profit maximising goes global the race to the bottom we explore four decades of cyclical and long run dynamics in income distribution and economic activity for a panel of 13 oecd countries as measured by the wage share and output gap when modeled as predator prey dynamics economic activity in oecd countries is weakly profit led convergence to a long run equilibrium is relatively slow delaying the profit squeeze stage for many years our race to the bottom model suggests that the oecd countries have been engaged in undercutting each other s real unit labour costs an extension of the model shows that the long run equilibrium has been shifting south west towards a lower wage share it may even be that this race has the undesirable consequence of decreasing economic activity

finance inflation and employment a post keynesian kaleckian analysis the purpose of this paper is to contribute to the post keynesian kaleckian macroeconomic literature we develop a macroeconomic model that explicitly integrates the role of borrowing and cash payment commitments on outstanding debt interest plus principal repayment into the consumption and investment expenditures as well as into the inflation generating process we explore the way that finance influences the distribution effects of inflation in the demand side of a money credit using economy we suggest a new phillips curve that encapsulates the impact of financial commitments on wage and profit claims we argue that high debt and cash payment commitments are likely to be associated with a positive demand side effect of inflation on the rate of employment and that they might be conducive to a negative supply side effect of employment on the inflation rate the author 2011 published by oxford university press on behalf of the cambridge political economy society all rights reserved

financialisation income distribution and aggregate demand in the usa this paper investigates the effects of financialisation and functional income distribution on aggregate demand in the usa by estimating the effects of the increase in rentier income dividends and interest payments and housing and financial wealth on consumption and investment the redistribution of income in favour of profits suppresses consumption whereas the increase in the rentier income and wealth has positive effects a higher rentier income decreases investment without the wealth effects the overall effect of the changes in distribution on aggregate demand would have been negative thus a pro capital income distribution leads to a slightly negative effect on growth i e the usa economy is moderately wage led

rising inequality as a cause of the present crisis the article argues that the economic imbalances that caused the present crisis should be thought of as the outcome of the interaction of the effects of financial deregulation with the macroeconomic effects of rising inequality in this sense rising inequality should be regarded as a root cause of the present crisis i identify four channels by which it has contributed to the crisis first rising inequality creates a downwards pressure on aggregate demand since poorer income groups have high marginal propensities to consume second international financial deregulation has allowed countries to run larger current account deficits and for longer time periods thus in reaction to potentially stagnant demand two growth models have emerged a debt led model and an export led model third in the debt led growth models higher inequality has led to higher household debt as working class families have tried to keep up with social consumption norms despite stagnating or falling real wages fourth rising inequality has increased the propensity to speculate as richer households tend to hold riskier financial assets than other groups the rise of hedge funds and of subprime derivatives in particular has been linked to rise of the super rich

on the single resource capacity problem for multi item inventory systems in this paper we study multi item inventory systems under a single resource capacity constraint in contrast to most previous approaches we treat the capacity as a decision variable and not as given data this is consistent with many practical cases where additional capacities resources can be acquired rented at some cost profit two solution procedures are developed for deriving an optimal policy within the class of policies that has a fixed cycle for all items with phasing of orders within the cycle these solution procedures can be applied to various types of cost functions as illustrated by an example

the drivers of structural change the main goal of this paper is to provide an integrated survey of the literature devoted to identifying the drivers of structural change broadly defined as the process of reallocation of economic activity across the three broad sectors agriculture manufacturing and services using the ggdc 10 sector database this paper first presents the empirical facts associated with structural change in different regions of the world that is europe and the usa asia latin america and africa then reviews four determinants of structural change i changes in income ii changes in relative sectoral prices iii changes in input output linkages and iv changes in comparative advantage s via globalization and trade

international competition income distribution and economic growth this paper shows that the neo keynesian case for wage led growth does not generally hold in an open economy model wage increases cause a loss of competitiveness that reduces the trade balance if the economy is relatively open to trade and price elasticities satisfy certain restrictions the worsening of the trade balance more than outweighs the increase in workers consumption thus reducing the growth rate the main theoretical innovation is a flexible markup pricing rule that allows changes in unit labor costs and exchange rates to affect profit margins implications for international relations and class conflict are discussed copyright 1989 by oxford university press

