Wednesday, February 8, 2012

Richard Koo on Europe, the US, and Japan

Richard Koo (Chief Economist at the Nomura Research Institute, Ltd.) gives a talk here at the Foreign Press Center (Japan) on the “Rebuilding of the European and US Economy and Japan” (January 19, 2012).

Richard Koo’s work on asset bubbles, debt deflation and balance sheet recessions is consistent with the Post Keynesian view of these problems. In many ways, his work complements that of Steve Keen.


  1. Do you believe that once this debt deflation problem is solved, employment may still remain at low levels?

    I was discussing with my econ professor about how elasticity of employment to growth has fallen so low that in some parts of the world, it is 0.16. Meaning that you need a 12.5% growth rate in national income to generate jobs at the same pace as the population and workforce.

    Plus, increases in private sector productivity have come to a point where Facebook can generate hundreds of millions of dollars of profits with just 4000 employees. And then we have other super-productive enterprises such as Apple and IBM. They can easily expand their turnover without hiring nearly as many additional people.

    Plus, superior management techniques and technology will mean that the Solow Residual will form a larger share of rise in incomes and outputs than additional employment of labour shall.

    So I wonder if mass unemployment will become a fact of life once this recession is over.

  2. There is no doubt in my mind that structural unemployment/technological unemployment will become a very serious problem as this century progresses.

    As automation, AI, and IT-assisted machines become more and more powerful, they will increasingly come to do more work.

    I written something about this here:

    This is not necessarily a bad thing of course (it has the potential to be a wonderful thing), if government provides direct employment programs for those made unemployed and maintains aggregate income levels.

  3. When Marx wrote about the "The Global Reserve Army of Labour" could he have imagined the current form of corporate globalization and the financial flows that have aided it? We know of the myth of perfect competition and the reality that laissez faire leads to a concentration of capital accumulation amongst the few but where is the discourse amongst the neoclassical orthodoxy that "The Great Moderation" was enabled through weaker labour power, outsourcing and technology improvement making hitherto work in the "non-tradeable" sector "tradeable", rather than monetary policy targeted at price stability?
    HBS Professor Willy Shih, a former Kodak executive, has criticized outsourcing as eroding the "industrial commons"—the collective R&D, engineering, and manufacturing capabilities that are crucial to new product development and which spins-off into more employment in the clusters that we witness in areas such as Silicon Valley.
    The reality is that technology is making faster inroads than workers can upgrade their "human capital" and as such I see little to no wage growth for all except those at the top of the food chain.