Someday some bright chap over at the OECD is going to draw a line between flexible labour markets (stagnant wages in the US), deregulation of finance and financial flows, free trade, global imbalances and this crisis. Until then we get more of the same. Interesting how the very same policies that created the crisis are its solution. Well, to be fair there is a nod to public infrastructure spending. Hardly a paradigm breaker. But then we know that the OECD is really PSA service for official policy. So there is no use howling at them for this ill-smelling wind.
By Chris Giles, Economics Editor
Published: March 3 2009 09:00 | Last updated: March 3 2009 09:00
Rich countries should redouble efforts to increase flexibility in labour markets and boost competition even though they are suffering the worst recession since the second world war, the Organisation for Economic Co-operation and Development said on Tuesday.
Arguing that liberalisation was the surest route to a speedy recovery, the Paris-based international organisation locked horns with a vocal group of European economists, who have been extolling the virtues of labour market rigidities as a way of preventing deflation and depression.
Klaus Schmidt-Hebbel, OECD chief economist argued: “More flexible product and labour markets are likely to strengthen country resilience to weather future downturns with less disruption to output and employment.”…
It also identified higher spending on infrastructure, increased spending on training and reduction of personal income taxes for low earners as policies that gave a “double-dividend” of limiting the depth of the recession and boosting longer-term growth prospects.
The list will please the new US administration of Barack Obama since it reflects much of the thinking behind Washington’s stimulus plan.