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European Elections and the Debt Debacle

May 17th, 2012

That;s the title of my latest piece in The National Interest. Here’s the three-para teaser

European Elections and the Debt Debacle

The victory of socialist François Hollande in the French presidential election has been interpreted, correctly, as a repudiation of the austerity policies imposed on the euro zone by his predecessor, Nicolas Sarkozy, in collaboration with German chancellor Angela Merkel, who endorsed Sarkozy in the election.

Hollande’s win was part of a backlash across Europe, with pro-austerity parties from Britain to Greece taking electoral drubbings. Even in Germany, Merkel’s coalition parties were crushed in a state election in Schleswig-Holstein.

It’s safe to predict that Hollande and Merkel will soon come into conflict over austerity. But Hollande’s real opponents in the struggle over European economic policy are not Merkel and the German government but the European Central Bank and its chairman Mario Draghi.

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  1. conrad
    May 17th, 2012 at 14:52 | #1

    I think you’ll find Sarkozy was on the nose for many reasons, with austerity being just one (or probably more accurately, the effect of austerity), and to some extent, he was simply blamed for everything after 2008 since, like almost everywhere else, people are not able to distinguish between bad policies and bad times very well. If it was simply austerity, it’s hard to see why he would have had such bad polls in 2008 before people actually had a chance to see that it didn’t work, and whilst it’s true that things further deteriated for him, they were picking up again by the election.

  2. Jim Rose
    May 17th, 2012 at 16:37 | #2

    The real French election takes place on 10 and 17 June to elect the National Assembly from 577 single member electorates

    The only real power of the French president is to dissolve the national assembly.

    Since only the French National Assembly has the power to dismiss the French Prime Minister, the president is forced to name a prime minister who commands the support of a majority in the national assembly.

    When the majority of the Assembly has opposite political views to that of the president, this leads to political cohabitation. In that case, the president’s power is diminished, since much of the de facto presidential power relies on a supportive prime minister and National Assembly, and is not directly attributed to the post of president.

    the presidential election was close. the socialists need to win 103 more seats for a majority. only the three major parties have seats. the New Centre party will most likely hold the balance of power in the national assembly. already has 22 seats. that party supports social welfare and a competitive market economy.

    France was governed under a cohabitation for almost half the period from 1986-2006, suggesting that French people no longer fear the prospect of having two parties share power. Chirac experinced cohabitation as PM and then as president.

    Jospin served as Prime Minister during France’s third cohabitation government under President Jacques Chirac from 1997 to 2002. Despite his previous image as a rigid socialist, Jospin went on to sell state-owned enterprises, and lowered the VAT rate, income tax and company tax.

  3. plaasmatron
    May 17th, 2012 at 21:34 | #3

    Merkels lost an even bigger State election in Nordrhein-Westphalia last week (the country’s most populous state) with a swing against her conservative CDU party of 8.3%, and she has just sacked her Environment minister because of it. The SPD (= Labor) gained 4% and will now govern with the Greens in a coalition. But once again, the Pirate Party, were the big winners of the protest vote with a 6.3% gain.

    Merkel will likely be out of office in the next Bundeswahl in late 2013. Watch out for the Pirate Party. Nobody knows what they really stand for (even they themselves), and they are liable to swinging to an extemist agenda if things get really bad in Europe.

  4. May 18th, 2012 at 05:21 | #4

    European Elections and the Debt Debacle

    The victory of socialist François Hollande in the French presidential election would appear to be a repudiation of the austerity policies imposed on the euro zone by his predecessor, Nicolas Sarkozy, in collaboration with German chancellor Angela Merkel, who endorsed Sarkozy in the election.

    Hollande’s win seems to be part of a backlash across Europe, with pro-austerity parties from Britain to Greece taking electoral drubbings. Even in Germany, Merkel’s coalition parties were crushed in a state election in Schleswig-Holstein.

    It’s probably safe to predict that Hollande and Merkel may soon come into conflict over austerity. But Hollande’s real opponents in the struggle over European economic policy are not Merkel and the German government but the European Central Bank and its chairman Mario Draghi.

    you need an editor to temper your strong assertions (which are open to argument) – strong assertions do curry favour with those bound by their world view to agree but they also “feel” repugnant to those who are either on the fence or lean towards opposition to your (exceedingly “commie”) viewpoint

    i often wonder why very many political and economic blogsters choose to preach to the converted instead of trying to encourage inquisitive minds to explore seeing things from different frames of reference

    i guess it’s hard not to break away from our long cultural (or species) habit of enjoying a good ol evangelical gathering

    framing and priming – conscious or unconscious – nasty things

    pop

  5. Alan
    May 18th, 2012 at 06:25 | #5

    @Jim Rose

    The only real power of the French president is to dissolve the national assembly.

