Environmental Engineering Reference
In-Depth Information
growth effectively stopped for a decade. This has led to much soul-searching
and numerous dire predictions of Japan's terminal decline. Yet after some
years neither the economy nor the society had imploded. Indeed, prominent
Japanese economists and commentators began to argue that a zero-growth
economy is to be welcomed.
Some Japanese commentators note that, while official unemployment
has grown to 5 per cent, the slump has provided an opportunity to change
entrenched work practices that have been literally killing people through
overwork and to trigger a cultural renaissance that might rescue Japan from
the emptiness of its affluence. Economic stagnation has provided the oppor-
tunity for Japanese society to slow down and reconsider the emphasis that
the Japanese growth machine has given to expansion at the cost of families,
communities and the natural environment.
2 Unless the growth rate is maximised unemployment will increase inexorably
There is no doubt that unemployment in our societies causes a great deal of
misery, but we must question whether maximising the growth rate is the
only or the best way to deal with it. In economics, the informal relationship
known as 'Okun's law' suggests that the rate of unemployment will fall by 1
per cent if the real economic growth rate reaches 2.5 per cent above the long
run average growth rate. If we embrace slower growth rates, and eventually
perhaps a stationary state, is this not a recipe for mass unemployment? The
relationship between growth of the economy and growth of employment is
more complicated than Okun's law allows. For example, the relationship
depends heavily on legal, political and cultural institutions as well as the
nature and source of economic growth. Economic growth fuelled by
increased consumption spending among high income earners will create sig-
nificantly fewer jobs than if the same amount of economic growth were to be
fuelled by government expenditure on nurses and teachers.
Moreover, since the 1970s chronic unemployment in Europe has often
seemed intractable even in the presence of strong growth over many years, a
situation sometimes referred to as 'jobless growth'. In other words, the rela-
tionship between economic growth and employment growth is highly con-
ditional. Certainly, there is no 'desire' on the part of capitalism to create jobs
and resolve unemployment. Job growth is an accidental, rather than a cen-
tral, element of the modern economic system. Indeed, it is often the case that
the financial markets react poorly to a reduction in unemployment, sparking
a sell-off that helps dampen the economy and shed jobs.
