The Economic Recovery: Jobs Edition

Economist Mark Perry has a great take on the current sluggishness of the jobs rate over at Carpe Diem. He brings our attention to the following graph:

His observations:

Most of the weakness in the U.S. labor market, the stubbornly high unemployment rate, and the slow rate of overall job creation can be traced to the ongoing decreases in government jobs, see chart above, especially at the local level […] Perhaps the significant downsizing of government at the state and local level is a positive development for the future growth of the U.S. economy, and one benefit of the Great Recession.  But we should also pay some attention to the fact that one of the reasons for the disappointing monthly employment reports is the persistent weakness in the public sector employment, which is offsetting the relatively healthy increases in private sector hiring.

This is a damn good point: unemployment rates have remained high because of losses in the public sector, not the private sector (which has been steadily growing). As Dr. Perry observes, this is good for long-run growth, but I can’t help but lament the fact that cuts in government spending have not been deeper and more robust. Imagine what the economy would look like if if deep cuts had been made six years ago.

As always, it is important to look at what the graph does not tell us. The graph explains that government jobs have been decreasing, but tells us nothing about expenses for current and retired government employees. Federal and state employees have gained notoriety for their lavish retirement packages (especially in California!), and none of this is covered in the graph. Public sector pension reform is still a vital issue that needs to be solved.

One other lament that I feel I must make pertains to the bank and auto bailouts of 2008-09. Although the bailouts don’t have any casual correlation to the graph I reproduced, I don’t think it is hard to image, again, what the economy would look like today if there had been a rigorous separation between business and state.

From the Comments: Keynesian Economics and the Stimulus Bill

A recent brouhaha has erupted in the comments thread of Dr. Delacroix’s post on Obama’s bad economic policies. Now, to be sure, the bad economy cannot be put on Obama’s shoulders alone. All he did was sign the stimulus act into law, after all, and I doubt John McCain would have vetoed it.

Let us also not forget about the two foreign wars that George W. Bush charged to the republic’s credit card, either. With that being said, I thought another economic chart would do readers of this blog a favor. From AEI’s blog comes this:

Ta-dah! Utter economic failure.

(h/t Steve Horwitz)

More Musings on Colonialism

I recently attended an excellent lecture at Cabrillo College, located in central California, by an International Relations scholar who focused on the effects of colonialism. We took a solid look at the ‘World Systems Theory’ of why the developing world is, well, developing, and it was great to go over this school of thought’s main arguments.

For those of you who don’t know, World Systems Theory is a Marxian analysis that basically states that poor countries are poor because of the effects of colonialism, and the evidence supporting their claims is pretty damn solid. Basically, the World Systems theorists argue that when the various European powers gained outright control of non-European lands (this process in itself took centuries, by the way, and I deplore the historical narrative that argues Europeans set out to conquer foreign lands and divide up the spoils of war for reasons outlined in the link provided), the European powers set up states that were designed specifically to export raw agricultural materials to European factories, to be produced by European workers, and to be consumed by European (and elite non-European) consumers.

This is pretty much what happened, and explains why most of the developing world is dependent upon raw commodity exports (that are shipped to European markets) for most of their well-being. Unfortunately, the very solutions that the World Systems theorists propose to dismantle the structural inequalities that exist in this world will (and have) actually led to more of the same structural inequality.

Allow me to explain. Continue reading