Saturday, February 1, 2014

Mark Weisbrot is clueless on Europe.

This article by Weisbrot has attracted attention, e.g. here and here. So let’s run thru Weisbrot’s article and see what it has to offer.
Weisbrot claims that allegedly wicked EZ “policy-makers” are trying to move Europe “as far as politically possible away from its social-democratic underpinnings” and in a “neo-liberal” direction.
Well “neo-liberalism” is bad, bad, bad in the eyes of all respectable lefties, so Weisbrot has pressed the right emotional button there. But what’s his evidence for thinking that “policy-makers” have the above agenda?
Well in the paragraph starting “It was not because…” he argues that when the ECB bought periphery bonds in volume, that “put an end to these crises in a matter of weeks”. And that fact, so he seems to argue, demonstrates that those wicked neo-liberal impositions on the periphery were unnecessary. (At least I think that’s what he’s arguing: though I’m not entirely clear, and he certainly isn't.)
But later in the article, he seems to claim that those wicked policy-makers are still trying to impose their neo-liberal agenda. And indeed that would be a logical thing for those policy-makers to do: I mean if you’re ideologically committed (neo-liberal or anything else) you don’t give up trying to impose your ideas just because you’ve found something that reduces the immediate need to impose those ideas.
Moreover, it’s a bit odd that those wicked “policy-makers” weren’t imposing their neo-liberal ideas before the recent crisis isn't it? I mean, I long to know when those policy-makers had their damascene conversion to neo-liberalism. Weisebrot doesn’t tell us, and for the very obvious reason that there WAS NO SUCH sudden conversion. That is, policy makers are imposing harsh conditions on the periphery not because they’ve been converted to neo-liberalism, but because due to the very nature of a common currency like the Euro, they haven’t much alternative to imposing harsh conditions.
Anyway, Weisbrot’s next bit of evidence for a neo-liberal plot is that IMF prescriptions for the periphery are neo-liberal in nature. True, they are. But that’s because the IMF is 100%, totally and completely clueless, as pointed out dozens of times by advocates of Modern Monetary Theory, e.g. Bill Mitchell.
That is, and to illustrate, the IMF adheres to the sort of economic howlers that the average politician adheres to, for example that a way of reducing a deficit is to cut public spending or increase taxes. And I’m 99% sure that the reason the latter point is a howler will be beyond Weisbrot’s comprehension.
Weisbrot then ends his article by saying in effect, “wouldn’t it be nice if Europe as a whole provided substantial assistance for the periphery so as to increase employment and raise living standards there?”
Absolute genius! Does Weisbrot seriously think no one has thought of that? The monster problem with that idea is that it amounts to saying German taxpayers should fork out even more for the periphery. Well German taxpayers just aren’t going to are they? So forget it.
But even if German taxpayers were generous to the same extent as US taxpayers are generous towards poorer areas in the US, or UK taxpayers are generous towards poorer areas in the UK, there is a limit to how much inefficiency in poor areas that the US or UK put up with. Likewise, if Germany WERE MORE generous towards the Euro periphery, it would doubtless still be putting pressure on the periphery to get its act together – or impose “neo-liberal” dogma on the periphery, if you want emotive, left of centre phraseology.
Mark Weisbrot is co-director, with Dean Baker, of the Center for Economic and Policy Research in Washington, D.C. I have a huge amount of respect of Dean Baker, and very little for Mark Weisbrot.

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