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Das einzige Magazin für Wirtschaftspolitik aus einer keynesianischen Perspektive in Deutschland.
In diesem Beitrag setze ich mich kontrovers mit Schuldenbremse auseinander, inwiefern sie stets ein Irrtum war, und warum Staatsschulden vor allem hierzulande meist nur einseitig und damit verzerrt wahrgenommen werden.
In Europa wird über die Einführung eines digitalen Euros diskutiert, digitales Zentralbankgeld. Auch Facebook hat überlegt eigenes Geld hera
Mein gemeinsamer Podcast mit Thomas Lämmer-Gamp geht in sein fünftes Jahr - hier Teil 3/3 der ausgewählten Folgen der letzten Jahre.
Erleben wir gerade wirklich eine Deglobalisierung oder ist es nur ein „Empfinden des Westens“, in dem sich Unsicherheit angesichts globaler
Mein gemeinsamer Podcast mit Thomas Lämmer-Gamp geht in sein fünftes Jahr - hier Teil 2/3 der ausgewählten Folgen der letzten Jahre.
Unter dem Eindruck der Schlachten des 1. Weltkrieges haben die Siegermächte Wirtschaftssanktionen als ultimative Waffe des Völkerbundes vorg
Mein gemeinsamer Podcast mit Thomas Lämmer-Gamp geht in sein fünftes Jahr - hier Teil 1/3 der ausgewählten Folgen der letzten Jahre.
Das Videoblog für meine Firma live aus Nairobi
Arguably the best soundtrack in political drama for years - and very stimulating indeed...
Ed Miliband got his US Presidents wrong – He’s not so much a Teddy Roosevelt but a Chester Arthur
These recent weeks, Ed Miliband, the leader of the Labour Party in Britain, has come to identify himself with Theodore “Teddy” Roosevelt, the 26th President of the United States. Ostensibly he has been being inspired for this comparison by Roosevelt’s reputation as “trust-buster”: In his time, the President flung the mighty club of the Sherman antitrust legislation, dating from Benjamin Harrison’s administration in the outgoing 19th century: By splitting up the powerful Standard Oil corporation of John D. Rockefeller, Roosevelt wrote his name into the history books of antitrust policy. It is this legacy Miliband attempts to allude to by his demands to curb the power of the few large energy companies in the UK, and, most recently, to do the same in the banking sector. However, a single piece of legislation does not make a president, just as a single trait of character does not constitute a man; and thus, Miliband got his presidential history lesson wrong.
Does Labour’s leader know that Roosevelt was not so much a “Teddy” (let you never be misguided by him championing the first national parks) but a self-righteous, sometimes outright brutal fan of the military and keen hunter, nay, slayer of big game? Thus, it is rather one of Roosevelt’s 19th century predecessors, Chester A. Arthur, the 21st president, Ed Miliband bears resemblance to (if any). Coming into office by accident – or more precisely put: by the atrocious murder of the elected president James A. Garfield – Arthur suffered from the bad reputation all Vice-Presidents-turned-Chief-Executives before him had had to face (one needs only to think back to the happless John Tyler, who was even nicknamed “His Accidency” by his contemporaries). Yet Arthur surprised his fellow citizens, and did not only overcome his initial reputation, but emerged as a reformer, respected by both parties and the public alike – even if, however, that did not suffice to gain him one of the more conspicuous places in the long list of presidents.
If Ed Miliband manages to emulate Arthur – judged by the current polls, his coming into office would be as an “accident” as Arthur’s some 130 years ago – that would be an admirable feat – and certainly the better role model to follow.
The economic legacy of Margaret Thatcher - a comment
Much has been written in the recent days since the death of Margaret Thatcher, and the reader might think: „My god, not another text on the subject, please!“ Yet, the majority, naturally, of those articles, essays and comments focussed on the political aspects and legacy of Baroness Thatcher’s years in Downing Street; and apart from the Economist, in comparison there have been only few comments on the economic legacy of Lady Thatcher. Three questions take centre stage here, and I will try and answer them in turn; in due course, I mainly elaborate on the excellent analysis by The Economist:
1) Britain in the late 1970s bore the rather unflattering sobriquet „the sick man of Europe“ due to its appalling economic situation, i.e., extreme inflation combined with high unemployment. So, did Thatcher's revolution in economic policy really push Britain out of the plight?