income distribution and current account imbalances we develop a three country stock flow consistent macroeconomic model to study the effects of changes in both personal and functional income distribution on national current account balances each country has a household sector and a non household corporate sector the household sector is divided into income deciles and consumer demand is characterized by upward looking status comparisons following the relative income hypothesis of consumption the strength of consumption emulation depends on country specific institutions the model is calibrated for the united states germany and china simulations suggest that a substantial part of the increase in household debt and the decrease in the current account in the united states since the early 1980s can be explained by the interplay of rising top end household income inequality and institutions on the other hand the weak domestic demand and increasing current account balances of germany and china since the mid 1990s are strongly related to shifts in the functional income distribution at the expense of the household sector

demand and distribution in integrated economies aggregate demand is influenced by the functional income distribution of an economy and that of its trading partners this relationship between income distribution and output is analyzed in a short run two country neo kaleckian model the effects of devaluation and redistribution are discussed in detail trade and redistribution within one country interact and output increases or decreases with changes in either depending on the specific distributional and exchange rate movements the marshall lerner condition is shown to be equivalent to the assumption of expansionary devaluation if devaluation increases output national redistribution policy toward wage earners is also more likely to be expansionary author s abstract

the modern view of macroeconomics some critical reflections david romer has proposed a new basic macroeconomic framework the is mp ia model its proponents claim that it represents the modern view of macroeconomics we show that the new framework remains closely attached to the neoclassical synthesis and in addition does not take account of i the empirical evidence on the output inflation trade off ii the evidence on the interdependence of aggregate demand and supply iii the institutional limits of monetary policy and iv the implications for macroeconomic policy of i ii and iii once these aspects have been incorporated short run stabilisation policy is not neutral in the long run the notion of a natural rate of interest becomes untenable and aggregate demand turns into the crucial exogenous variable copyright 2005 oxford university press

stagnation income distribution and monopoly power the deceleration in the rate of industrial growth in the indian economy since the middlesixties initially interpreted by some as a temporary downward deviation from trend hasnow come to be generally accepted as reflecting long run tendencies towards stagnation several explanations for these tendencies have been offered bhagwati and desai 1970 and bhagwati and srinivasan 1975 have focused on inefficiencies and the misallocationof resources arising from industrial policies pursued by the government others chakravarty 1974 raj 1976 and vaidyanathan 1974 among them have emphasisedthe sluggishness of agricultural growth which is alleged to have retarded industrial growthby limiting markets and the supply of wage goods and raw materials a third view reflectedin srinivasan and narayana 1977 for example has put the blame on a slackening of invest ment demand due to lower public investment but does not explain why public investmentfell or why its fall restrained industrial growth finally there is the explanation put forthin bagchi 1970 1975 1982 in nayyar 1978 and in parts of mitra 1977 that inequali ties in income distribution have resulted in a limited demand for industrial goods reducedincentives for investment and therefore reduced growth this view seems to suggest apositive relation between growth and income equality which is opposed to the generallyaccepted idea derived from cambridge growth models that higher growth requires greaterinequality the purpose of this paper is to examine the last explanation by considering the inter action between growth and income distribution in an underdeveloped economy with thehelp of a simple macroeconomic model the model is a stylisation of the indian economy so that we will be able to use the model to assess the argument that a deceleration in therate of growth of the indian industrial economy could have been caused by an unequaldistribution of income the argument will not be made that this income distributional con straint is the binding constraint on industrial growth the model will merely examine theinternal consistency of the argument that a bad income distribution could explain stagnation in the sense of reduced growth and show that in the indian context as in other similarcontexts this argument can be put forward in explaining stagnation our argument is first presented with a highly simplified schematisation of the indianeconomy which we shall call the basic model the economy modelled produces only one

the circular path of social sustainability an empirical analysis abstract the sustainable human resource management literature provides arguments linking the social sustainability dimensions of business and society suggesting a circular or two way relationship between them the norm of reciprocity builds social sustainability by increasing trust and cooperation in any group of people and explains this complex relationship in this study we test the connection between society poverty and inequality and business human resource investment strategy using a large longitudinal data set with six time points findings showed that past poverty negatively contributes to a later human resource investment strategy and vice versa this mutual relationship configures a positive feedback loop where environmental social sustainability and organizational social sustainability enhance each other results also show that a human resource investment strategy negatively affects income inequality revealing that corporate decisions on social sustainability can affect social sustainability in society

