The main problem explained in this article is why the unemployment so high in Europe. The author Olivier J. Blanchard does an in depth analysis of the different hypothesis used to describe the high (over 10%) unemployment rate in Europe. As we can see in Europe today and back in the 80s when this article was written, the unemployment rate is two to three times as high as the American unemployment rate. The author believes that standard theories, the Keynesian and classical theories of macroeconomics fluctuations, do not apply in the European case. Instead, a theory of “fragile equilibrium”, referring to a change in the rate of unemployment due to a past event resulting in changes of the slopes of the labor demand and supply curves.
the macroeconomics development in England over the 1980s to show standard theories did not succeed in making useful contact with what the situation really was. Standard theories suggest that the high current rate of unemployment could be the result of structural factors which the author disagrees with by showing that England in the past ten years has made more moves toward a free market economy (“against welfare state, attacking union power”) than ever before.
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