Beppe Grillo, the comedian-turned-rebel leader of Italian politics, must have laughed heartily. No sooner had he announced to supporters that the euro was “a total disaster” than the currency union was driven to the brink of catastrophe once again.
Grillo launched a campaign in Rome last weekend for a 1 million-strong petition against the euro, saying: “We have to leave the euro as soon as possible and defend the sovereignty of the Italian people from the European Central Bank.”
Hours later markets slumped on news that the 18-member eurozone was probably heading for recession. And there was worse to come. Greece, the trigger for the 2010 euro crisis, saw its borrowing rates soar, putting it back on the “at-risk register”. Investors, already digesting reports of slowing global growth, were also spooked by reports that a row in Brussels over spending caps on France and Italy had turned nasty …
In the wake of the 2008 global financial crisis, voters backed austerity and the euro in expectation of a debt-reducing recovery. But as many Keynesian economists warned, this has proved impossible. More than five years later, there are now plenty of voters willing to call time on the experiment, Grillo among them. And there seems to be no end to austerity-driven low growth in sight. The increasingly hard line taken by Berlin over the need for further reforms in debtor nations such as Greece and Italy – by which it means wage cuts – has worked to turn a recovery into a near recession.
Even if France and Italy find a fudge to bypass the deficit rule, they will be prevented from embarking on the Marshall Plan each believes is needed to turn their economies around. Hollande wants a EU-wide €300bn stimulus to boost investment and jobs – something that is unlikely to ever get off the ground …
So a rally is likely to be short-lived. Volatility is here to stay. The only answer comes from central bankers, who propose pumping more funds into the financial system to bring down the cost of credit and encourage lending and, hopefully, sustainable growth …
Andy Haldane, the chief economist at the Bank of England, said he was gloomier now than at any time this year. He expects interest rates to stay low until at least next summer.
It’s not a plan with much oomph. Most economists believe the impact of central bank money is waning. Yet without growth and the hope of well-paid jobs for young people, parents across the EU who previously feared for their savings following a euro exit appear ready to consider the potential benefits of a break-up. There is a Grillo in almost every eurozone nation. Now that would bring real volatility.
The UKIP Councillor for Henley on Thames in Oxfordshire has written an odd, homophobic letter to a local newspaper.
David Silvester, who resigned from the Conservative Party over David Cameron’s same-sex marriage policy, has said gay marriage is to blame for Britain’s recent spell of bad weather in a letter to The Henley Standard.
He wrote: “Since the passage of the Marriage (Same Sex Couples) Act, the nation has been beset by serious storms and floods.”
Wooh! Who would have thought anything like that.
Impressive indeed …
Isn’t it just splendid with all these intelligent and unprejudiced conservative politicians …
Photo by barnilsson
During my first ten years traveling back and forth between Lund and Berlin it was still there, even when this photo of yours truly — leisurely reading taz — was taken at Café Einstein back in the summer of 1988.
Had anyone told me then that the wall would soon come tumbling down, I would probably just have shaken my head and laughed. At the time everyone thought it was there for good.
For twenty-five years now I’ve been happy we were all so wrong, so wrong.
For more on the topic, check out this Vox material.
Som väl ingen kunnat undgå i ekonomkretsar har det varit många synpunkter på “jämviktsarbetslösheten” sedan Uppdrag Granskning sände sitt program Jobb-bluffen.
Tyvärr har det mesta av “debatten” bestått av tämligen ovederhäftiga och magsura kommentarer från — både före detta och nuvarande — Riksbanksledamöter och andra etablissemangsekonomer.
Detta förvånar föga med tanke på det tankegods dessa bär med sig i form av Friedmanska idéer om den naturliga arbetslösheten och senare nyklassiska och nykeynesianska diton om NAIRU.
Mer förvånande är väl då att de som man kanske kunde tro skulle stå för alternativen tydligen fullständigt kapitulerat för den nationalekonomiska ortodoxin. Så skriver t ex Ragnar Bengtsson — ivrigt påhejad av Elin Molin och Sandro Scocco — på Arena Idé:
Som Mats Persson, professor i nationalekonomi säger i Uppdrag Granskning är det svårt att veta var jämviktsarbetslösheten ligger men att den fungerar bra som en tankeram. Som med flera nationalekonomiska modeller är osäkerheten stor om hur jämviktslägen och effekter ser ut i praktiken. Ofta fungerar modellerna bättre som tankeramar än som exakta modeller som verkligheten kan prognostiseras efter.
