MacroScope

Employer of last resort, Arab Spring style

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The concept that the government should serve as an employer of last resort in times of economic stress was first floated by the late economist Hyman Minsky. Its modern-day proponents remain largely marginalized, despite the nation’s persistently high unemployment and the extreme damage to the job market that was done by the deepest recession in generations. 

But Ali Kadri, senior research fellow at the National University of Singapore, argues the policy, which works as an automatic stabilizer when economies are struggling, is all the more appropriate for an Arab world that has been plagued by extremely high joblessness and a general lack of infrastructure and development. He says the Arab spring creates an opportunity for a drastic shift in the region’s approach to social and economic policy.

The retention of resources and their redeployment within the national economy are indispensable conditions for development and job creation. Employment policies are best set subject to social efficiency criteria distinct from the salient neoclassical productivity ones. It is highly unlikely, in view of the sheer smallness to which industry and the productive economy have shrunk under neoliberalism, that it would be possible to reemploy the massive redundant labour force on the basis of expanding private sector expansion and productivity gains. A criterion valuing and remunerating social work may be costly in the short term, but the social returns will reimburse initial expenses over the long term.

Notwithstanding the reductionist nature of the neoclassical criterion of efficiency, equity, in an Arab context of war and oil, must precede any received criteria for efficiency. More egalitarian rent, land and resource distributions redressing the dispossession of the working population during the neoliberal age represent the necessary conditions for effective demand enhancement and a successful development strategy. In practical terms, the state has to act as the employer of last resort (Minsky’s ELR) creating socially relevant and public sector employment. Increasing-returns industry and a granting of preferential status to regional capital and labour are also required. In view of the instability besetting capital accumulation, a regional security arrangement bolstered by working class security and substantiating autonomy over policy can underwrite long-term employment generating investment

from Global Investing:

Moscow is not Cairo. Time to buy shares?

The speed of the backlash building against Russia's paramount leader Vladimir Putin following this week's parliamentary elections has taken investors by surprise and sent the country's shares and rouble down sharply lower.

Comparisons to the Arab Spring may be tempting, given that the demonstrations in Russia are also spearheaded by Internet-savvy youth organising via social networks.

But Russia's economic and demographic profiles suggest quite different outcomes from those in the Middle East and North Africa. The gathering unrest may, in fact, signal a reversal of fortunes for the stock market, down 18 percent this year, argue  Renaissance Capital analysts Ivan Tchakarov, Mert Yildiz and Mert Yildiz.

The promise of middle age

The wave of popular discontent now sweeping the Middle East and North Africa has been driven by the region’s youth, frustrated by chronic umemployment and enraged by widespread corruption.

In a special report entitled ‘Youth bulges and equities’, Deutsche Bank argues that the proportion of angry young men to the general population is not only a gauge of socio-political stability but also a key indicator of market performance.

The ‘youth bulge’ — the ratio of males between 15-29 versus those aged 30-59 – came in at an average of 106 percent in the 251 conflicts seen around the world between 1950 and 2006. Two-thirds of countries that suffered social upheaval had a young-to-old men ratio of above 100 percent compared to the current 45-55 percent average seen in developed countries.

Social media for the Arab jobless

In the realm of  long-term economic things to worry about, there is not much that can rival youth unemployment in the greater Middle East and North Africa. Some years ago, for example, the World Bank  estimated that the region’s population rise was such that jobs needed to grow by some 3.5 percent  per year if unemployment along the lines of one-in-four was to be avoided over the next couple of decades. There has been nothing of great note to change this forecast.

The International Monetary Fund has just weighed into the issue with a post on the subject and some startling figures on the depth of the problem. As author Masood Ahmed writes:

Simply put, the region is facing unparalleled demographic pressures. Population growth over the past two generations has been among the fastest in the world: the region’s work force is projected to reach 185 million in 2020, 80 percent higher than in 2000. And the region is one of the most youthful in the world—with about 60 percent of the population less than 25 years old.