pseudo goodwin cycles in a minsky model goodwin cycles result from the dynamic interaction between a profit led demand regime and a reserve army effect in income distribution the paper proposes the concept of a pseudo goodwin cycle we define this as a counter clockwise movement in output and wage share space which is not generated by the usual goodwin mechanism in particular it does not depend on a profit led demand regime to illustrate this a simple minsky type model is extended by a reserve army distribution adjustment in this model the cycle is generated by the interaction of financial fragility and demand the wage share rises at higher levels of output but this generates no feedback so that by design demand does not react to changes in income distribution but the model does exhibit a pseudo goodwin cycle in the output wage share space this holds true even if we introduce a wage led demand regime this demonstrates that the existence of a counter clockwise movement of output and the wage share cannot be regarded as proof of the existence of a goodwin cycle and a profit led demand regime

the endogeneity of the natural rate of growth the aim of this paper is to estimate the sensitivity of the natural rate of growth to the actual rate of growth for 15 oecd countries over the period 1961 95 on the hypothesis that the natural rate of growth is not exogenously given to do this we estimate the natural rate of growth and then how it changes when the actual growth rate is different from the natural rate as a side test of the endogeneity hypothesis we also test for the direction of causality between national output and factor inputs for the same set of countries our results support the idea that the natural rate of growth is not independent of the actual rate of growth and bring to the fore the importance of focusing on demand as well as supply for an understanding of long run growthrate differences between countries

functional income distribution and aggregate demand in the euro area an increase in the wage share has contradictory effects on the subaggregates of aggregate demand private consumption expenditures ought to increase because wage incomes typically are associated with higher consumption propensities than capital incomes investment expenditures ought to be negatively affected because investment will positively depend on profits net exports will be negatively affected because an increase in the wage share corresponds to an increase in unit labour costs and thus a loss in competitiveness therefore theoretically aggregate demand can be either wage led or profit led depending on how these effects add up the results will crucially depend on how open the economy is internationally the paper estimates a post kaleckian macro model incorporating these effects for the euro area and finds that the euro area is presently in a wage led demand regime implications for wage policies are discussed

98 effective integer ratio lot sizing for one warehouse multi retailer systems a warehouse supplies n retailers constant external demand occurs at each retailer and shortages are not allowed there are linear holding costs and fixed costs for ordering at the warehouse and at each retailer the goal is to minimize the long run average cost over an infinite time horizon we define a new class of policies for this problem whose simple structure facilitates both computation and implementation the cost of a policy that is optimal within this class is shown to be within 2 of the cost of an optimal policy for the original problem in the worst case such a policy can be computed in on log n time

offsetting inventory replenishment cycles abstract the inventory staggering problem is a multi item inventory problem in which replenishment cycles are scheduled or offset in order to minimize the maximum inventory level over a given planning horizon we incorporate symmetry breaking constraints in a mixed integer programming model to determine optimal and near optimal solutions local search heuristics and evolutionary polishing heuristics are also presented to achieve effective and efficient solutions we examine extensions of the problem that include a continuous time framework as well as the effect of stochastic demand

on kaldor and pensions in this paper the kaldorian saving function on differential propensities between household and corporate income is restated and extended to account for saving through occupational pension funds the extended hypothesis is then tested and compared to nicholas kaldor s own using recent u k data solid support is found for the kaldorian hypothesis and the extended corporate capitalism saving function the author s findings cast doubt on the life cycle and related hypotheses on savings they also raise interesting questions about neoclassical and post keynesian theories of growth and distribution copyright 1997 by oxford university press

distribution and growth reconsidered empirical results for six oecd countries we analyse the relationship between functional income distribution and economic growth in austria france germany the netherlands the uk and the usa from 1960 until 2005 the analysis is based on a demand driven distribution and growth model for an open economy inspired by bhaduri and marglin which allows for either profit or wage led growth we find that growth in france germany the uk and the usa has been wage led whereas austria and the netherlands have been profit led in the case of austria a domestically wage led economy changes to profit led when including the effect of distribution on external trade the netherlands however are already profit led without external trade our results so far only partially confirm bhaduri and marglin s theoretical conclusion that wage led growth becomes less feasible when the effects of distribution on foreign trade are taken into account

