Comment on DeLong: The Pain Has a Purpose, Namely, Higher Profits

Abstract

Here’s a simple and simply nasty hypothesis that would explain why governments are carrying on policies that will prolong high unemployment: 1. The business community has considerable influence on what governments do and don’t do. 2. Globalization has decreased the concern that managements of large corporations used to have for the well-being of the people in the high-wage economies. 3. The prolonged high unemployment is having the effect of putting downward pressure on wages in the high-wage countries. It is also increasing productivity, as the remaining workforce is being worked harder. 4. That will likely result in higher profits, both now and in the future. 5. The business community likes that.