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  • user warning: Table './cer_staging/cache_filter' is marked as crashed and should be repaired query: UPDATE cache_filter SET data = '<p>Economic growth in Europe depends on a recovery in household consumption. And that, in turn, requires a rethinking of the balance between capital and labour.</p><p>Over the last 30 years, wage growth has lagged behind productivity across the industrialized world, leading to a steep fall in wages, salaries and other employee benefits as a proportion of GDP.<br /><br />Simultaneously, there has been a big rise in inequality as the benefits of economic growth have accrued to those at the top of the income scale, as well as a steady increase in corporate income and profits. These trends have gone hand-in-hand with a steady decline in business investment. <br /> Europe’s strategy for dealing with the euro zone crisis has exacerbated these trends and is therefore a further obstacle to economic recovery.<br /><br />European countries are relying on two things to boost investment and hence employment: <br /> First, they are trying to lower labour costs, make their business environments more attractive by switching the burden of taxation from the corporate sector to the consumer, pushing through labour reforms aimed at reducing workers’ bargaining power and curtailing social rights and transfers. Second, they are attempting to boost business confidence by consolidating public finances.<br /><br /> Such a strategy might make sense for individual countries, so long as they can rely on exports, but not for the European economy as a whole. The strategy promises to further aggravate Europe’s core problem — a structural shortage of demand — by bringing about a further decline of labour income and a further rise in inequality.<br /><br /> There is no doubting the need for reforms aimed at increasing competition and opening the way for the adoption of new technologies. But governments need to combine market-led reforms with measures aimed at preventing a further decline in labour’s share of the pie. <br />With households now highly indebted across the industrialised world, a sustained recovery in private consumption will require a rise in the share of national incomes accounted for by wages and salaries.<br /><br /> There are a number of things governments can do. But some will require them to challenge firmly held assumptions, to work more closely together and to distance themselves from special pleading by business. <br /><br /> •There is some evidence that raising skills levels can combat inequality, and governments should certainly redouble their efforts to reduce the number of people who leave school early. But even countries that have well-trained work forces have experienced sharp falls in labour share and rising inequality.&nbsp;<br /><br /> •Executive remuneration needs to be linked to long-term performance, and not just to the share price. Executives’ duty should be to the company, its long-term health and those who work for it. This would encourage a greater emphasis on long-term organic growth (as opposed to expansion through mergers and acquisitions) and lower the excessive focus on reducing labour costs. The relationship between risk and reward must be rebuilt by reducing executive remuneration.<br /><br /> •Tax systems need to be more redistributive. The better-off need to pay more tax; those on lower incomes need to pay less. In tandem, governments should switch the burden of taxation from consumption to capital by reducing value-added taxes and increasing taxes on capital and wealth. There is no empirical evidence that this would hit investment or work incentives. In an effort to address beggar-thy-neighbor tax competition, the European Union should move to harmonize corporate tax bases and rates.<br /><br />•Countries need to end their obsession with “competitiveness.” Competitiveness is relative; countries cannot all return to growth by becoming more competitive relative to one another. The policies employed to boost competitiveness threaten a further decline in labour share and rising inequality. Instead of competitiveness, European governments should be focused on boosting domestic demand. This will require expansionary macroeconomic policies. Monetary policy should be loosened further, and the European Union as a whole needs to put an end to fiscal austerity.<br /><br /> •Finally, governments should adopt a more skeptical ear when confronted with business lobbying. What might work for individual firms is at best zero-sum when adopted by countries.<br /><br /> For their part, the leaders of finance and business need to recognize that their remuneration is an obstacle to the kinds of market-led reforms that they themselves advocate and that are needed to boost economic performance.<br /><br /> What will happen if governments fail to change track? Economic recovery will prove elusive and public finances will remain chronically weak. This will exacerbate the legitimacy problems of markets, weaken social cohesion and undermine political effectiveness.<br /><br /> Voters will associate structural reforms with declining living standards, increased insecurity and inequality. Not only will governments struggle to push through the needed reforms, but there will also be a risk of a broader backlash against the market economy and the European Union.<br /> Mainstream political parties are likely to lose much of their credibility, and euro-skepticism is likely to take hold as more populist politicians respond to mounting popular anger by becoming increasingly hostile to the European Union. Support for state control over capital is likely to rise as are demands for greater trade protectionism and tougher curbs on immigration.<br /><br /> These are unlikely to prove transient trends: Events of this kind tend to influence attitudes for decades.</p><p>&nbsp;</p>', created = 1508449921, expire = 1508536321, headers = '', serialized = 0 WHERE cid = '3:076af238d6ac8f1ebcf4a8f36651eeec' in /home/cer/staging/includes/cache.inc on line 112.
