Sam Ghandchiسام قندچيUnemployment Cannot be Resolved by the Proposed Solutions

Sam Ghandchi


After the start of Obama administration in the U.S. many of the economists whose words were not listened to in the past have been able to find audience in the daily papers but the question is whether there is still a clear understanding of the problem we are facing in the current economic crisis.  I do not mean the reason for the start of the this crisis which I discussed in details seven months ago (1).  My point is about the nature of this crisis.


Let us review some of the recent views expressed by one of the prominent economists,  Dr. Joseph Eugene Stiglitz.  Before the recent G-20 meeting, Dr. Stiglitz proposed to create a global Federal Reserve not only because of the decline of dollar but also because he sees the need for financial monitoring and control at a global level.  Perhaps one can expand on his view and also call for a global organization like the U.S. Security and Exchange Commission (SEC) which was formed after the 1930 depression to establish and execute financial regulations with respect to the stock exchange transactions. In fact, the basic discussion in the U.S. is that national initiatives are not enough to restore growth, and that global solutions are needed.


If one looks at the current economic recession just from the angle of causes of the 2008 financial crisis, the lack of regulations and monitoring of the real estate market and mortgage loans show prominence and thus the above proposals are exactly in relation to those underlying causes of the crisis. But regardless of the reasons for the start of this economic earthquake, its effect is no longer limited to the real estate and the mortgage market and what is becoming more and more pronounced is the serious unemployment in the U.S. and Europe and the increasing poverty in the poor nations.  Dr. Stiglitz has dealt with the second topic very well and has proposed to the rich countries to help the poor nations thru IMF and other international organizations before those countries fall into complete devastation.  In this regard, Dr. Stiglitz has explained enough and I do not to repeat here.


What seems not to have received enough attention is the dimensions of the problem of unemployment in the West and particularly in the U.S. which is unprecedented in the last half Century. According to economic forecasts, unemployment will increase till the middle of 2010 and although economic growth is predicted for the second half of 2010, the forecast is that employment level till the end of 2011 will be below the peak of 2007.


And more importantly I should note that the proposed solutions for unemployment are not effective.  For example, the current emphasis on Education, whereas those who have lost jobs were in positions making three times more than what they would make even after they receive the education that is being proposed for them. In other words, even if they receive all the education that is being recommended for them and if they find a new job, their income will be one third of their previous job.  For example a worker who was in the auto industry making 25 dollars an hour, thanks to trade union protections, after receiving all the computer education and getting a job at a Walmart store, may not make more than 8 dollars an hour, which is one third of what he made before, because most of the new professions do not have trade unions.


And stronger reason for being unemployed, is not the knowledge, to be able to solve the problem by education.  Basically the need for labor all across the board is reduced and with automation this issue is becoming more and more serious and even in the jobs related to computers, this elimination of jobs is happening at a faster rate.  This problem cannot be solved by education, and job creation cannot be done by such a solution.  Not that I discourage such programs by the state. But if knowledge level at  a doctorate level  in genetics is needed, the one who has lost a job in auto industry, cannot reach such educational level in genetics in a short time, to get a job.


In other words, more and more the issue of unemployment needs to be addressed by an alternative income solution which I discussed in a different article (2).


Unfortunately essentially I do not see any discussion in this area in the economic circles of the U.S.


Sam Ghandchi, Publisher/Editor

May 9, 2008



1. (in Persian)
2.  (in English)

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