    Sorry that statement is simply untrue. France has a semi-presidential system, more specifically the premier/parliamentary variant. The president has significant powers and is the dominant leader except under cohabitation. Even under cohabitation the president retains significant powers in foreign affairs, defence, legislation and appointments. The president can for instance call a referendum on any legislation proposed by the parliament and can put their own proposals directly to the electorate. de Gaulle used that ‘insignificant’ power to amend the constitution on several occasions. The president’s ability to call a national election at will also gives significant influence over a government controlled by the opposition. Given that the literature invariably describes the French presidency as one of the most powerful under the semi-presidential system I cannot imagine what would move anyone to describe the office as powerless.

    Moreover your description of the National Assembly is also inaccurate. It is true there are 3 blocs in the assembly, but the Centre nouvelle is part of the bloc that supported Sarko, not a bloc in its own right. The actual parliamentary standings of the 3 blocs at the last election were: Centre-Right 345, Centre-Left 204, remaining seats divided between various parties – the extreme right and left and a couple of small centre parties.

    Your analysis that Sarko’s electoral problems predate 2008 is interesting but fails to explain the massive surge in support for anti-austerity parties like the Front nationale and the Front de gauche. Your sunny description of the Right’s prospects in the legislative elections is equally interesting but also fails to acknowledge the way that the second ballot works in a legislative election or the endorsement of Hollande by significant elements of the Left and Centre who opposed him in the first round of the presidential elections. It is also true that under the Fifth Republic no newly-elected president has ever failed to win the parliamentary election that followed their election.

    France uses single-member electoral districts like Australia so a swing the size that Hollande needs to govern in his own right is very achievable.

  6. May 18th, 2012 at 06:32 | #6

    Regarding: “But Hollande’s real opponents in the struggle over European economic policy are not Merkel and the German government but the European Central Bank and its chairman Mario Draghi.”

    He has already said as much:
    “FRANÇOIS HOLLANDE: [translated] My real enemy doesn’t have a name or a face or a party. He’ll never run as president, and so he’ll never be elected, although he does govern. My enemy is the world of finance.”

    See:
    2012/05/17: DemNow: Paul Krugman on Eurozone: “The Whole Thing Could Fall Apart in a Matter of Months”

    Somehow I suspect that what happens as PIIGS banks melt down will matter more than any French leader.
    -het

  7. Jim Rose
    May 18th, 2012 at 06:43 | #7

    thanks alan, the French PM controls the domestic agenda under cohabitation because he controls the national assembly. the outcome of the two-round election will be interesting.

  8. Alan
    May 18th, 2012 at 06:57 | #8

    Even under cohabitation, a French prime minister does not have exclusive control of the domestic agenda. The closest and easiest analogy for an Australian would be a system where the governor-general was popularly elected and not bound by ministerial advice. Moreover controlling the national assembly is not quite as easy as in Australia where both major parties are famously disciplined by international standards.

    It is true that the Wikipedia Cohabitation entry http://en.wikipedia.org/wiki/Cohabitation_(government) says:

    Although originally believed to be improbable, France was governed under a cohabitation of leaders for almost half the period from 1986-2006, suggesting that French people no longer fear the prospect of having two parties share power.

    It is not immediately obvious why 1986-2006 is a relevant period. The statement is untrue for the period 1986-2012 and becomes wildly inaccurate for the period 1958-2012. What is true that is every newly-elected president of the Vth republic has won their ‘honeymoon’ election.

  9. Jim Rose
    May 18th, 2012 at 08:12 | #9

    good point, but the election is not a sure thing.

  10. J-D
    May 18th, 2012 at 08:19 | #10

    In each of the years 1986, 1993, and 1997, France had a National Assembly election but no Presidential election. In each case, the result was a National Assembly with a majority opposed to the President. But in every year where there was both a Presidential election and a National Assembly election, the result has been a pro-Presidential majority in the National Assembly. That’s not only in years where a new President was elected, but also in years where an incumbent President was re-elected.