offsetting inventory cycles of items sharing storage abstract the ability to determine the optimal frequencies and offsets for independent and unrestricted ordering cycles for multiple items can be very valuable for managing storage capacity constrained facilities in a supply chain the complexity of this problem has resulted in researchers focusing on more tractable surrogate problems that are special cases of the base problem this research has focused on developing fundamental properties of the original problem we exploit the problem structure and present a heuristic for offsetting independent and unrestricted ordering cycles for items to minimize their joint storage requirements heuristics of this type may prove useful in solving the more general problem of selecting order quantities to minimize combined holding ordering and storage costs

wage led growth in the eu15 member states the effects of income distribution on growth investment trade balance and inflation this paper estimates a multi country demand led growth model for eu15 countries a decrease in the share of wages in national income in isolation leads to lower growth in finland france germany greece italy luxembourg netherlands portugal spain sweden and the united kingdom whereas it stimulates growth in austria belgium denmark and ireland however a simultaneous decline in the wage share leads to an overall decline in eu15 gdp hence eu15 as a whole is a wage led economy furthermore austria and ireland also experience negative effects on growth when they decrease their wage share along with their trading partners the results indicate that a decline in the wage share has had significant negative effects on growth in the eu15 countries and supports the case of wage coordination we present different wage led recovery scenarios taking into account further effects of a change in the wage share on prices nominal unit labour costs investment and net exports

monetary policy and macroeconomic stability under alternative demand regimes in this paper we analyse the interaction of macroeconomic activity and the dynamics of real wages from a theoretical perspective by means of a system dynamic approach we investigate the economic viability of wage and profit led demand regimes by analysing not only the effect of real wages on output but also the feedback mechanisms of macroeconomic activity on the real wages furthermore in this context we focus on the role of monetary policy as a macroeconomic stabilisation mechanism in the two mentioned demand regimes

determinants of labour s income share in the era of financialisation numerous studies have analysed the decline in the labour share of income but only few have linked it to the increase in financialisation the process of financialisation can roughly be described as an increasing importance of the financial sector that had an impact on the distribution between wages and profits on the one hand and retained earnings and financial income in the form of dividends and interests on the other hand this article seeks to explore the relationship between financialisation and labour s share of income using a time series cross sectional dataset of 13 countries over the time period from 1986 until 2007 the results suggest that there is indeed a relationship between increasing dividend and interest payments of non financial corporations and the decline of the share of wages in national income other factors that can account for the decline relate to globalisation and a decrease in the bargaining power of labour

alternative closures again a comment on growth distribution and inflation marglin 1984a b has recently made a most valuable contribution to the study of econ omic growth and income distribution by showing that the neoclassical neo keynesian and neo marxian approaches can be interpreted as providing alternative rules which close an underdetermined system comprising a production equation and a price equation this exercise provides simple models illustrating the essence of each tradition and allows easy comparison to be made between them however a problem with the exercise of which marglin is aware is that those partial to particular traditions may find his reading of the essence of their approach to be inadequate some of those who may loosely be identified as belonging to the neo marxian and neo keynesian tradition in particular will find some central elements of their theories having no place in marglin s models perhaps the most important concerns the possible stimulative effects of greater income equality on growth a higher real wage could increase the level of consumption in the economy increase effective demand induce firms to invest more and raise the rate of growth of the economy 1 such a story cannot be told by marglin s models in which the relationship between growth measured by the rate of growth of output and income distribution measured by the real wage is inverse criticisms of this type may imply that there may be problems inherent in marglin s comparative method or in the way his exercise is conducted i shall argue that the latter is the case and suggest how it can be rectified without damaging the nature of the exercise the problem lies in marglin s slipping in without acknowledgement strong econ omic asumption in his underdetermined model which supposedly has minimal economic

personal income inequality and aggregate demand this paper presents a theoretical and empirical investigation of how changes in the size distribution of income can aect aggregate demand and the demand regime of an economy after presenting empirical evidence for the us economy that the propensity to save increases signicantly from the bottom to the top quintile of wage earners we demonstrate that more equal distributions always lead to higher output in the traditional neo kaleckian macroeconomic model we also present conditions under which a reduction of income inequality among workers turns demand more wage led this view is supported by the results of an econometric study for the united states 1967 2010 which show that the rise after 1980 in income inequality has made the us economy more prot led

