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The Rise of Unemployment in Europe

A Keynesian Approach

Engelbert Stockhammer

This book offers a long overdue and refreshing Keynesian approach to the rise of European unemployment. It critically discusses the NAIRU theory and presents econometric evidence to assess the relative importance of capital investment and labor market institutions. The author also explores the reasons for the slowdown in capital accumulation, and is able to establish a clear link between changes in the financial sector, changes in corporate governance and investment expenditures.
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Chapter 1: The Rise of Unemployment in Europe: A Synopsis

Engelbert Stockhammer


Unemployment in the European Union has risen from a modest level of around 2 per cent in 1970 to 8.3 per cent in 2002, a level unseen since the Great Depression. The social costs of this mass unemployment range from income losses to severe social and psychological problems resulting from not having a job, insecurity about the future and dropping out of social security systems. More than 11 million people are directly affected by this misery, not counting the families and communities of the unemployed. While most politicians claim that the fight against unemployment is one of the top priorities, policy concerns have in fact shifted during the 1980s and 1990s. Preserving price stability and the integration of European countries along neo-liberal lines is what history books will record about these decades, not energetic attempts to create jobs for those who need them. Obviously this rise in unemployment is but one aspect of the many farreaching transformations that societies and economies in advanced capitalist countries (ACC) have undergone over the past decades. The most prominent of these, that has also called forth a vigorous social opposition, is globalization (Pollin 2000). The internationalization of trade and capital flows is part of the changes that have taken place in the transition from Fordism to the Neo-Liberal Era.1 In the 1970s a phase of capitalist development, labelled Fordism, came to an end and with it the institutional structures and social compromises that carried it (Aglietta 1979, Boyer 1990, Bowles et al. 1986)...

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