Structural Reform (1 Viewer)

[Lex152]

Some of the reasons attributed to the Great Depression/GFC are business confidence, weak demand or over supply. Sure this sounds great in theory but I fail to see how in a practicle sense this can be true...
how can having too much of a product be a bad thing, how can 'excess labour' be a bad thing, how can confidence influence our national direction*?

*National direction: In a production based society, where we designated governments to regulate but not intervene in society it is the corporations we support which will progress our personal morals...

Isn't there areas that we could utilise the unemployed for 'national interest', whether it be in environmental rehabilition, research, community servicing or infrastructure creation. Sure it would mean reskilling, economic structural reform and a change in perception but isn't this a feasible solution to what will be rises in unemployment???

Ideas/discussion?

 

[Lex152]

Thats the theoretical side isn't it? and I know there are difficult choices to be made, but there is always difficult choices to be made as we weigh up the benefits we take up for ourselves and the benefits we give to the next generation.

I.e. things like debt for stimulus packages, environmental degredation, self funded retirement or welfare dependence etc.

I also disagree with band-aiding as a solution as you are not solving a problem, only waiting for it to be covered up by mass production.


I mean ciritically think about our economic paradigm, I would assume that a fiar proportion of those employed are does so to facilitate our trash culture (probably not in Australia [outside the retail sector], but internationally). Surely if we could restructure this production we could increase our standards of living and reduce poverty. ?
To do this we could offer economic incentives into new industries (reducing the barrier to enter industries of 'national interest'). These industries would change our perceptive focus away from the quantitative measures towards the qualitative ones.
An example of this would be to incentise the modulisation of appliances to encourage a mentality of repairing rather than recycling. A direct impact of this would be to reduce the CAD, create more Australian jobs, and reduce the strain on resource extraction. If this was a global movement it would shift resources away from the mineral industry, owever new opportunities would be created.

I'm sure there are plenty of opportunities lije these to redesign our economic paradigm, to shift to lower environmental costs and stop placing the true costs onto future generations.

I find the current climate change policy as insulting. 5%, expandable up to 15%. To me this inability to adapt to new information which is not in the interest of corporate wealth but social responsibility represents a flaw in the system.

And the acceptance of this conservative paradigm as truth, the unquestioning rhetoric of economic theory is disturbing... I post this in the economic section because this is relevant in our economic discussion. This is our future and we must admit that, the current problems will barely affect the older generations, those in the workforce will make up the aged population that we support... And we must exercise our thinking in challenging established models, or we will end up following established precedent.

 

[gnrlies]

Well in macroeconomics, expectations are extremely important. Expecations about everything - unemployment, growth, inflation, etc etc

These expectations impact upon current economic behaviour. For example, if you had $10 000 in your bank account and you were thinking about how you were going to spend it. In a 'confident' economy, you might go out and have a holiday. In an environment such as the GFC or the great depression, most people will hang onto that money in case something happens (for example if you were made redundant).

In the great depression there was a 'general glut' of goods and services which was generally produced by a series of financial collapses. Many of these collapses were due to the psychology of a run. A run is essentially a situation where people want to convert their assets into cash. By doing this, problems arise when banks cannot give customers the cash they request (as banks only hold a certain amount of reserves). People then get concerned and the run spreads to other banks and it creates financial panic. This affects the real economy as investment and consumption dries up.

I also want to point out that an unemployed person is not necessarily someone who can be put to work on anything the government deems fit. Every employee has a reservation wage that must be paid in order to induce their labour. This means that governments have to spend a significant amount of money in order to get these people to work. This is what Keynes was on about, and arguably this is what the stimulus package is about (except that rather than the government deciding what to spend the money on, the government is allowing us to decide).

 

[jchoi]

Some of the reasons attributed to the Great Depression/GFC are business confidence, weak demand or over supply. Sure this sounds great in theory but I fail to see how in a practicle sense this can be true...
how can having too much of a product be a bad thing, how can 'excess labour' be a bad thing, how can confidence influence our national direction*?

*National direction: In a production based society, where we designated governments to regulate but not intervene in society it is the corporations we support which will progress our personal morals...

Isn't there areas that we could utilise the unemployed for 'national interest', whether it be in environmental rehabilition, research, community servicing or infrastructure creation. Sure it would mean reskilling, economic structural reform and a change in perception but isn't this a feasible solution to what will be rises in unemployment???

Ideas/discussion?

Well you see, during structural reform, there is always a "time lag". There is time when unemployment rate rises, and there are "reskilling" occurring. Especially in certain regions, reskilling may be harder due to lack of resources for learning etc. It isn't the solution to everything - who will pay for the reskilling? If the gov pays for it, how does gov use expenditure on other necessities?

And excess labour doesn't mean a bad thing. But in economics, there are always chain events happening. Excess labour is going to --> to excess products. Over-confidence of firms occur when firms experience growth. This growth doesn't last forever. Thus when the firms are employing and inflation recession is striking, what's going to happen? There will be excess supply (due to excess products as during recession, there is overall reduced consumption), what will the stores do when they have leftover goods? Stores will cut people, until they see fit that they start needing to employ people again. So as a reaction, the unemployment will rise which I'm assuming contributed towards the Great depression.

That's how I see it.

 

[gnrlies]

Well you see, during structural reform, there is always a "time lag". There is time when unemployment rate rises, and there are "reskilling" occurring. Especially in certain regions, reskilling may be harder due to lack of resources for learning etc. It isn't the solution to everything - who will pay for the reskilling? If the gov pays for it, how does gov use expenditure on other necessities?

And excess labour doesn't mean a bad thing. But in economics, there are always chain events happening. Excess labour is going to --> to excess products. Over-confidence of firms occur when firms experience growth. This growth doesn't last forever. Thus when the firms are employing and inflation recession is striking, what's going to happen? There will be excess supply (due to excess products as during recession, there is overall reduced consumption), what will the stores do when they have leftover goods? Stores will cut people, until they see fit that they start needing to employ people again. So as a reaction, the unemployment will rise which I'm assuming contributed towards the Great depression.

That's how I see it.

Youve muddled your section on excess labour. Excess labour implies a disequilibrium between the demand for labour and the supply of labour. This leads to unemployment and the opposite of pretty much everything you just said (i.e. lower inflation, lower build up of inventories, etc etc).

The main thing that contributed to the great depression was an unparralleled systematic breakdown in confidence. This started from a financial crisis whereby many banks were allowed to fail by the Fed which started a whole series of bank runs as confidence deteriorated. At these early stages it was merely a financial crisis, not a crisis in the real economy. But the two are interwined. Eventually confidence in the real economy (consumer and investor confidence) collapsed which resulted in deflation, massive unemployment, and negative growth.

This is what politicians are trying to avoid with the current financial crisis. It is so far a financial crisis which is starting to effect the real economy. Financial crises need not affect the real economy. For example the 1987 crash did little to the real economy.