OECD Growth Report.

The OECD has released its report on the growth prospects of its membership. To no one’s great surprise, the eurozone comes in for criticism:

But he said his main concern was the eurozone, which has suffered from high oil prices and the rise of the euro against other currencies. "Some European countries also suffer from a chronic lack of resilience when it comes to economic shocks," said Mr Cotis.

This, to me, is at the heart of the entire debate over what sort of economy we want to have. I understand the desire of people to have stability, security, can see how various lefties/social democrats are reflecting that desire in the policies that are pushed. Job security, worker’s rights, a reigning in of free markets, a lessening of the economic buffeting that people can be subject to. All perfectly rational.

However (and there always is a however now isn’t there?) I would in response want those promoting such things to accept that they come at a cost, a loss of flexibility in the economy. If the economic environment was unchanging that would not matter very much, for little change means little requirement for flexibility. Unfortunately, the economic environment does change, so we have a need for at least the possibility of flexibility to respond to it. It might be relatively short term things like the bounce in the price of oil, medium term things like the US deficits, long term things like the rise of China or changes in underlying technology.

Of course, there needs to be a balance in such things, a trade off between people’s desire for security and the need for such flexibility, but what the OECD seems to be saying above is that the eurozone has gone too far in one direction, too much security in the short term, leading to a loss of the needed ability to cope with change, and thus a loss of security in the long term. As those 10% of Germans  unemployed, 20% of French youth so, could tell you.