    The French shortened the Presidential term from seven years to the same five years as the National Assembly, synchronising the election cycle. I think they don’t want any more cohabitation.

  11. J-D
    May 18th, 2012 at 08:20 | #11

    Jim Rose :
    good point, but the election is not a sure thing.

    Of course it’s possible that the election will produce a National Assembly with an anti-Hollande majority. But given the recent history, that doesn’t look like the way to bet.

  12. Alan
    May 18th, 2012 at 08:28 | #12

    @Jim Rose

    Well we are making progress from a powerless president with no prospect of a parliamentary majority to a somewhat different picture.

    I do not say the legislative election is a sure thing. No election ever is. I would be surprised, however, if a leaderless bloc succeeded in holding a legislative majority when it has just lost its presidential majority.

  13. Jim Rose
    May 18th, 2012 at 09:00 | #13

    My point is the media reporting does not dwell on this quirk in the french system.

    J_D made a good point too. No one expected a minority government in australia in 2010 either.

  14. Jim Rose
    May 18th, 2012 at 09:09 | #14

    On the recent left-ward drift after the recent right-ward drift in the EU, remember Schumpeter’s theory of democracy:
    - Elections vote parties out rather than vote parties in; and
    - Voting is mainly retrospective rather than prospective.

    Schumpeter disputed that democracy was a process by which the electorate identified the common good, and that politicians carried this out:
    • The people’s ignorance and superficiality meant that they were manipulated by politicians who set the agenda.
    • Although periodic votes legitimise governments and keep them accountable, the policy program is very much seen as their own and not that of the people and the participatory role for individuals is usually severely limited.

    Schumpeter’s theory of democratic participation is voters have the ability to replace political leaders through periodic elections.

    Citizens do have sufficient knowledge and sophistication to vote out leaders who are performing poorly or contrary to the electoral majority’s wishes.

    Democracy is not a deliberative process, in the sense that voters examine and discuss issues and so formulate a thoughtful, knowledgeable opinion on what policies are right for the nation or for them.

    Voters have neither the time, the education, nor the inclination for such an activity – all they know is results. So if the Right fails, as it did in France to deliver on its promises, the Left takes over, whether or not it has better or even different policies.

  15. J-D
    May 18th, 2012 at 09:11 | #15

    The Peak Oil Poet :
    European Elections and the Debt Debacle
    The victory of socialist François Hollande in the French presidential election would appear to be a repudiation of the austerity policies imposed on the euro zone by his predecessor, Nicolas Sarkozy, in collaboration with German chancellor Angela Merkel, who endorsed Sarkozy in the election.
    Hollande’s win seems to be part of a backlash across Europe, with pro-austerity parties from Britain to Greece taking electoral drubbings. Even in Germany, Merkel’s coalition parties were crushed in a state election in Schleswig-Holstein.
    It’s probably safe to predict that Hollande and Merkel may soon come into conflict over austerity. But Hollande’s real opponents in the struggle over European economic policy are not Merkel and the German government but the European Central Bank and its chairman Mario Draghi.
    you need an editor to temper your strong assertions (which are open to argument) – strong assertions do curry favour with those bound by their world view to agree but they also “feel” repugnant to those who are either on the fence or lean towards opposition to your (exceedingly “commie”) viewpoint

    Huh??

    Any competent editor would see at once that these assertions are not ‘strong’ but are already tempered/hedged:

    ‘The victory … _would appear to be_ …’
    ‘Hollande’s win _seems to be_ part of …’
    ‘It’s _probably_ safe to predict that Hollande and Merkel _may_ soon …’

  16. JB Cairns
    May 18th, 2012 at 09:12 | #16

    Jim, history tells us Holland’s party will get a majority of votes in Parliament.

    Jospin was a very rare even. his economic policies although very good for France didn’t do him a lot of good in the Presidential election!

  17. Alan
    May 18th, 2012 at 09:22 | #17

    In Greece anti-austerity parties received over 2/3 of the popular vote. In France you would need to add the Front nationale vote to those of the centre-left and the left. Despite rather strange claims about the powerlessness of the French presidency and the relevance of Schumpeter, ProfQ’s original point cannot be disputed.

    Hollande’s win was part of a backlash across Europe, with pro-austerity parties from Britain to Greece taking electoral drubbings.

