No, but if the problem is bad enough, the peasants can always revolt and kill the aristocracy.
There are lots of reasons why this just doesn’t happen very much. For example, consider the free rider problem.
Yeah… I forgot to use the facetious font …
Meh. Half the peasants can be paid to kill the other half.
I’m curious. As a European, do you think that the relatively socialist and regulatory politcies of Eurpope contribute to it’s relatively high structural unemployment?
Yes, however, unemployment in Europe isn’t as rough as it is here I think. Here, if you are unemployed, you better be wealthy or healthy, just don’t get sick.
Contribute, sure, I think it does; but I don’t think it’s a major, or perhaps even significant factor. I think it contributes only in the sense that the aid given to the unemployed and homeless mitigates the desperation of their situations, such that some unemployed feel they can afford to hold out for better jobs. By this I mean that, for example, experienced systems analysts can try to hold out for a job in their field within a non-absurd commuting distance instead of applying for working the checkout counter at the local supermarket so they don’t starve; I haven’t seen any evidence that a non-miniscule number of young and/or inexperienced people are turning down possible jobs because they’re “not good enough”. Legislation making hiring and firing more difficult and expensive plays a bigger role (I’ve seen it cited as one of the reasons for Spain’s difficulties), but that sort of legislation is pretty much global, it just varies in degree; I’m not sure it’s a major factor either.
So then that raises the question of what the significant factors really are. This isn’t anything I’ve been looking at for long, but from my recent reading and discussions with acquaintances, I’d speculate the following as the roots of the problem:
- Company profits are overwhelmingly passed to the bosses and to shareholders, and all company actions are aimed at improving shareholder profits. In general of course this is the whole point of a business in a capitalist economy, and not a bad thing. However, maximising profit by maximising productivity has led to companies being as automated as possible, and to laying off as many people as possible while hiring as few new people as possible. Again, this is completely rational behaviour individually. The problem is that now all businesses in the industrialised world are doing this, meaning that society is hit by so many layoffs and hiring freezes that structural unemployment is high and growing, even while industrial capacity and efficiency rises ever higher; and those with jobs outside management get salary freezes (or effective salary reductions by increasing their hours but not their salary). So the purchasing power of domestic populations decreases, while businesses look abroad for markets. Decreased local purchasing power hurts domestic retail and services industries, worsening un/underemployment, and so forth. I can see no solution to this; it’s an inherent flaw in the capitalist system, but there has been no better system proposed, and I don’t think any system of government regulation is likely to *fix *(as opposed to ameliorate) the problem without creating different ones. The irony is that a capitalist society needs consumption to function, and people need to produce (work) to be a part of that society; but the search to maximise profits and minimise costs are to some extent opposed to these needs.
(The typical counter-argument presented is the “buggy whip” example, i.e. that new industries and jobs will appear that will create employment in new fields. The thing is, I’m not seeing this happening; and I can’t see where the consumption of new goods would come from. For example, apart from food, I have almost no expenses – I don’t have a car, walking whenever possible; I own my own apartment (small family loan); I don’t smoke and hardly drink; my clothes last years; I play music, and my instruments are all years or decades old, often second-hand; and I have enough cheaply-bought books and PC games to last me a decade. I simply don’t spend almost any extra money, and don’t see a reason to. Most of the other young people I know who live within their means are the same. The alternative, funding a society on credit that won’t realistically be repaid, shouldn’t be a tenable solution. I think the US is up for an even bigger crash sometime soon because of the high levels of public debt; or at least, it would be, were it not in everybody’s interest to maintain the status quo somehow)
- The different cost of living in different countries – basically, effects of the “big mac index”. In short, as the industrialised nations increased the standard of living of everyone by making all products and services more affordable, there was an inflation in prices as (A) salaries went up across the board and (B) demand increased at a faster rate than supply. So today, a big mac or a haircut costs more in Norway or Canada or Japan than it does in Tanzania or Malaysia or Suriname. These higher prices lead to the need for higher salaries (and therefore higher production costs) – a Norwegian needs a higher salary than a Tanzanian for the same level of consumption. With real estate, it’s even worse (I bought my apartment in Rio de Janeiro, in a relatively central area, for less than a tenth of the price of an apartment in a near suburb of Stockholm – probably less than 1/20 if we price it by area). So when we get to industries, globalisation becomes a problem; shops in Europe contain clothes and electronics made in Southeast Asia from raw materials from South America and Africa. Offshoring isn’t even the issue, as a relatively small number of jobs have actually been *moved *– it’s more that new companies can start up with their business being run overseas, with only wholesale, retail, and/or import/export potentially being run from Europe. Prices remain as high as the market can bear; I can buy a t-shirt in Brazil for $7, but it’ll likely be at least $15 in Denmark, say – even though in both cases it’s made in China. Companies will, rationally, continue to look for the lowest production costs; the Spanish company Zara was recently blacklisted in Brazil as its factories were using “slave labour” (translation of the Brazilian term. In regular English, I guess they were “sweatshops” exploiting Bolivian illegals). So, perversely, we have the high standard of living in Europe discouraging establishing job-creating businesses there, reducing jobs, meaning fewer and smaller salaries for citizens, leading to a lower average standard of living. What’s the solution? A few years of hyperinflation?
IANAEconomist, though I read and learn what I can in my free time. I’ll end with an observation. The industrialised world – US, EU, Japan, et al – has in the last decade seen a boom in productivity, but stagnation or real decrease in average income. So debt has increased and consumption has stagnated or decreased. In Brazil, there’s been a boom in average income, but productivity has been stagnant in comparison (i.e. the increase in average income has far outstripped the increase in productivity). Government policy has actually been to try to restrain consumption, such that e.g. cars in Brazil are much more expensive here than the same models in other countries, to prevent “overheating the economy”. The standard of living has boomed, for all segments of the population but especially the poor – and economic growth continues.