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  • user warning: Table './cer_staging/cache_filter' is marked as crashed and should be repaired query: UPDATE cache_filter SET data = '<p>\"The consequences are likely to be far-reaching. Not only will governments struggle to push through the needed reforms, but there is a risk of a broader backlash against the market economy and the European Union,\" said Simon Tilford of the CER,</p><p></p><p>The risk, however, is that these and other structural reforms become discredited because voters associate them with declining living standards and rising inequality, according to Simon Tilford, chief economist at the Centre for European Reform, a London think tank. \"The consequences are likely to be far-reaching. Not only will governments struggle to push through the needed reforms, but there is a risk of a broader backlash against the market economy and the European Union,\" he said.</p>', created = 1508449921, expire = 1508536321, headers = '', serialized = 0 WHERE cid = '3:a0105a06fbb973e3b5108beee2b9f742' in /home/cer/staging/includes/cache.inc on line 112.
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  • user warning: Table './cer_staging/cache_filter' is marked as crashed and should be repaired query: UPDATE cache_filter SET data = '<p>\"The consequences are likely to be far-reaching. Not only will governments struggle to push through the needed reforms, but there is a risk of a broader backlash against the market economy and the European Union,\" said Simon Tilford of the CER,</p><p></p>', created = 1508449921, expire = 1508536321, headers = '', serialized = 0 WHERE cid = '3:2778adf9e1ff3311837d4917e34b5cfe' in /home/cer/staging/includes/cache.inc on line 112.
  • user warning: Table './cer_staging/cache_filter' is marked as crashed and should be repaired query: SELECT data, created, headers, expire, serialized FROM cache_filter WHERE cid = '3:d41d8cd98f00b204e9800998ecf8427e' in /home/cer/staging/includes/cache.inc on line 27.
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  • user warning: Table './cer_staging/cache_filter' is marked as crashed and should be repaired query: UPDATE cache_filter SET data = '<p>According to Philip Whyte, a senior research fellow at the&nbsp;CER in London, to accept that the eurozone suffers from a structural flaw that can only be corrected by more federalism is politically explosive. In his <a href=\"http://www.cer.org.uk/sites/default/files/publications/attachments/pdf/2012/essay_bankingunion_5dec12-6704.pdf\" target=\"_blank\"><span style=\"text-decoration: underline;\"><span style=\"color: rgb(0, 102, 204);\">analysis</span></span></a>, he points out that a more federal structure goes at the heart of sovereignty because it allows European bodies to dictate the fate of national banks, putting taxpayers\' money at the disposal of the eurozone to solve problems in other member states. This is the reason, the analyst believes, why it takes so much time to accept the idea of a banking union and all its implications.</p><p>It is clear that a fully fledged banking union in the euro area will not emerge any time soon, Philip Whyte writes, because political constraints are too big. Acquiescing a partial federalisation, embodied in the supervisory mechanism for the banks, however, will not solve the problems, the analyst is convinced underscoring that the rest of the bitter medicine - direct recapitalisation of banks, creating a resolution mechanism and deposit guarantees - cannot be avoided. Moreover, he explains, partial solution creates another problem - destabilisation of the EU-27 by diminishing the status of the non-euro countries.</p>', created = 1508449921, expire = 1508536321, headers = '', serialized = 0 WHERE cid = '3:ce93cc6ce230422e1cfd1c41a4735734' in /home/cer/staging/includes/cache.inc on line 112.
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  • user warning: Table './cer_staging/cache_filter' is marked as crashed and should be repaired query: UPDATE cache_filter SET data = '<p>According to Philip Whyte, a senior research fellow at the&nbsp;CER in London, to accept that the eurozone suffers from a structural flaw that can only be corrected by more federalism is politically explosive. </p>', created = 1508449921, expire = 1508536321, headers = '', serialized = 0 WHERE cid = '3:99e4bd91606e8192f07cc9ba49dbcd04' in /home/cer/staging/includes/cache.inc on line 112.
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  • user warning: Table './cer_staging/cache_filter' is marked as crashed and should be repaired query: UPDATE cache_filter SET data = '<p>\"For two decades Britain\'s EU debate has been one-sided: Eurosceptic politicians and commentators have set the agenda, while few politicians (or business leaders) have argued the merits of the EU,\" Charles Grant of the CER wrote in a recent paper. \"Pro-EU politicians have seen the short-term advantages of saying little about an unpopular subject. So they have lost the argument by default.\"</p>', created = 1508449921, expire = 1508536321, headers = '', serialized = 0 WHERE cid = '3:233339d68a8a06c84db000c563b06502' in /home/cer/staging/includes/cache.inc on line 112.
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  • user warning: Table './cer_staging/cache_filter' is marked as crashed and should be repaired query: UPDATE cache_filter SET data = '<p>\"For two decades Britain\'s EU debate has been one-sided: Eurosceptic politicians and commentators have set the agenda, while few politicians (or business leaders) have argued the merits of the EU,\" Charles Grant of the CER wrote in a recent paper.</p>', created = 1508449921, expire = 1508536321, headers = '', serialized = 0 WHERE cid = '3:e256a2ee010e8de98e588d195c312a05' in /home/cer/staging/includes/cache.inc on line 112.
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  • user warning: Table './cer_staging/cache_filter' is marked as crashed and should be repaired query: UPDATE cache_filter SET data = '<p>Europe\'s common security policy is \"stuck between the strategic realities of declining defence budgets, waning European power in the world and a lack of will and ability to project strategic force outward\", said Hugo Brady, a senior research fellow at the CER.&nbsp;\"And on the other side, political inertia to do serious stuff in defence.\"</p>', created = 1508449921, expire = 1508536321, headers = '', serialized = 0 WHERE cid = '3:3227d4f886a611271ccddf1b6a607299' in /home/cer/staging/includes/cache.inc on line 112.
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  • user warning: Table './cer_staging/cache_filter' is marked as crashed and should be repaired query: UPDATE cache_filter SET data = '<p>\"È stata una risposta un po\' emotiva - precisa Philip Whyte economista del think-tank Centre for European Reform - nel senso che i timori politici sono apparsi dominanti sulle considerazioni tecniche\".</p>', created = 1508449921, expire = 1508536321, headers = '', serialized = 0 WHERE cid = '3:2d2a95bc47e87c107a40d6395646833f' in /home/cer/staging/includes/cache.inc on line 112.
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Workers must get a bigger slice of the pie