    An argument (complete with an unadmitted direct quotation from Wikipedia) that runs the French president has no power to the French president will lose the legislative election to Schumpeter rabbits on endlessly about democracy does not negate the original point.

    Governments that wish to get re-elected, including Merkel’s own government, need to discover a different economic policy.

  18. Alan
    May 18th, 2012 at 09:23 | #18

    Oops, second paragraph should be in blockquote.

  19. Jim Rose
    May 18th, 2012 at 09:33 | #19

    JB, Jospin got little thanks, third behind La Pen! an example of volatile french voters.

    Alan, governments get voted out.

    EU Governments should discover a different economic policy. for example, Greece is ranked 100th in the world bank’s cost of doing business index. 155th on one indicator.

    Cahuc et al. estimated that Spanish unemployment would be 40% lower if Spain adopted the more liberal French labour laws! see http://www.voxeu.org/index.php?q=node/6039 i in 3 EU unemployed are spanish.

  20. Alan
    May 18th, 2012 at 09:54 | #20

    Jim Rose :

    Cahuc et al. estimated that Spanish unemployment would be 40% lower if Spain adopted the more liberal French labour laws! see http://www.voxeu.org/index.php?q=node/6039 i in 3 EU unemployed are spanish.

    That is not what your link says. Spanish law is more permissive on temporary jobs yet more restrictive on permanent jobs. The actual finding is not about more ‘liberal French laws’ but about an element of French law that is less liberal than Spanish law.

    I agree that ‘governments get voted out’. I cannot imagine how you see that truism advances your argument. Europeans seem to be quite enthusiastic right now about voting out austerity governments.

  21. JB Cairns
    May 18th, 2012 at 10:03 | #21

    Another thing was Jospin’s win came about after Chirac’s coalition whitewashed their opponents in elections straight after Chirac’s win.

    Juppe proved unpopular and Jospin came in at the next unexpected election.

  22. Jim Rose
    May 18th, 2012 at 10:16 | #22

    The Greeks have done a fine job in gambling for redemption. Squeezing huge debt write-offs! The rise of the far left party is their latest prop in this war of attrition.

    When debt stabilizations have significant distributional implications, different groups attempt to shift the burden of stabilization to other groups.

    The process leading to a fiscal stabilisation becomes a war of attrition, with each group finding it rational to attempt to wait the others out.

    • The political battle is not over the need for reducing large deficits, but over which groups should bear the higher taxes and expenditure cuts to achieve that end.

    • Successful stabilizations are usually preceded by several failed attempts; often a previous program appears quite similar to the successful one.

    Stabilization occurs only when one group concedes and is forced to bear a disproportionate share of the burden of fiscal adjustment.

    The passage of time and the accumulation of costs eventually lead one group to give-in and make a previously rejected policy programme economically and politically feasible. When stabilization occurs it coincides with a political consolidation. Often, one side becomes politically dominant.

    The Irish played by the rules, guaranteed bank bond holders to which the government had no obligation, and despite bank fraud, and got screwed.

  23. Alan
    May 18th, 2012 at 13:32 | #23

    @Jim Rose

    Can I respectfully suggest that when you repeat text verbatim you should give us the URL for the paper you are quoting? http://papers.ssrn.com/sol3/papers.cfm?abstract_id=246871#%23 Alesina and Ardagna have form on this blog for their bungled paper on the glories of austerity.

  24. Jim Rose
    May 18th, 2012 at 15:25 | #24

    sorry, was some old text I had. did not recall the source. the published paper dates from 1991 with 303 citations so far. game theory with some case studies

    see http://ideas.repec.org/a/aea/aecrev/v81y1991i5p1170-88.html

    do you disagree with the game theory used therein?

  25. Alan
    May 19th, 2012 at 09:45 | #25

    @Jim Rose

    In this thread you have made untrue statements about the French presidency, about Nouveau Centre and about the powers of a French prime minister. Note those were not statements where there can be a difference of opinion. They were simply untrue. You have twice represented someone else’s text as your own by posting it without attribution. You have misrepresented the conclusions reached in the Cahuc paper. You even attach the conclusions of the Alesina paper, published in 1989, to the Greek crisis of 2012 as though the Alesina conclusions had been drawn from an analysis of the present Greek situation. Can you think of a good reason that we should be giving you much credence?

