Episode 167 · 2022-12-25 · 40:35 · Original in Finnish
Worries About the Economy and Unemployment | Mauri Kotamäki | Negotiator 167
Originally published as “Kansantalouden huolet ja työttömyys | Mauri Kotamäki | Neuvottelija 167”
Mauri Kotamäki, chief economist of the Finnish export credit agency Finnvera, goes through the macro picture at the turn of the year: central banks slowing the pace of rate rises, inflation turning first in the United States and later in Europe. The conversation also asks whether fiscal dominance was ever the binding constraint many expected it to be, and why accelerating inflation in Japan is larger news than it looks. Kotamäki uses the data to separate how much of the rise in employment is policy and how much is world growth, and why Finland's structural unemployment stays high regardless. It closes on electricity subsidies, the self-employed pension reform, and a comparison between the Chinese and Soviet growth models.
Core theses
- Most of the improvement in Finnish employment tracks world growth rather than domestic policy, and the two are separable in the data.
- Structural unemployment is untouched by the cycle, which is why a strong employment number can coexist with an unchanged structural problem.
- Fiscal dominance was widely expected to bind before inflation turned, and it did not — a forecast worth marking as it was.
- Japan's inflation turning is the larger signal, because it ends the one standing counter-example to the whole framework.
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Summary
Mauri Kotamäki, chief economist of the Finnish export credit agency Finnvera, goes through the macro picture at the turn of the year: central banks slowing the pace of rate rises, inflation turning first in the United States and later in Europe. The conversation also asks whether fiscal dominance was ever the binding constraint many expected it to be, and why accelerating inflation in Japan is larger news than it looks. Kotamäki uses the data to separate how much of the rise in employment is policy and how much is world growth, and why Finland’s structural unemployment stays high regardless. It closes on electricity subsidies, the self-employed pension reform, and a comparison between the Chinese and Soviet growth models.
Separating policy from the world economy
The useful move in this episode is arithmetic rather than rhetorical. Employment rose; the question is how much of that is the government’s doing and how much is a world economy that was growing anyway. Kotamäki does the decomposition rather than asserting a share, which is what makes the answer worth citing in either direction.
The part the cycle does not reach
Structural unemployment sits underneath the cycle and does not move with it. That is why a good headline employment figure and an unchanged structural problem are not a contradiction, and why Kotamäki treats the two numbers as answers to different questions.
Japan as the counter-example that ended
Japan spent decades as the standing exception to the story that money and inflation are connected. Inflation accelerating there removes the exception, which is a bigger event for the framework than its size in the world economy suggests.
Watch
The recording lives on the Neuvottelija channel: Kansantalouden huolet ja työttömyys | Mauri Kotamäki | Neuvottelija 167. A Finnish edition of this episode is published at www.neuvottelija.fi.
In depth
The Neuvottelija AI editions carry a long-form write-up of this episode: English · suomeksi.
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People and topics
Guests: Mauri Kotamäki
Topics: Finnish Economy & Policy