When recessions become prolonged and long-term unemployment rises, the conservative denial machinery always scapegoats the most disadvantaged by recommending cuts to welfare to make people more desperate. This is dressed up in terms that attempt to make this sort of policy sound reasonable – like we should all be adventurous and entrepreneurial. The facts are that mass unemployment represents a macroeconomic failure that can be addressed by expansionary fiscal and/or monetary policy. It has nothing to do with the provision of the miserly amounts that are given to the unemployed via income support arrangements. Cutting those benefits will not cure involuntary unemployment. In all likelihood, cutting benefits will make the aggregate demand shortfall that caused the unemployment to worsen. The result is that the cuts will only make the lives of the unemployed more desperate than they already are. It is time that the conservatives learned about macroeconomic constraints....
Macroeconomics teaches us that individual choice can be rendered powerless as a result of the presence of macroeconomic constraints – most usually spending constraints on the product market that ration the number of overall jobs and working hours that will be on offer at any point in time to an economy.
Once an economy is operating under such a demand constraint, the supply-side of the economy loses traction – that is, no longer influences the market outcome, which renders much of the orthodox labour market analysis irrelevant, if not false.Bill Mitchell — billy blog
Macroeconomic constraints render individual action powerless
Ten dogs, nine bones.