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In New Classical theory, periods of declining employment - business cycle downturns - may be caused by an unexpected decline in aggregate demand, which leaves workers mistakenly holding out for nominal wages that exceed the new market-clearing level.

For those unfortunate enough to experience it, long-term unemployment - now, as in the 1930s - is a tragedy. And, for society as a whole, there is the danger that the productive capacity of a significant portion of the labour force will be impaired.

The more the division of labor and the application of machinery extend, the more does competition extend among the workers, the more do their wages shrink together.

In addition to joblessness, of course, by the working of supply and demand, when you have a larger number of people unemployed, wages do not rise at the normal level, so that we had last year a drop in real wages.

The fallacy of the neoclassicals is their tenet that total employment, though hit by shocks, can be said always to be heading back to some normal level.

In the U.S. the powerful critics of austerity such as Paul Krugman and Robert Reich rightly identify the decline of 'labor' as a problem, and renewing trade unionism part of the solution. Our opportunity is to make the same case in the UK.

Increased jobs are the consequence of increased trade. Increasing jobs more than output implies a fall in productivity and standards of living. That surely cannot be our goal.

Productivity - the amount of output delivered per hour of work in the economy - is often viewed as the engine of progress in modern capitalist economies. Output is everything. Time is money. The quest for increased productivity occupies reams of academic literature and haunts the waking hours of C.E.O.s and finance ministers.

The pace of increases in labor compensation provides another possible indicator, albeit an imperfect one, of the degree of labor market slack.

In the late 1960s, the New Classical economists saw the same weaknesses in the microfoundations of macroeconomics that have motivated me. They hated its lack of rigor. And they sacked it.