Thursday, March 29, 2012

What's really wrong with austerity a la Merkel et al?

What's really wrong with austerity a la Merkel et al?
Greece is a good case study of that. Too much, rigid, austerity, without a growth element.
A result of Ordiliberalism? Still not convinced?
Or is it a result of the type of the philosophy Max Weber described in his 1905 book "Protestant Ethic and The Spirit of Capitalism"?
Or a result of austerity that focuses on such rigid targets that even the Dutch or Germany itself has trouble adhering to (thus opening Pandora's box, see eg the German and French violations of the Stability Pact in the previous decade)?

There is no question that not only Greece and other so called "PIIGS" as well as other Eurozone, EU and OECD countries need to consolidate their budgets.

The issue is how. How fast, how strictly,and with what policy tools and side-effects (including unemployment and social systemics).

A somewhat "fundamentalist" approach to austerity is what makes the so called Fiscal Compact, proposed by Germany in December and signed (but not ratified yet) by 25 in March such a hard pill not only for the PIIGS but also for NL and even Germany to swallow.

To paraphrase a slogan re taxes, too much austerity (planned) = no austerity, or failures of the austerity dogma all over Europe!

Ordoliberalism, with its insistence on separation of economic policy between fiscal (by governments), monetary (by 100% independent central banks) and macroeconomic (by market actors, eg social partners) , leads to un-cordinated economic policy, even at national level.

The capitalist dogma that to be helped, "sinners" must prove worthy, is another (faulty) fundamentalist element.

Fiscal fundamentalism is not going to help Europe. No fundamentalism ever did.

The proper economic and other policy mix is needed. But who knows how to get that mix right?

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