Support for austerity: where does it come from?
Paul Krugman comments on Simon Wren-Lewis’s paper, which explains the widespread resort to austerity in the face of a liquidity trap as the result of right-wing opportunism, exploiting instinctive popular concern about rising government debt in order to reduce the size of the state. Interestingly though, many people who were not especially right-wing assumed that debt reduction was the obvious thing to do. Specific instances of this general phenomenon are documented for example by Ezra Klein, and are in line with Brad Setser’s observation that the IMF continues to push for fiscal contraction even though its research department supports a broadly Keynesian view of macroeconomics. The internal conflicts between management and staff within the IMF are also scrutinized by Daniel Munevar, who thinks that the most glaring example was the decision not to restructure Greece’s debt in 2010, even though staff members provided warnings regarding the viability of the programme.
According to Florian Sanden and Bernd Schlüter a possible response to the excesses of austerity may come from the “New European Pillar Of Social Rights”, which attempts to put social monitoring on an equal footing with macroeconomic surveillance in the European Semester. While the decision certainly goes in the right direction, the lack of clear-cut social indicators hinders its practical effects. The draft from the Commission refers to the necessity of adequate minimum incomes but does not specify what it means by “adequate” nor who is to receive such incomes. Most importantly, however, there is no way for assessing compliance with these and other principles of effective welfare provision in order to monitor member states´ performance in social policy.
Brexit: towards less Europe?
Anatole Kaletsky argues that the EU should avoid treating Brexit as final and make symbolic concessions to the UK, in order to avoid it. These are not to be seen as giving in to blackmail so long as they are applied EU-wide and presented as responses to popular demands. Lucas Bergkamp agrees that those pushing for further integration are missing the point. Europe needs to learn the true lesson of Brexit, i.e. that the Union’s foundations are weak, and radical reform is needed if European integration is to flourish. The solution is to bring the power back to the people and their national representatives, by having simplified European treaties guaranteeing free movement of goods, capital, and services, but having each national parliament free to decide whether to implement any EU secondary legislation.
Brexit from neoliberalism
Nick Herbert remind us that the risk of Brexit remains concrete, since markets have not vanished in an act of democratic will. Not only is the idea that new trade deals can be set up easily and quickly incredibly naïve, but it also counters the spirit of the referendum insofar as voters supported Brexit less in a rush of enthusiasm for free trade than to pull up the drawbridge. Similarly, Vernon Bogdanor remarks that contrary to the hopes of many Brexiteers, leaving the EU will expose Britain to more globalization, not less; and in a more competitive and harsher world it will be the “left behind”, those most likely to have voted for Brexit, who will suffer the most. Martin Kettle argues that the real problem for those left behind is not liberalism but his ideological variation, neoliberalism, whose great heresy is believing that corporations should be treated like persons in legal terms and that there is no need for the state to act against over-concentrations of market power.
Photo Credits CC: Rachel Docherty
– Fiscal capacity to support large banks – Bruegel
– Boundary issues – The Economist