A smaller labour force is required to meet extant demand, leading to a vicious cycle of lower demand and employment
The economy has not behaved the way economic textbooks prescribe ever since the global financial crisis broke over a decade ago. Economic policies are proving to be singularly ineffective in reviving the global economy. Governments have been running levels of fiscal deficits and public debt that most economists baulk at. Central banks have been experimenting with unorthodox policies such as quantitative easing, zero interest rate and now negative interest rate policy. But all the king’s men and horses have been unable to put Humpty Dumpty back together again.