So, austerity isn't working again. How surprisng is that?
Not at all.
The last time the euro area’s inflation rate went negative in 2009, the economy was struggling to recover from the recession that followed the collapse of Lehman Brothers Holdings Inc. This time, the decline was partly driven by sluggish growth and a drop in crude oil prices of about 50 percent in the past year.RtO has said it many times but it won't hurt to repeat it, because hardly anybdy gets it -- deflation is the worst of ecnomic trends and the one no one knows how to remedy.
Anybody my age grew up hearing endless warnings and laments about inflation, so it is not so surprising that the word sets off alarm bells even when it is no longer a problem. We have a whole political party -- not, a big one, true -- devoted to inflation alarmism.
The Bloomberg story is not detailed. Some of Europe's economic problems predate the switch to the euro, continent-wide attempts to force smaller government deficits and other remedies beloved of Tea Partiers and mental inhabitants of the last century generally. Southern Europe is less educated and less modern than northern Europe. It mimics the situation in the United States for the 150 years fter the end of the Civil War. (A situation that continues to drag down the overall American economic performance.)
If tempted to make too close comparisons to other areas, it is also important to recall that Europe's fundamental stimulus and problem has not changed for over 500 years -- it is not a resource extraction area, with the exception of North Sea oil -- an asset in deep discount for the moment.
Bottom line: Keynesianism works better than austerity, at least in modern,highly-ramified economies, and no economy is more modern than Europe's.
Define exactly what you mean by "austerity".
ReplyDeleteIn this context, I think its meaning is well understood as Tea Party and IMF-inspired cutbacks in government investment in human capital, elimination of valuable services and, generally, pissing and moaning about out-of-control spending and worrying about fiscal deficits. As RtO has pointed out many times, we now have 500 years of evidence in favor of big government and intervention and 0 years evidence that TP nostrums get you anything worthwhile.
ReplyDeleteOk, in this context, what has been the change in government spending in Europe over the last seven years?
ReplyDeleteCompared to, say, the US.
Drastically lower in Greece, Portugal.
ReplyDeleteKeeping in mind that Greece was yet another case of how socialism works in practice.
ReplyDeleteNever mind that, you are yet again epically missing the point. You assert that austerity is responsible for Eurozone deflation.
Yet you, in a Krugmanesque moment, leave that pivotal word "austerity" undefined. Well, if you are going to use the concept, it really would be best to demonstrate just what you mean by "austerity": how government spending changed over the period.
Further, you completely neglect another example of "austerity", the US. Where, despite "austerity", the economy is doing far, far better than the Eurozone.
Which just might mean the real problem with the Eurozone isn't too much "austerity", but rather too much socialism.
What, you are not going to acknowledge the evils of QE, money-printing and stimulus. (Head spins)
ReplyDeleteGreece is equally an example of how finance capitalism works in practice among the lesser states. It was never a doctrine of socialism of sell cooked derivatives. Credit (and its opposite) where credit is due
Greece is equally an example of how finance capitalism works in practice among the lesser states.
ReplyDeleteUmmmm, no. Greece is a perfect example of socialism spending other people's money until they decide to stop handing it over.
The Greek government-debt crisis ... [is] ... believed to have been directly caused locally in Greece by a combination of structural weaknesses of the Greek economy along with a decade long pre-existence of overly high structural deficits and debt-to-GDP levels on public accounts.
And massive corruption, and having been caught lying about their public accounts. All part of socialist doctrine.
What, you are not going to acknowledge the evils of QE, money-printing and stimulus.
You used the word "austerity" -- define what you mean by it, and whether it applies in reality.
And stop shifting goal posts.
Not everybody is so puzzled by 'austerity' as you are, and not everyone observes that left approaches to economic policy are so bad:
ReplyDeletehttp://www.bloombergview.com/articles/2015-01-13/greece-can-learn-from-brazil-and-argentina
'All part of socialist doctrine.' Really? I suppose you found that in the 'Anti-Lasalle.'
ReplyDeleteIt seems to me that Europe's problems stemmed more from private banks bidding too much for offshore deposits in an unsupervised market that crashed, but that doesn't seem socialistic to me. It sounds like market capitalism.