When the entire thrust of a piece on "unemployment" is contained in historic economic theories, you know for a fact that no solution will be offered, only a restatement of the problem in slightly different terms.

Anyone who has ever run a business will tell you that employment results from two critical sources: one, is the investment of time and capital needed to start and run the business. And two, a product that the market will buy at a price that is able to sustain the business.

The problem that we have yet to grasp is that our collective ability to meet criterion two is diminishing every year. As a direct result, the number of people willing to put themselves on the line for criterion one is also diminishing.

But the key lesson still have difficulty in accepting, is that this has nothing - absolutely nothing at all - to do with politics, the political leanings of different governments, or government policies of any kind, shape or format whatsoever.

If we "protect" our internal markets, we raise prices and reduce our standard of living. If we open our markets, we face price competition that drives out the ability to compete locally. Which will eventually increase unemployment (for the reasons stated above) and ultimately reduce our standard of living.

That is why we have never had a sustainable car industry, or a sustainable computer industry, or even a sustainable manufacturing industry of any substantial nature. We survive on growing stuff, and digging stuff up. End of story.

Our only real opportunity to avoid a steady decline is to bring our tourist industry to somewhere close to international standards, exploiting an abundant resource that is competitive with anywhere else in the world. Sadly, we won't actually believe that is possible without government support, such is the prevailing cargo-cult mentality.

Individual
Pretty much all countries are both borrowers and lenders, so in that sense all have debt. A more meaningful measure is net debt (borrowings minus loans), and for this there must be a global balance between net lenders and borrowers. Significant net lenders include Singapore, Hong Kong, Switzerland and Luxembourg.

Most of Australia’s net external debt (74%) is held by the private sector

The problem is the world is now running a current account surplus with the aliens.

http://www.economist.com/node/21538100

Frankly economics is a branch of politics; it is not a science as some people would have you believe. A lot of the data just does not stack up and therefore it not possible to come to any rational conclusions as to what happened and why.

A number of people on this thread have mentioned stagflation of the 1970s. The traditional view was that it was caused by the 1973 oil shock when the oil went up by 400%, but these days that is mostly dismissed and the blame laid elsewhere depending on people’s political beliefs.

The only data that I have ever found useful in making any sense of the economic situation is the demographics of the area in question. There is quite good data in the developed countries on what people earn and buy depending on their age. While I expect the stagflation of the 1970s had a number of causes, I suspect that one of them was the large influx of baby boomers into the work force, who were learning on the job, and as a result every thing started to cost more than it should. As a matter of interest much of the present economic woes in the western nations, may well be related to baby boomers going into retirement

warmair
Interesting article. Of course, a current account deficit is not the same thing as debt, but it raises valid concerns about data quality.

The oil price shocks of the 1970s may have exacerbated stagflation, but they didn’t cause it. The first oil price shock happened in October 1973. In Australia, inflation averaged 2.5% in the 1960s but rose from 3.2% in September 1970 to 9.9% in September 1973. It climbed further, probably exacerbated by higher oil prices, but it was already out of control before the crisis hit.

I agree that demographics can influence economic trends, but a young and growing workforce is an economic benefit, I would have thought.

We need to attack the problem from a different angle and consider the option of providing a job guarantee on a living wage- starting with jobs for young people.

From a neo-liberal POV it will be argued that this can't be afforded. But, we just need to look at the strength of that argument a little more closely. It's always better to pay someone slightly more, and have them do something, than slightly less and receive nothing at all in return. The level of the wage paid to those on JG will set a floor on wages paid to all employees.

A JG would probably be opposed by some on the left who would consider it to be a kind of forced labour. On the right , too, many would argue that it was just 'make work'. But, in a sense all jobs are make work. All wages and salaries are paid from money which originated from government spending. If it wasn't it must be counterfeit! So, in practice, government's fiscal and monetary policies determine who get employed.

If we could provide jobs for everyone, but are worried about the inflationary implications of doing so, we at least need to publicly acknowledge this. Some commentators on this article seem to be unaware of the position.