Bill Mitchell — The Eurozone Groupthink and Denial continues …

I have been going back through my snippets library looking at what economists and politicians said back earlier in the crisis and comparing the predictions with reality to try to understand better why Europe is lagging behind. I have been compiling national profiles for various nations lately to ensure I remain cogniscant of the detailed developments that have been occurring. It takes some organisation. I have been concentrating by interest on Finland, Spain and Portugal lately. It astounds me when I read or hear that the Eurozone has been a success because the currency is stable. Even that last statement is false given the monetary union is fighting deflation at present with recessed output levels and entrenched mass unemployment. The current statements coming out of European leaders accord almost directly with the same sort of things they were saying in 2010 as the region was plunging deep into recession. It seems that they have learned nothing. Some of the past leaders have retired with handsome pensions and will not be held to account for their policy incompetence. Others remain in office and their public statements demonstrate that they cannot see beyond the blindness of the Groupthink that defines the patterned behaviour of the elite European policy-making institutions.…

Bill Mitchell – billy blog
The Eurozone Groupthink and Denial continues …
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Bill Mitchell — The European Project is dead

When the GFC emerged and confirmed what Modern Monetary Theory (MMT) proponents had been predicting for more than a decade, I initially thought that this might be the ‘paradigm-shift’ line in the sand with respect to economic theory and policy. The OPEC oil price hikes in the 1970s provided the ‘space’ for Monetarism to usurp Keynesian thinking – not as a triumph of evidence and facts but as an ideological shift in thinking. The ideological battle had been going on for three decades in the academy but the oil crises exposed policy flaws in the Keynesian orthodoxy that were exploited by the Monetarists to allow them to reintroduce ideas (and policies) that had been completely discredited during the Great Depression of the 1930s. In the same that the dominant paradigm collapsed in the 1970s, I thought the GFC would so destroy the public credibility of Monetarism’s latest iteration, which we call neo-liberalism, that we could find intellectual space to restore rigor to economic policy and the way economics was taught in the universities. I even thought that the pragmatic and dramatically successful use of fiscal stimulus in most advanced countries would provide the empirical reinforcement necessary to repudiate and expunge neo-liberalism forever. I was wrong. But what the GFC has achieved as neo-liberalism hangs onto the reigns of power in policy making circles is a major breakdown of the what is referred to as the European Project. The creation of ‘Europe’, which was conceived after World War 2 as a means to maintain peace and create prosperity among previously hostile nations, was a major human achievement in the C20th. That vision is now in tatters as the neo-liberals, blinkered by their own Groupthink, steadily dismantle the meaning and application of that great Post WW2 experiment. Jean Monnet and Robert Schuman would be turning over in their graves to see what their ‘Project’ has become under the domination of Wolfgang Schäuble and his lackeys in the Eurogroup. So we might see the demise of neo-liberalism after all as it destroys the grand European political project….

Bill Mitchell – billy blog
The European Project is dead
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Bloomberg View — Stopping Europe's Descent Into Deflation

Europe also needs to rethink its fiscal policy. That's beyond the remit of the ECB, though it wouldn't hurt for Draghi to demand changes. Again, he took a step in that direction in his recent speech, saying that fiscal policy should "play a greater role" in boosting demand. Then he took a step back by saying that Europe's Stability and Growth Pact allowed sufficient room to maneuver, and that it would be "self-defeating" to abandon it. No. It isn't a matter of finding room for maneuver. This pact, which tells governments to cut government borrowing regardless of impending deflation, needs to be scrapped.…

Monetary policy can and should do more. That's the responsibility of Draghi and his ECB colleagues. If they want to, Europe's governments can repair their fiscal policies, as well -- by scrapping the fiscal pact rather than fiddling with it. If Europe's long recession gets worse, it will be because its leaders saw what was happening yet chose not to act.

Bloomberg View
Stopping Europe's Descent Into Deflation
By The Editors