Fighting Unemployment: The Limits of Free Market Orthodoxy Book

With much of Europe plagued by high levels of unemployment, it became the conventional wisdom in the 1990s that deregulated labor markets - the "American Model" - were a necessary condition for good employment performance. Leading policy and banking institutions like the Organization for Economic Cooperation and Development (OECD), the International Monetary Fund (IMF) and the European Central Bank and many mainstream economists strongly advocated reforms that would fundamentally transform the economies of many developed countries by limiting union strength, reducing wages and raising inequality, increasing job insecurity (and perhaps decreasing efficiency) by repealing employment protection laws and sharply scale back unemployment and social welfare benefits. Fighting Unemployment provides a critical assessment of this free market orthodoxy. Through both cross-country statistical analyses and country case studies, leading economists from seven North American and European countries argue that the accepted view has greatly exaggerated the extent to which the unemployment problem can be blamed on welfare state institutions, that there is no simple tradeoff between unemployment and wage inequality, and that the justification for dismantling the welfare state to fight unemployment rests perhaps more on free market ideology than on the empirical evidence. The larger message of this book is that many labor market models - ranging from the relatively free markets of the U.S. to the much more regulated markets of Scandinavia - are compatible with low unemployment, but strong labor market institutions are required to limit the incidence of very low wages, high earnings inequality, and excessive job insecurity.