The real cost of euro austerity

27 May, 2016 at 16:58 | Posted in Economics | 2 Comments

The euro has taken away the possibility for national governments to manage their economies in a meaningful way — and in Greece the people has had to pay the true costs of its concomitant misguided austerity policies.

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The unfolding of the Greek tragedy during the last couple of years has shown beyond any doubts that the euro is not only an economic project, but just as much a political one. What the neoliberal revolution during the 1980s and 1990s didn’t manage to accomplish, the euro shall now force on us.

But do the peoples of Europe really want to deprive themselves of economic autonomy, enforce lower wages and slash social welfare at the slightest sign of economic distress? Is inreasing income inequality and a federal überstate really the stuff that our dreams are made of? I doubt it.

History ought to act as a deterrent. During the 1930s our economies didn’t come out of the depression until the folly of that time — the gold standard — was thrown on the dustbin of history. The euro will hopefully soon join it.

Economists have a tendency to get enthralled by their theories and models, and forget that behind the figures and abstractions there is a real world with real people. Real people that have to pay dearly for fundamentally flawed doctrines and recommendations.

Let’s make sure the consequences will rest on the conscience of those economists.

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2 Comments

  1. I totally agree with Prof. Syll’s sentiments regarding austerity and the Euro.
    It is also good (and unusual) that Prof. Syll bases his argument in part on empirical evidence.
    According to Prof. Syll: “During the 1930s our economies didn’t come out of the depression until the folly of that time — the gold standard — was thrown on the dustbin of history.”
    Thus his argument here is based in part on econometric time-series analysis of several countries in the 1930s. This is surprising given Prof. Syll’s numerous methodological diatribes against econometrics.

    Unfortunately, no reference or details of this econometric research are given. From the limited information given here, the methodology seems crude and inconsistent with Prof. Syll’s views regarding econometrics. Just a few fundamental questions are mentioned below, drawn from previous posts of Prof Syll:

    – Are the alleged economic regularities merely the result of a man-made mathematical-statistical ‘nomological machine’? What is the “data-generating process”?
    – Is valid to ‘export’ 80 year old estimated relationships to our ‘target system’ [the Eurozone today] without ceteris paribus assumptions which diminish our understandings, explanations or predictions of real economic systems?
    – Can we be sure that the causal mechanisms operating in the “real world social target systems” [the Eurozone] do not operate with “ever-changing and unstable combinations where the whole is more than a mechanical sum of parts”?
    – Can we be sure that there are no other (non-quantifiable) variables – of vital importance and although perhaps unobservable and non-additive not necessarily epistemologically inaccessible – that were not considered?
    – Are the processes and events being analysed of the Georgescu-Roegen-Keynesian uncertainty type? Can we fully pre-specify how people will decide when facing uncertainties and ambiguities that are ontological facts of the way the world works? Isn’t it better to conclude “we simply do not know”.

    Comment by Kingsley Lewis— 28 May, 2016 #

  2. “But do the peoples of Europe really want to deprive themselves of economic autonomy, enforce lower wages and slash social welfare at the slightest sign of economic distress?”

    Apparently they do. The majority of the Spanish and Greek populations want to stay in the EZ despite gross loss of sovereignty and the imposed hardships. That’s the crazy fact.

    Comment by Henry— 27 May, 2016 #


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