Workers must get a bigger slice of the pie

Written by Simon Tilford, 22 November 2012
From The New York Times

Economic growth in Europe depends on a recovery in household consumption. And that, in turn, requires a rethinking of the balance between capital and labour.

Over the last 30 years, wage growth has lagged behind productivity across the industrialized world, leading to a steep fall in wages, salaries and other employee benefits as a proportion of GDP.

Simultaneously, there has been a big rise in inequality as the benefits of economic growth have accrued to those at the top of the income scale, as well as a steady increase in corporate income and profits. These trends have gone hand-in-hand with a steady decline in business investment.
Europe’s strategy for dealing with the euro zone crisis has exacerbated these trends and is therefore a further obstacle to economic recovery.

European countries are relying on two things to boost investment and hence employment:
First, they are trying to lower labour costs, make their business environments more attractive by switching the burden of taxation from the corporate sector to the consumer, pushing through labour reforms aimed at reducing workers’ bargaining power and curtailing social rights and transfers. Second, they are attempting to boost business confidence by consolidating public finances.

Such a strategy might make sense for individual countries, so long as they can rely on exports, but not for the European economy as a whole. The strategy promises to further aggravate Europe’s core problem — a structural shortage of demand — by bringing about a further decline of labour income and a further rise in inequality.

There is no doubting the need for reforms aimed at increasing competition and opening the way for the adoption of new technologies. But governments need to combine market-led reforms with measures aimed at preventing a further decline in labour’s share of the pie.
With households now highly indebted across the industrialised world, a sustained recovery in private consumption will require a rise in the share of national incomes accounted for by wages and salaries.

There are a number of things governments can do. But some will require them to challenge firmly held assumptions, to work more closely together and to distance themselves from special pleading by business.

•There is some evidence that raising skills levels can combat inequality, and governments should certainly redouble their efforts to reduce the number of people who leave school early. But even countries that have well-trained work forces have experienced sharp falls in labour share and rising inequality. 

•Executive remuneration needs to be linked to long-term performance, and not just to the share price. Executives’ duty should be to the company, its long-term health and those who work for it. This would encourage a greater emphasis on long-term organic growth (as opposed to expansion through mergers and acquisitions) and lower the excessive focus on reducing labour costs. The relationship between risk and reward must be rebuilt by reducing executive remuneration.

•Tax systems need to be more redistributive. The better-off need to pay more tax; those on lower incomes need to pay less. In tandem, governments should switch the burden of taxation from consumption to capital by reducing value-added taxes and increasing taxes on capital and wealth. There is no empirical evidence that this would hit investment or work incentives. In an effort to address beggar-thy-neighbor tax competition, the European Union should move to harmonize corporate tax bases and rates.

•Countries need to end their obsession with “competitiveness.” Competitiveness is relative; countries cannot all return to growth by becoming more competitive relative to one another. The policies employed to boost competitiveness threaten a further decline in labour share and rising inequality. Instead of competitiveness, European governments should be focused on boosting domestic demand. This will require expansionary macroeconomic policies. Monetary policy should be loosened further, and the European Union as a whole needs to put an end to fiscal austerity.

•Finally, governments should adopt a more skeptical ear when confronted with business lobbying. What might work for individual firms is at best zero-sum when adopted by countries.

For their part, the leaders of finance and business need to recognize that their remuneration is an obstacle to the kinds of market-led reforms that they themselves advocate and that are needed to boost economic performance.

What will happen if governments fail to change track? Economic recovery will prove elusive and public finances will remain chronically weak. This will exacerbate the legitimacy problems of markets, weaken social cohesion and undermine political effectiveness.

Voters will associate structural reforms with declining living standards, increased insecurity and inequality. Not only will governments struggle to push through the needed reforms, but there will also be a risk of a broader backlash against the market economy and the European Union.
Mainstream political parties are likely to lose much of their credibility, and euro-skepticism is likely to take hold as more populist politicians respond to mounting popular anger by becoming increasingly hostile to the European Union. Support for state control over capital is likely to rise as are demands for greater trade protectionism and tougher curbs on immigration.

These are unlikely to prove transient trends: Events of this kind tend to influence attitudes for decades.