  26. Jim Rose
    May 19th, 2012 at 10:52 | #26

    Thanks Alan,

    1. You say the (French) president has significant powers and is the dominant leader except under cohabitation. That is a positive spin on the French president’s dependence on having a PM and national assembly that supports him. Are the June elections not significant?

    2. The French PM counter-signs all but a few Presidential instruments, proposes ministers to the president for appointment, ‘direct the actions of the Government’ and ‘shall determine and conduct the policy of the Nation’. is foreign policy not a policy of a nation?

    3. What powers the French president will have if he does not win the coming election are to make a nuisance of him-self. Do those remaining powers allow him to implement his domestic agenda on his own rather than with the (legal required) co-operation of the PM or parliament or by winning a referendum?

    4. If the New Centre wins the balance of power, are you suggesting it would stick with the Sarko leftovers in cohabitation, or have a new awaking as a centrist party because it is a separate party for a reason? More so, if the French president is as powerful as you say? All politicians like to be on the winning side.

    5. French employment laws are slightly more liberal according the OECD index, as is documented in the link.

    6. Cahuc et al then say that “there are good reasons to think that this average EPL index, based on legal regulations and not on their implementation, does not capture Spanish EPL satisfactorily’. They then set-out the negative effects of dual labour contracts on Spain and propose reforms.

    The Greeks are playing a game of chicken with germany and france. Do you agree?

    There is an internal war of attrition in Greece over who pays for the fiscal consolidation. Do you agree?

    A EU drift to the left is bad news for the PIGS because governments with prospectively larger budget deficits have less scope to borrow and on-lend to the PIGS.

  27. Alan
    May 19th, 2012 at 11:39 | #27

    Ah, when all else fails the Gish gallop. What you do is propose an avalanche of points and demand agreement or reasoned disagreement. Only your paragraph 6 actually addresses the string of misrepresentations.

    Cahuc simply does not say what you claim. The discussion turns on the difference between temporary jobs and permanent jobs and identifies Spain’s greater use of temporary jobs, as compared with France, as a cause of their relatively high unemployment.

    That is completely different from a single-axis explanation that depends on which country’s employment laws are more liberal.

    I do not plan on responding either to the grand list of paraphrases of the French constitution which you have cribbed from Wikipedia or to straw man arguments like ‘Are the June elections not significant?’ where you put words into my mouth that I have never used.

    The official translation published by the National Assembly at http://www.assemblee-nationale.fr/english/8ab.asp, reads, for example, in relation to countersignatures:

    Article 19.
    Instruments of the President of the Republic, other than those provided for under articles 8 (paragraph one), 11, 12, 16, 18, 54, 56 and 61, shall be countersigned by the Prime Minister and, where required, by the ministers concerned.

    Article 8 applies to the appointment and termination of the prime minister. That is, by your definition, an insignificant matter.

    That is quite different from the Wikipedia paraphrase. A literal reading of the Australian constitution gives the impression that Australia is governed directly by a hereditary monarch. You are welcome to make that argument but I don’t like your chances of finding anyone to agree with you.

  28. Jim Rose
    May 19th, 2012 at 12:36 | #28

    “Article 8.

    The President of the Republic shall appoint the Prime Minister. He shall terminate the appointment of the Prime Minister when the latter tenders the resignation of the Government.

    On the recommendation of the Prime Minister, he shall appoint the other members of the Government and terminate their appointments.”

    “Article 50.

    When the National Assembly passes a resolution of no-confidence, or when it fails to endorse the Government programme or general policy statement, the Prime Minister shall tender the resignation of the Government to the President of the Republic.”

    Cahuc et al show that “that differences in employment protection legislation account for nearly half of the dramatic rise in unemployment in Spain” and ask “What if Spain had French legislation?” to illustrate their point about the the insider-outsider divide.

    the OECD index is a composite of three indices.

  29. Ernestine Gross
    May 19th, 2012 at 23:13 | #29

    “FRANÇOIS HOLLANDE: [translated] My real enemy doesn’t have a name or a face or a party. He’ll never run as president, and so he’ll never be elected, although he does govern. My enemy is the world of finance.”

    Yes, het, and it seems to me this is the common ground for Hollande and Merkel. Moreover, it seems to me both (including their parliaments and the people whom they represent) see no point in feeding the ‘world of finance’, as characterised by the proverbial Wall Street bankers and the rating agencies, for the sake of being labelled anti-austerity. Furthermore, both accept limits on government deficits and the idea that budgets should be brought into balance over a reasonable time period.

