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laissez half-emptyism? the cycle never sets on structural reform? capitalism vs. GDP etc…

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There really should be a word for neoliberal eitherorism of this sort. Just as, in the US, tax cuts for the wealthy were first proposed as the only fair thing to do with the federal surplus in the first years of the 2000s, and then, after the economy began to stutter and tank, the only form of economic stimulus sure to bring the feds back into the black, the Economist here greets Europe’s strong economic performance vis a vis the US with a call to Americanizing workplace reform.

Eitherorism, yes, and also pickumandchoozumism. If you are in favor of labor market reform, then the strong performance serves as apt evidence that more reform is needed:

The transformation has been most remarkable in Germany, the biggest European economy, once tarred as “the sick man of Europe”. From 1995 to 2005 German GDP grew at an average of only 1.4% a year. But in the first quarter of 2007 it expanded more than twice as fast, despite a large rise in value-added tax. The 2004 reforms in labour markets and welfare made by the previous government under Gerhard Schröder are bearing fruit. On international definitions, unemployment is down to 6.4%, not much above the level in Britain. German business is doing spectacularly well: the country is again the world’s biggest exporter, profits are at a record, competitiveness has improved sharply.

But if, on the other hand, you take this strong performance as evidence that things are more or less OK the way they are, that there has been enough reform, or even godforbid that European competitiveness is evidence that the relatively “unreformed” European model actually does work, then you are misreading a cyclical effect as an indicator of the effectiveness of policy.

Some Europeans may be tempted to conclude that their economic problems are behind them, their structural faults have been put right—and there is no need for more painful reforms. […] But much of the recovery is really cyclical. When the global economy is registering a fourth successive year of near-5% growth, it would be surprising if the world’s biggest exporter did not benefit; indeed, growth of 3% seems rather modest.

And I think it’s safe to say that the logic deployed in the following paragraph won’t likely be deployed by the Economisers during the next European downturn:

European countries that have introduced radical reforms have usually done so in times of serious economic crisis: Britain in 1979, the Netherlands in 1982, Ireland in 1987, Denmark, Finland and Sweden in the early 1990s. Yet as all these countries found, it is easier to change when times are good, not when they are bad. That is a lesson that Germans, French, Italians and other Europeans should ponder as they bask in today’s sunshine.

So, during the next European recession, we should expect to hear strong advocacy of postponing reform for sunnier times in favor of dosing the economy with some nice state spending, right?

Written by adswithoutproducts

July 18, 2007 at 12:24 pm

One Response

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  1. Yup, definitely need a word for it — maybe one a tad bit more euphonious, that would work as an instant dismissal and putdown, like the right has “tax-and-spend liberal.”

    Conversely, we need a catchy word or slogan to call for investment in infrastructure and social welfare systems — “Support safety net funding! If not you, then who? If not now, then when?”

    Eh, I better not quit my day job…

    Sisyphus

    July 18, 2007 at 10:21 pm


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