as prominent as for instance in England. From this viewpoint my impression is that there can be no doubts about the German position.Marcello Colittinoreply@blogger.com