    IMHO, the EU is waiting for the USA to face out its debt-driven psyeudo prosperity and the associated mess of derivatives, swaps, bundled securities, fee structures and what nots. I am amazed people still talk about ‘bottom lines’ of financial accounts of financial corporations. These numbers are illusory because ‘the balance sheet’ cannot possibly represent the actual properties of these financial securities. J.P. Morgan got a lesson in this regard a few days ago.

    I stick out my neck – or should I say I’ll state the obvious: No amount of printing of money by the ECB or the Fed is going to prevent an implosion of the said ‘world of finance’; it can only affect the timing.

    The system is unbounded and financial corporations, by their very nature, cannot have strictly risk averse preferences. (Does anybody else among the readers recall the many Finance theory results that rely on ‘risk-neutrality’?? All these results presume the system works, ie they do not ask the more difficult questions. )

  30. May 20th, 2012 at 01:33 | #30

    New French industry policy to moderate globalisation: Ministerial interview

    (Interview with Arnaud Montebourg, the new French Minister for reestablishing manufacturing industry, translated from http://jt.france2.fr/20h/)

    New French Minister for Industry in France says globalisation is extremist policy and that France, Europe and other westernised countries need to protect themselves from total free-market doctrine. He also proposes external taxes, including on carbon emissions for imported products. This is a fascinating interview for citizens of Anglophone countries who feel that free-market ideology has replaced democracy.

    750,000 manufacturing jobs have been lost in the past 10 years and 900 factories have closed in the last three years in France. Ten years ago 28 per cent of France’s economy was manufacturing. Now it is 13 or 14 per cent. According to Minister Montebourg, France is “deindustrialising even faster than the UK which has the reputation at the moment of having almost no manufacturing left at all.”

  31. Chris Warren
    May 20th, 2012 at 09:14 | #31

    @Malthusista

    Very interesting – a bit of real fresh air for once.

    Unregulated globalisation is one aspect – but we have to understand why economies are forced to seek benefits outside their own resources and standards.

  32. Jim Rose
    May 20th, 2012 at 11:25 | #32

    why would his enemy be the world of finance? if his policies lead to a faster recovery and higher GDP growth, as promised, repayment on their bonds will be more secure, and there are more French bonds to buy?

  33. Alan
    May 20th, 2012 at 14:45 | #33

    @Chris Warren

    The thing is that once you question globalisation at all the whole ideological house of cards goes down very quickly and that questioning is what people like Merkel were so afraid of.

  34. Chris Warren
    May 20th, 2012 at 15:53 | #34

    @Alan

    Yes – with W. M. Cordon as the Joker, and J. M. Keynes the Ace of spades.

  35. Chris Warren
    May 20th, 2012 at 15:53 | #35

    Cordon => Corden

  36. Jim Rose
    May 20th, 2012 at 22:26 | #36

    manufacturing? who wants their children to end up in a manufacturing industry job?

  37. Tom
    May 21st, 2012 at 09:44 | #37

    @Chris Warren

    Well, at least they’ve got government officials that actually questions or got the guts to raise the issues and problems about the free market doctrine or neoliberalism. Whether if they made these statements by heart or politically, it is still better than our political economy that only the Greens is about the only political party that talks about the problems of this ideology. A return to Keynesian economic and a sizable manufacturing industry is about the only way capitalism will survive in the short – medium term; if it is here to stay.

  38. Jim Rose
    May 21st, 2012 at 12:45 | #38

    tom, know of anyone who self-identifies as a neoliberal?

  39. Dan
    May 21st, 2012 at 12:52 | #39

    @Jim Rose

    I think JC from the Club Troppo threads might…?

    Ditto Thomas Freedman.

    Ditto Niall Ferguson.

  40. Chris Warren
    May 21st, 2012 at 13:00 | #40

    @Tom

    I know many people think:

    A return to Keynesian economic and a sizable manufacturing industry is about the only way capitalism will survive in the short

    But as Keynes would himself admit – Keynesianism only works provided any economy is able to fix its own interest rates without reference to rates prevailing elsewhere in the world – [ Collected Writings v25].