Samtidigt är tanken att riksbanken ska stabilisera konjunkturarbetslösheten så att den ligger omkring jämviktsarbetslösheten, för då når vi inflationsmålet. Om arbetslösheten understiger jämviktsnivån kommer inflationen dra iväg. Därför står riksbanken inför två problem. Det ena är att effekten avsänkt ränta dröjer (1,5-2 år). Det andra att vi egentligen inte vet var jämviktsarbetslösheten ligger.
Bra tankeram? Nej, nej och åter nej!
NAIRU och andra jämviktsarbetslöshetsbegrepp fungerar verkligen inte alls bra som tankeram. I själva verket fungerar de — som inte minst senare tids forskning av exempelvis Engelbert Stockhammer (2011), Özlem Onaran (2012), Roger Farmer (2010), Storm & Naastepad (2012) och andra övertygande visat — monumentalt dåligt som just tankeram.
Som Servaas Storm & C. W. M. Naastepad så riktigt påpekar:
In our extended NAIRU model, labor productivity growth is included in the wage bargaining process … The logical consequence of this broadening of the theoretical canvas has been that the NAIRU becomes endogenous itself and ceases to be an attractor — Milton Friedman’s natural, stable and timeless equilibrium point from which the system cannot permanently deviate. In our model, a deviation from the initial equilibrium affects not only wages and prices (keeping the rest of the system unchanged) but also demand, technology, workers’ motivation, and work intensity; as a result, productivity growth and ultimately equilibrium unemployment will change. There is in other words, nothing natural or inescapable about equilibrium unemployment, as is Friedman’s presumption, following Wicksell; rather, the NAIRU is a social construct, fluctuating in response to fiscal and monetary policies and labor market interventions. Its ephemeral (rather than structural) nature may explain why the best economists working on the NAIRU have persistently failed to agree on how high the NAIRU actually is and how to estimate it.
Så varför detta fasthållande vid ett begrepp som alla — inklusive dess försvarare — medger är dåligt teoretiskt underbyggt och empiriskt nästintill omöjligt att skatta? Jag tror Roger Farmer kommer sanningen nära när han skriver:
Defenders of the Natural Rate Hypothesis might choose to respond to these empirical findings by arguing that the natural rate of unemployment is time varying. But I am unaware of any theory which provides us, in advance, with an explanation of how the natural rate of unemployment varies over time. In the absence of such a theory the NRH has no predictive content. A theory like this, which cannot be falsified by any set of observations, is closer to religion than science.
Britain’s big supermarkets are in trouble … There’s an obvious cause of these troubles. Six years of falling real wages – with maybe more to come – have forced shoppers to become more bargain-conscious and to shift to low-cost stores … This, though, implies that the wage squeeze isn’t just bad for workers but also for at least part of capitalism. Which in turn supports the idea that wage-led growth (pdf) would benefit not just workers but bosses too. Perhaps, therefore, the interests of capital and labour coincide. All would benefit from higher wages …
Britain needs a pay rise because falling wages hit businesses as well as households. Why are they not doing this? It could be, of course, that it’s mistaken. Just because some capitalists would benefit from higher wages it does not follow that all would. However, whilst there has been a debate about wage-led growth in economics blogs, this debate, AFAIK, has barely entered media or business circles.
I fear there’s a reason for this … Workers’ interests … have always been regarded by those in power as a sectional interest opposed to the national interest …
From this perspective, the failure of “business leaders” to even consider the possibility that wage-led growth is in most people’s interests might be an example of a path-dependent belief – an idea that lingers on even if it has outlived its usefulness.
Or is it? Perhaps instead what we are seeing here is what Kalecki called the “class instinct” of capitalists. This tells them that even if higher wages do benefit capitalists in the short-term, they are to be resisted because of their longer-term dangers. After all, if we start empowering workers, where will it lead?