distribution aggregate demand and productivity growth theory and empirical results for six oecd countries based on a post kaleckian model empirical research based on the bhaduri marglin variant of the kaleckian model has recently shown that aggregate demand in many medium sized and large open economies tends to be wage led in the medium to long run even in a period of increasing globalisation in this paper we extend this type of analysis and integrate the effects on productivity growth theoretically and empirically productivity growth is introduced into the theoretical model making use of the verdoorn effect or of kaldor s technical progress function and hence of a positive relationship between gdp or capital stock growth and productivity growth further on a cost push or marx hicks effect and hence a positive impact of real wage growth or the wage share on productivity growth is taken into account in the empirical part we estimate productivity growth equations for six countries introducing these two effects finally economic policy conclusions are drawn

internal devaluation in a wage led economy the case of spain the aim of this paper is to use the theoretical distinction between wage led and profit led economies to consider the impact of internal devaluation policy on gdp growth for the case of spain we assess to what extent wage devaluation in spain has proven useful vis a vis triggering an exportled strategy boosting aggregate demand and overcoming the crisis for said purpose we estimate a bhaduri marglin model drawing on quarterly data from eurostat and we expand the traditional model to take into account the effect of private debt on consumption and investment our main conclusion is that the spanish economy can be characterized as a wage led economy and that therefore a wage share decrease proves counterproductive to growth according to our calculations internal devaluation policy detracted an average of 0 3 percentage points of annual economic growth during the period 2010 2016

the economic consequences of political donation limits the economic consequences of limits on political donations depend on the degree of political competition donors who are ideologically aligned with candidates decide how much to contribute to their own candidate they may benefit from rent seeking by their own candidate but dislike rent seeking by the opposition increased rent seeking by politicians thus generates campaign contributions for themselves but also mobilizes donations to the opposing candidate potentially to a greater extent this latter effect acts as a deterrent to rent seeking when contributions finance electoral campaigns and positively affect election chances when political competition is low incumbent donors outnumber opposition donors and limits reduce rent seeking when political competition is high donors are equalized and laissez faire reduces rent seeking consistent with these hypotheses data from the us states suggest that limits are associated with better policies and stronger growth performance at low levels of political competition whilst laissez faire is preferred when political competition is high

the effects of income distribution and fiscal policy on aggregate demand investment and the budget balance the case of europe this paper develops a multi country post kaleckian model that incorporates the role of the government one key novelty of the model is that it integrates cross country effects of both changes in income distribution and fiscal policy the model is used to estimate econometrically the effects of income distribution and fiscal policy on the components of aggregate demand and the budget balance in eu15 countries the results show that a simultaneous increase in the wage share in all eu15 countries would increase demand and the primary budget balance in all countries a simultaneous increase in government spending turns out to boost economic activity in all the eu15 countries indicating the positive economic effects of expansionary fiscal policy moreover a progressive tax policy that would be implemented simultaneously at the eu level would lead to an increase in output in all countries

unemployment and the real wage the economic basis for contesting political ideologies using the keynesian theory of effective demand this paper demonstrates how particular models such as that of cooperative capitalism enunciated by the left keynesian social democrats the marxian model of profit squeeze emphasizing distributive conflict and even the conservative model relying on supply side stimulus fit in as particular variants of a more general theoretical scheme through a reconstruction of the familiar is schedule the argument is weaved around the theme of the relations between unemployment and real wage in the context of both a closed and an open economy to explain the common macroeconomic basis of contesting ideologies copyright 1990 by oxford university press

financialisation and the slowdown of accumulation over the past decades financial investment of non financial businesses has been rising and accumulation of capital goods has been declining the first part of the paper offers a novel theory to explain this phenomenon financialization the shareholder revolution and the development of a market for corporate control have shifted power to shareholders and thus changed management priorities leading to a reduction in the desired growth rate in the second part the link between accumulation and financialization is tested econometrically by means of a time series analysis of aggregate business investment for usa uk france and germany extensive test of robustness are performed for the first three countries evidence that confirms the negative effect of financialization on accumulation is found author s abstract

labour share decline financialisation and structural change the purpose of this article is to explain the determinants behind the decline of labour share in the last three to four decades in oecd countries in our view this decline was determined by financialisation and was deepened by the structural changes that occurred almost simultaneously in those economies financialisation or finance dominated capitalism from the 1980s onwards was a key element in the strategic offensive of the advanced countries dominant classes to appropriate higher shares of national income and to restore their control over the political process a control that had been threatened by a generalised advancement of the labour movement in the 1970s the development of a finance dominated capitalism was helped by the process of globalisation which affected not only oecd countries but also many others a new though unstable macroeconomic model emerged which we will call financial capitalism in financial capitalism trade unions lost power vis a vis capital labour flexibility increased enormously and a structural change from manufacturing to services was accelerated in rich countries this resulted in negative consequences for labour share and income inequality after having provided a theoretical discussion of the determinants of the compression of the wage share making reference to the relevant literature we submit our hypotheses to empirical scrutiny performing a panel data analysis on 28 oecd countries the results of the estimations provide support to the theoretical argument