    So unless our Keynesians move to seek capital controls etc. then they are barking from the wrong tree. I know they are rather pleased that recent massive stimulus has not set-off massive inflation, and this is a puzzle, but most of the stimulus went to recapitalise banks (ie retire debt). Possibly the existence of debt had already inflated prices?

    Keynesian stimulus only works if you continuously ssume a greater population in the future or a market socialist economic framework.

  41. Jim Rose
    May 21st, 2012 at 13:05 | #41

    are neoliberals the same as libertarians and classical liberals? do the latter two groups sum to 1% of voters

  42. Jim Rose
    May 21st, 2012 at 13:23 | #42

    I should add that up to the mid-1990s, despite the global triump of neo-liberalism, a good way to not get a job was to mention Friedman. Hayek was safer because few knew who he was.

  43. Dan
    May 21st, 2012 at 13:23 | #43

    @Chris Warren

    Increasingly I am thinking this is right. The asset bubble was indeed inflation, but in the context of stagnant wages and cheap manufactures, it showed up econometrically as growth rather than traditional inflation.

  44. Dan
    May 21st, 2012 at 13:26 | #44

    @Jim Rose

    No, and no.

    Malcolm Turnbull is a classical liberal.

    Peter Thiel is a libertarian. There aren’t that many around, and economically they are generally Austrian (rather than freshwater) in their orientation.

  45. Dan
    May 21st, 2012 at 13:28 | #45

    With reference to my previous reply to Chris, you could describe it as an economic elephantiasis or gigantism…

  46. Jim Rose
    May 21st, 2012 at 13:33 | #46

    Dan, in Neoliberalism: From New Liberal Philosophy to Anti-Liberal Slogan, Taylor C. Boas & Jordan Gans-Morse look to find anyone who self-identifies as a neo-liberal at http://people.bu.edu/tboas/neoliberalism.pdf

    despite neoliberalism appearing in nearly 1,000 academic articles annually between 2002 and 2005, they did not uncover a single contemporary instance in which an author used the term self-descriptively. There was one article – by New York Times columnist Thomas Friedman (1999) — in which it was applied to the author’s own policy recommendations.

    Digging into archives, they did find that while Friedman (1951) embraced the neoliberal label and philosophy in one of his earliest political writings, he soon distanced himself from the term, trumpeting “old-style liberalism” in later manifestoes (Friedman 1955). The paper is “Neo-liberalism and its Prospects.” Milton Friedman Papers, Box 42, Folder 8, Hoover Institution Archives. 1951. Hardly a smoking gun?

  47. Dan
    May 21st, 2012 at 14:20 | #47

    @Jim Rose

    Do you think this is important, at all?

  48. Jim Rose
    May 21st, 2012 at 14:50 | #48

    dan, some on the left might have objected in the past to labels that lumped them in with people who they are not and opposed: socialist or social democrat; democratic socialist or communist fellow-traveller.

    Labels should inform, not cloud. In Neoliberalism: From New Liberal Philosophy to Anti-Liberal Slogan, Taylor C. Boas & Jordan Gans-Morse find, based on a content analysis of 148 journal articles published from 1990 to 2004, that: the term is often undefined; it is employed unevenly across ideological divides; and it is used to characterize an excessively broad variety of phenomena

  49. Tom
    May 21st, 2012 at 14:50 | #49

    @Chris Warren

    Can’t agree more. I am, however, making pessimistic (realistic) assumption that capitalism is here to stay when I argue for a return to Keynesian economics. I do however, believed that Keynesian economics can and should co-exist with welfare state similar to of post war era.

    I believe asset prices are perhaps inflated like what you suggested. Also I suppose since domestic demand was fueled by an increase in private sector (household) debt; when the GFC hit, the stimulus weren’t enough to keep domestic demand like it use to be since people are more concerned about borrowing money. That combined with lower foreign demand for domestic goods probably didn’t create a shortfall in goods supply even when the stimulus was in action (not much of the stimulus was government purchase of goods and services), so inflation wasn’t too serious. Just my two cents.

  50. Dan
    May 21st, 2012 at 15:58 | #50

    @Jim Rose

    Well, there’s quite a good Wiki page on it, so let’s not bother reinventing – indeed, rehashing – the wheel.

    Very little political terminology is unproblematic, so I think a common understanding of the sorts of policy prescriptions advocated by neoliberals (or market liberals, or whatever) will suffice here.

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