Austerity measures aggravate the euro crisis

29 January, 2012 at 12:22 | Posted in Economics | 2 Comments

Simon Wren-Lewis - economics professor at Oxford University – gets it basically right on the counterfinality of solving the euro crisis with austerity measures:

We can put it this way. If the problem is simply one of government debt, and we have good reason to believe there is too much debt in most Eurozone countries (including Germany), then general austerity is the order of the day. Whereas the markets believe Germany will undertake austerity of their own free will, in other countries neither the markets nor the ECB believe this, so we need a continuing but controlled crisis to force these countries to act. However, if the problem is external imbalances and competitiveness, we have a danger of ‘competitive austerity’. We need more austerity outside Germany than within Germany to correct imbalances between the two. The more Germany adopts a contractionary fiscal policy the further countries outside Germany are forced to go. The end result is not only general stagnation within the Eurozone, but recession so acute in some countries that political turmoil may follow, possibly leading to the breakup of the Eurozone.
 
In other circumstances, competitive austerity might not be a problem, because the ECB could counteract any general stagnation by reducing interest rates. There are two reasons why this is not a way out today. First, by raising interest rates last year, the ECB appears to be too preoccupied by short term inflation, so they may not act when they should. Second, and more fundamentally, they are close to a zero lower bound, and so have lost the ability to prevent a second recession through monetary policy. So unlike the case where the problem is risk premia on government debt, the ECB cannot be sure to act effectively in a Eurozone recession.
 
This suggests that the key problem for the Eurozone is similar to that faced by the US, the UK and others. Too much austerity in the short term is holding back or even killing the recovery from the last recession, because monetary policy has lost its power in a liquidity trap. In these other countries this excessive austerity will ‘only’ result in significantly higher unemployment for many years to come. In the Eurozone the consequences could be more dramatic.   
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  1. Har du läst den marxistiske ekonomen Andrew Klimans senaste bok The Failure of Capitalist Production: Underlying Causes of the Great Recession?

    Han ska här kritisera underkonsumtions-teorin som i olika varianter företräds av såväl vänster-keynesianer (ex. Krugman) som marxister (ex. David Harvey, Richard Wolff). Kliman menar bland annat att det inte är korrekt att påstå att arbetarnas reallöner och andel av nationalinkomsten minskat eller att kapitalister sedan 1980 investerat en mindre andel av sina profiter i produktion – tvärt om!

    Istället bygger han upp ett starkt försvar för den ofta avfärdade teorin om profitkvotens fallande tendens som enligt Kliman är det som bäst förklarar krisen.

    Andrew Kliman and The Failure of Capitalist Production

    http://thenextrecession.wordpress.com/2011/12/08/andrew-kliman-and-the-failure-of-capitalist-production/

    New Book: The Failure of Capitalist Production

    http://www.marxisthumanistinitiative.org/economic-crisis/new-book-the-failure-of-capitalist-production.html

    • Tack för länkarna.
      Måste erkänna att jag inte läst Kliman, men det låter spännnande, så jag ska försöka ta mig tid och titta på boken och eventuellt kanske återkomma med ett inlägg.
      Inom parentes sagt har jag de senaste 10 åren kanske inte riktigt hållt mig a jour vad avser den nyare marxistiska ekonomiteorin (bortsett från den s k analytiska marxismen, som å andra sidan ju inte har ett dyft med marxism att göra), mest därför att jag tyckt det vara svårt att operationalisera de marxska begreppen i mer empiriadekvata ekonomisk-politiska sammanhang. Men eftersom jag ju gjort mig känd som en hård kritiker av den neoklassiska hegemonins självgoda inskränkthet ska jag såklart inte själv falla offer för samma brist på mångfald och vidsynthet!


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