We tend to perceive our identities as stable and largely separate from outside forces. But over decades of research and therapeutic practice, I have become convinced that economic change is having a profound effect not only on our values but also on our personalities. Thirty years of neoliberalism, free-market forces and privatisation have taken their toll, as relentless pressure to achieve has become normative. If you’re reading this sceptically, I put this simple statement to you: meritocratic neoliberalism favours certain personality traits and penalises others …
The sociologist Zygmunt Bauman neatly summarised the paradox of our era as: “Never have we been so free. Never have we felt so power-less.” We are indeed freer than before, in the sense that we can criticise religion, take advantage of the new laissez-faire attitude to sex and support any political movement we like. We can do all these things because they no longer have any significance – freedom of this kind is prompted by indifference. Yet, on the other hand, our daily lives have become a constant battle against a bureaucracy that would make Kafka weak at the knees. There are regulations about everything, from the salt content of bread to urban poultry-keeping.
Our presumed freedom is tied to one central condition: we must be successful – that is, “make” something of ourselves. You don’t need to look far for examples. A highly skilled individual who puts parenting before their career comes in for criticism. A person with a good job who turns down a promotion to invest more time in other things is seen as crazy – unless those other things ensure success. A young woman who wants to become a primary school teacher is told by her parents that she should start off by getting a master’s degree in economics – a primary school teacher, whatever can she be thinking of?
There are constant laments about the so-called loss of norms and values in our culture. Yet our norms and values make up an integral and essential part of our identity. So they cannot be lost, only changed. And that is precisely what has happened: a changed economy reflects changed ethics and brings about changed identity. The current economic system is bringing out the worst in us.
The risks associated with a negative economic shock can vary widely depending on the wealth of a household. Wealthy households can, of course, absorb a shock much easier than poorer households. Thus, it’s important to think about how economic downturns impact various groups within the economy, and how policy can be used to offset the problems experienced by the most vulnerable among us.
When thinking about the effects of an increase in the Fed’s target interest rate, for example, it’s important to consider the impacts across income groups. I was very pleased to hear monetary policymakers talk about the asymmetric risks associated with increasing the interest rate too soon and slowing the recovery of employment and output, versus raising rates too late and risking inflation …
Which mistake is more costly – raising rates too soon versus too late – is not just a technical question about which of the two mistakes is easiest for policymakers to reverse. We also need to ask who will be hurt the most if the Fed makes a policy error on one side or the other. If the Fed raises rates too soon, it is working class households who will be hurt the most by the slower recovery of employment. If it raises rates too late allowing a period of elevated inflation, it is largely those who lend money, i.e. the wealthy, who will feel the impact. Thus, one mistake mostly affects working class households who are very vulnerable to negative shocks, while the other hurts those most able to withstand economic problems.
I don’t mean to pick on monetary policy-makers. I have no doubt that monetary policymakers think about how the Fed’s policies will impact different income groups even if this is not explicit in their discussion of policy options. I also have no doubt that fiscal policymakers think about how their policies impact various income groups. For example, the whole idea behind “trickle-down” economics is that tax cuts motivate those at the top of the income distribution to undertake new economic initiatives that benefit working class households.
Somehow, by helping those least in need of help – the wealthy – we will end up helping those who need it the most. It hasn’t worked in practice — not much trickled down after all, but that hasn’t stopped conservatives from making these claims. Conservatives also think about the impact of fiscal policy on lower income groups and use this as a reason to block or scale back programs such as unemployment compensation or food stamps …
Why do we hear so much about the need to raise interest rates now rather than later, or get the deficit under control immediately despite the risks to households who are most vulnerable to an economic downturn? Those who are most in need – those least able to withstand a spell of unemployment or other negative economic events – have the least power in our political system …
If we are going to be a fair and just society, a society that protects those among us who are the most vulnerable to economic shocks, this needs to change. The necessary change won’t come easily, the entrenched political and economic interests will be difficult to dislodge.
But the current trend of rising inequality in both the economic and political arenas along with the rising economic risks faced by working class households due to globalization, technological change, and a political system that increasingly neglects their interests is not sustainable. If these trends continue unabated, change will come one way or the other. The only question is how.