2) If so, might some of her policies be applied to today’s economic crisis?
3) What exactly is the lasting imprint Lady Thatcher has left on the United Kingdom and in general in terms of economic policy?
Alright, let’s begin with the expediency and the effect of Margaret Thatcher’s drastic economic treatment at the turn of the 1970s and ‘80s. Though a Keynesian myself, I nonetheless believe that there cannot be any doubt about the most aching economic plague of that time: inflation. The reader might ask: What about unemployment? Isn’t that the more relevant and necessary object of economic policy?
Being an economist, my clear answer is this: It depends… Battling against inflation with fiscal tightening when the former is around, say, 3-4%, at the sacrifice of losing many jobs is an economic stupidity. But a double digit inflation such as it persisted when Lady Thatcher moved into Downing Street is a nightmare, in itself and because it is the very cause of stable and high unemployment: Once inflation and its related expectations feed on themselves in a vicious circle, interest rates soar, demand – particularly investment – goes down, and with it employment. Hence, Margaret Thatcher’s determined and unequivocal fight against inflation, even though that necessitated brute budgetary measures to the detriment of many poor, was not only economically right, but in the end prepared the ground to bring back many of those poor into work (that, of course, is the macroeconomic side of the argument. The reader might compare that to the microeconomic job losses stemming from the coal mine demise due to Mrs. Thatcher’s policy; however, that’s a different kettle of fish at this point of the argument, for one could pursue Margaret Thatcher’s macroeconomic policy without simultaneously picking a fight against a specific sector of the economy). Thus, even though that did not lead to remarkable improvements of the real growth rate between the 1970s and the 1980s (cf. The Economist), in the long term it improved the employment situation.
Now, turning the second question, The Economist continues to state, that:
„The political legacy of Mrs Thatcher’s macroeconomic programme may be more important than the economic legacy. By so thoroughly discrediting the postwar Keynesian consensus, and by doing so more convincingly than in America, Thatcherism helped move the centre of gravity in economics from fine-tuning and stabilisation and towards more rules-based, non-discretionary policy. (…) The ensuing 25-year “Great Moderation” is often ascribed to this new consensus: that fiscal policy should leave stabilisation to central banks, who in turn should firmly fix their focus on a medium-term inflation target.“
On the one hand, I concur to the analysis that “Keynesian” (better put: the vulgar, political interpretation of Keynes’s theory) fine-tuning of an economy was a general folly of the time indeed, in the end almost always aggravating the amplitude of the economic cycle rather than smoothing it. On the other, I would contest the notion that, in general, stabilisation of the economy in any case should be left to monetary policy, for situations might arise where monetary policy is all but powerless – such as it is today. Therefore I fully subscribe to The Economist’s analysis, that:
„The problem, of course, is that the 1970s is probably the wrong parallel to worry about; for Britain the 1920s may be more apt. Monetary and fiscal stringency left real output lower in 1928 than in 1918. The main difference between those two decades was that monetary policy was clearly too loose in the 1970s, but too tight in the 1920s. British monetary policy is not wrong headed today as it was in the 1920s, but is constrained with interest rates jammed against zero. That significantly alters the role for fiscal policy.“
This finally lead us to the third question: The lasting legacy of Lady Thatcher in terms of economic policy. I tend to think that it is this: The finding that too much interference with the economy by the state in times where monetary policy should take the lead (i.e., where inflation and interest rates are abnormally high) is detrimental, and on the other hand the lesson that monetaristic policies themselves are no panacea, but at specific times, described by Keynes as the well-known “liquidity trap”, are completely sinewless.
Margaret Thatcher's legacy, in the end, is not a specific policy - but the meltdown of a general consensus and its replacement by a discretionary approach to the tools of economic policy.