endogenous economic growth a new approach this new approach incorporates on the demand side the problem of effective demand and unemployment while rejecting on the supply side the oversimplistic use of a production function with or without capital labour substitution the focus on the adoption and diffusion of labour productivity growth permits viewing supply as being driven endogenously by inter class conflict over distribution as well as inter class conflict among rival firms over market shares the result is a race between growth rates in labour productivity and in the real wage rate which drives demand and productivity growth on the one hand while making wage share reasonably constant on the other the existence and stability properties of the steady state are also examined copyright 2006 oxford university press

some instability puzzles in kaleckian models of growth and distribution a critical survey we tackle the issue of the possible instability of the kaleckian distribution and growth model distinguishing between keynesian and harrodian instability we review various mechanisms that have been proposed by critics of the kaleckian model to tame harrodian instability while bringing back the rate of utilisation to its normal rate we find that the mechanisms that have been suggested are far from convincing therefore we conclude that it may be premature for the critics of the kaleckian model to dismiss the endogeneity of the rate of capacity utilisation in long run growth equilibrium copyright the author 2010 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

offsetting inventory replenishment cycles to minimize storage space abstract in a recent paper murthy n n benton w c rubin p a 2003 offsetting inventory cycles of items sharing storage european journal of operational research 150 304 319 discussed the problem of offsetting inventory replenishment cycles of several items in order to minimize the maximum required storage space they analyzed the case where replenishment cycles are given integer multiples of a basic period and proposed a heuristic to solve the problem while they provided a good analysis of the considered problem the proposed heuristic produces less interesting results in the following a simpler more efficient and easier to implement heuristic is proposed numerical results are provided to prove its superiority

debt driven growth wealth distribution and demand in oecd countries the paper investigates the effects of changes in the distribution of income and in wealth on aggregate demand and its components we extend the bhaduri and marglin 1990 model to include personal income inequality as well as asset prices and debt this allows for an evaluation of the wage or profit led nature of demand regimes of the expenditure cascade argument frank et al 2010 and several hypotheses regarding the effects of wealth and debt our estimates are based on a panel of 18 oecd countries covering the period 1980 2013 for the full panel the average demand regime is found to be wage led we fail to find effects of personal inequality but do find strong effects of debt and property prices which have been the major drivers of aggregate demand in the decade prior to the 2007 crisis

technology demand and distribution a cumulative growth model with an application to the dutch productivity growth slowdown this paper argues that the case for real wage growth restraint and the consequent restoration of profitability which the mainstream consensus regards as a necessary condition for sustained output and productivity growth is based on weak foundations because it neglects the negative impact of wage moderation on productivity growth using a general keynesian growth model which integrates a wage led or profit led demand regime and a productivity regime incorporating the productivity growth enhancing effects of higher demand and higher real wages the conditions are identified under which real wage restraint fails to raise output and productivity growth the model is applied empirically to the netherlands 1960 2000 copyright 2006 oxford university press

europe s hunger games income distribution cost competitiveness and crisis the dominant view both on the mainstream right and on the left holds that the eurozone crisis is a crisis of labour cost competitiveness with trade imbalances and hence foreign indebtedness being driven by divergences in relative unit labour costs rulcs between surplus and deficit countries to re balance eurozone growth the mainstream solution is a deflationary policy of internal devaluation i e cutting the wage share by as much as 30 in the deficit countries the progressive view holds that the surplus countries should adjust by raising their wage shares we argue that both sides of this debate are wrong and unhelpful europe s trade imbalances are determined by domestic and world demand whilst rulc divergences play only a negligible role eurozone growth can only be revived when eurozone demand growth is restored not by lowering wages here and or raising them there the current deflationary adjustment forced on the wage led economies of greece italy portugal and spain is self destructive it is a confidence killer not only deepening the free fall of southern european incomes but also damaging their productive base and productivity growth the outlook is depressing further increases in already high unemployment rates inequality measures and poverty rates inconceivable in prosperous europe just a few years ago and arguably dystopian