J. Bradford DeLong is Professor of Economics at the University of California at Berkeley and a research associate at the National Bureau of Economic Research. He was Deputy Assistant US Treasury Secretary during the Clinton Administration, where he was heavily involved in budget and trade negotiations. His role in designing the bailout of Mexico during the 1994 peso crisis placed him at the forefront of Latin America’s transformation into a region of open economies, and cemented his stature as a leading voice in economic-policy debates.
APR 29, 2016, Project Syndicate
BERKELEY – For countries where nominal interest rates are at or near zero, fiscal stimulus should be a no-brainer. As long as the interest rate at which a government borrows is less than the sum of inflation, labor-force growth, and labor-productivity growth, the amortization cost of extra liabilities will be negative. Meanwhile, the upside of extra spending could be significant. The Keynesian fiscal multiplier for large industrial economies or for coordinated expansions is believed to be roughly two – meaning that an extra dollar of fiscal expansion would boost real GDP by about two dollars.
Some point to the risk that, once the economy recovers and interest rates rise, governments will fail to make the appropriate adjustments to fiscal policy. But this argument is specious. Governments that wish to pursue bad policies will do so no matter what decisions are made today. And to the extent that this risk exists at all, it is offset by the very tangible economic benefits of stimulus: improved labor-force skills, higher business investment, faster business-model development, and new, useful infrastructure. Den Rest des Beitrags lesen »
Jean Pisani-Ferry is a professor at the Hertie School of Governance in Berlin, and currently serves as Commissioner-General of France Stratégie, a policy advisory institution in Paris.
MAR 31, 2016, Project Syndicate
PARIS – If you do not understand what is happening to the eurozone economy, you are not alone. One day we are told that growth is definitely passé; the next that recovery is on track; and the third that the European Central Bank is considering sending checks to all citizens to boost output and revive inflation. Rarely has the economic picture been so confusing.
Start with medium-term growth. Since the global financial crisis erupted in 2008, productivity has grown at a snail’s pace. Oddly, the smartphones’ magic computing power does not seem to offset the slowdown in efficiency gains in manufacturing and standard services. For almost a decade, annual productivity growth in the advanced economies has been close to 1%, versus 2% previously.
This may be a temporary lull or a statistical illusion. But with no evidence that it will end, policymakers have downgraded their forecasts. Since 2010, the US Congressional Budget Office has lowered its outlook for productivity growth in the decade to 2020 from 25% to 16%; so has the United Kingdom’s Office for Budget Responsibility, reducing its forecast from 22% to 14% productivity growth. Everyone is adjusting to leaner times. Den Rest des Beitrags lesen »
Simon Tilford is Deputy Director at the Center for European Reform.
OCT 28, 2015, Project Syndicate
LONDON – Spain is the eurozone’s latest poster child for austerity and structural reforms. Its economy has expanded for eight consecutive quarters, steadily gaining momentum and easily outperforming the rest of the currency union. Export growth has matched that of Germany; unemployment has fallen by over a million people in two years; investment is picking up; and industrial production has jumped 5% in the last 12 months.
But Spain’s recovery is not quite what it seems, and there is scant evidence that what progress the country has made is the result of austerity and reforms.
In fact, far from adhering to the usual austerity narrative – according to which fiscal consolidation revives business confidence and thus investment and job creation – Spain’s return to growth partly reflects the easing of austerity since early 2014. The country has sensibly resisted pressure from the European Commission to take more aggressive steps to reduce its deficit, which, at 5.9% of GDP, was the European Union’s third highest last year. Den Rest des Beitrags lesen »
Russland will große Einschnitte bei den Staatsausgaben vornehmen. Die Austeritätspolitik ist eine Reaktion auf die sich verschlechternde Lage wegen des Rohstoff-Schocks. Die Regierung in Moskau schließt auch Einschnitte im Sozialsystem nicht aus.
Predators and prey. The homeless and left-behind are at the bottom (“decomposers”). Most of everyone else is in the next layer up (“producers”). The rest, from the well-off to the wealthy, are “consumers.” Interesting how that language works, isn’t it? (source)
by Gaius Publius
A recent piece I did on the British Labour politician Tony Benn featured a speech that offered a “history of neoliberalism”(click here to read and listen). Near the beginning of the speech, Benn said, “This country and the world have been run by rich and powerful men from the beginning of time.” Consider that for a moment, what that means about the arc of human history.
Near the end of his short talk, referencing the Thatcher (and Reagan) counterrevolution against the great populist gains of the 19th and 20th centuries, he said that this is “what the whole [modern] crisis is about, the restoration of power to those who’ve always controlled the world, the people who own the land and the resources and all the rest of it.”
That radical re-transformation of the world back to control by its original and longtime owners, “rich and powerful men,” was begun in England by Margaret Thatcher and several deliberate policies. Benn (my emphasis): “So privatization is a deliberate policy, along with the destruction of local democracy and the destruction of the trade unions to restore power back to to where it was.”
Andrés Velasco, a former presidential candidate and finance minister of Chile, is Professor of Professional Practice in International Development at Columbia University’s School of International and Public Affairs. He has taught at Harvard University and New York University, and is the author of numerous studies on international economics and development.
