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Great Leap Forward blog: MMT, THE EURO, AND THE ROAD TO RECOVERY: Interview with L. Randall Wray (conducted by CJ Polychroniou for the Greek national financial daily Express)
Q: You have written a great deal about the euro crisis, including the Greek crisis. In your view, did Greece have much of a choice when it ended up under an EU/IMF rescue mechanism, or should it have managed somehow an orderly default and returned to the drachma? This is a position taken by a number of economists both in Europe and in the US. Where do you stand on this?

A: Here's what I recommended for Greece, Ireland, Portugal, Italy, and Spain. You must band together, making a pact that you will not allow the center to pit one Euro member against the other. Together you demand an end to austerity, or you will leave the EMU--all for one and one for all. Debt relief for all. Substantial fiscal stimulus from the center for all. A job guarantee program for all. Without that, all of you leave. Make it clear. Make it believable. And leave if the center does not stop the austerity. You do not need to serve Germany's domestic policy agenda.

Q: The contractionary policies and the harsh austerity measures advocated so passionately by Germany and the EU leaders as a means for the peripheral nation of the euro zone to deal with their fiscal and debt problems, regardless of how they arose, have proven to be absolutely catastrophic for those economies, causing massive human suffering and stalling global growth. How do you explain the persistence of EU chiefs and certain capitals on having Greece and the other indebted euro zone nations stay the course when the results are so devastating?

A: As discussed, domestic politics combined with some desire to impose labor discipline have got Euroland to the present situation. Here's the problem. Those who are powerful in the center view exports as the path to prosperity. Germany is of course the most successful at that. While Germany is huge within the EU it is relatively small compared to the global economy. It is conceivable that Germany can hold costs in check while innovating, improving efficiency and focusing on high value exports to create demand for its output (many of those exports staying within the EU, of course). Perhaps Germany can hold its own against Asia and the Americas. But this strategy has no chance of succeeding for Europe as a whole. The world is not big enough to supply demand for Europe's potential output, while Martian demand is at best speculative. And everywhere else has cheaper labor than Europe's. So Germany insists on belt-tightening and cost-cutting throughout Europe, which cannot work because Europeans cannot reduce living standards to those of Viet Nam. And even if they did, that kills Germany, too.

If one were extremely cynical, one would conclude that Europe's leaders understand all this but don't give a damn because they plan to move all jobs to Asia anyway. They are globalists, not nationalists or even Europeanists. Europe can wither and die, and Europe's megacorps would find outlets and workers in China. It is possible that this is the true strategy. It wouldn't be the first time--look at Japan, which moved jobs abroad and killed their own economy. I don't know.



I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Sun Feb 10th, 2013 at 04:02:38 PM EST

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