SEP 30, 2015, Project Syndicate
SANTIAGO – Latin America has a new export: populist backlash. It first landed on the warm and receptive shores of the Mediterranean, nurturing support for Greece’s Syriza and Spain’s Podemos. Now it has reached the United Kingdom.
Corbynismo, the ideology of the long-marginalized British MP Jeremy Corbyn – who admired Venezuela’s late president, Hugo Chávez, thinks Vladimir Putin was justified in invading Ukraine, and now heads Britain’s venerable Labour Party – sounds familiar to anyone acquainted with Latin America. It calls for monetary financing of fiscal deficits (now called “people’s quantitative easing”), nationalization of industry (beginning with the railroads), and an end to competition and the private provision of public services. This is the stuff that former Prime Minister Tony Blair and his supporters thought – wrongly, it seems – they had consigned to the dustbin of history.
Of course, this new populism (Hillary Clinton’s Democratic rival Bernie Sanders is also a card-carrying member) has much fodder. As Martin Wolf has emphasized, the 2008-2009 financial crisis made voters understandably angry at “greedy plutocrats and their lackeys in politics and media.” Nobel Laureate Paul Krugman (who sometimes sounds like a Corbynista, but isn’t one) and Wolfgang Munchau stress that Europe’s moderate left lost popular support by being too ready to embrace the extreme version of fiscal austerity demanded by Germany and its orthodox allies. Den Rest des Beitrags lesen »
Researcher, Peterson Institute for International Economic
The public narrative on austerity is shaped by simple scatter plots purporting to portray the large negative impact of fiscal ‘austerity’ on economic growth. This column argues that, while recognising concerns about causality, economists should systematically explore correlations and multiple regressions, and test their robustness. The results reveal a mixed picture, lending partial support to the notion that fiscal choices and output growth are empirically associated.
The Global Crisis that began in 2008 has rekindled the debate on the impact of fiscal policy on economic growth. At the outset of the Crisis the focus was on whether fiscal stimulus boosts economic growth. Since 2011 or so, with the Crisis becoming more severe in some European countries and Greece in particular, the emphasis has shifted to whether fiscal adjustment should be seen as part of the emerging ‘consensus’ view (Baldwin and Giavazzi 2015) on the causes of the output loss. Several researchers have delved into the question using novel, sophisticated methods, but these have proved difficult to communicate to the public at large.1
As German Chancellor Angela Merkel is fond of repeating, the EU accounts for just 7% of the world’s population and a quarter of its gross domestic product (GDP) but as much as half of its welfare spending.
Her underlying message is that Europe spends too much on social policies and thus has no choice but to retrench.
Austerity is one reason for cuts, but other threats to the sustainability of the welfare state are more fundamental.
They include dealing with an ageing population and adapting to evolving societal expectations.
Intensifying competition from emerging markets has also seen globalisation become a threat, because the cost of welfare policies has undermined the competitiveness of companies.
However, as I and my colleagues argue in a new paper, it would be wrong to view the welfare state mainly as a burden and it is undeniable that welfare states encapsulate values that people across the EU cherish.
How much is spent on the welfare state?
Social expenditure per person in the EU in 2012 (the most recent year available, using a harmonised definition) was €7,600 (£5,540), but with a range from €18,900 (£13,800) in Luxembourg to just €927 (£675) in Bulgaria.The UK figure was €8,700 (£6,340). Den Rest des Beitrags lesen »
This is Part 3 of the “Relitigating 2010” series. It’s largely independent of Parts One and Two, although if you’ve literally only just starting reading about the issue, you might want to look at those ones first.
After a slight delay, this piece concludes my series on looking back on the 2010 bailout to see if things could have been done better. During that period, I’ve received a lot of interesting feedback on some of the points made, and it very much struck me that when I was responding to that feedback, there was always one common theme … see if you can spot it.
“The Greek banks didn’t have to be bailed out by borrowing money; they could have been recapitalised by the Greek government issuing new government bonds and giving them to the banks. This would have massively reduced the financing requirement you talk about in Part 2.”
Yes … but you have to remember that Trichet was in charge of the ECB at this point. Normally in a bank rescue, it’s not only orthodox to use newly created government bonds, it’s the sensible thing to do. (Banks don’t need cash, usually, so if you bail them out by issuing government bonds on the market and giving the cash to the banks, the first thing they will do with it is buy government bonds). But Euroland in 2010 was already at a point where the ECB was reluctant to accept Greek bond collateral. To have allowed the Greek government to first reduce its debt by defaulting, then blow it back out again by issuing around EUR50bn of new bonds to the banking system, would have required the co-operation of the ECB, which could not at all be relied upon. Den Rest des Beitrags lesen »
LONDON – Fiscal austerity has become such a staple of conventional wisdom in the United Kingdom that anyone in public life who challenges it is written off as a dangerous leftist. Jeremy Corbyn, the current favorite to become the next leader of Britain’s Labour Party, is the latest victim of this chorus of disparagement. Some of his positions are untenable. But his remarks on economic policy are not foolish, and deserve proper scrutiny.
Corbyn has proposed two alternatives to the UK’s current policy of austerity: a National Investment Bank, to be capitalized by canceling private-sector tax relief and subsidies; and what he calls “people’s quantitative easing” – in a nutshell, an infrastructure program that the government finances by borrowing money from the Bank of England. Den Rest des Beitrags lesen »