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Monday, March 30, 2009

The New Capitalists

European leaders are balking at Keynesian stimulus, to the degree that Obama has backed off his original plan to push this at the upcoming G20 sumit.

Did I miss something? In this country, the Neanderthal Republicans are sceptical of Keynesian stimulus, and Democrats -- especially liberal Democrats -- apparently think it's settled that it works and that nothing else in times of recession will. Forget inflation, stagflation, or any other bugaboo. If you're a liberal Democrat, this Keynesian spending stuff works.

So, what's wrong with Europe? Why aren't they buying fiscal stimulus? Really not buying it. Czech Prime Minister Topolanek called more spending right now "the road to hell". French President Sarkozy and German Chancellor Merkel have explicitly rejected Obama's call for more global spending. Their position is clear enough:

"...the problem is not about spending more, but putting in place a system of regulation so that the economic and financial catastrophe that the world is seeing does not reproduce itself."

What are these European leaders, closet Capitalists? Sheesh. I wonder what Paul if-only-we-could-spend-even-more Krugman thinks of the Continent now. Neanderthals.

Read it here.

4 comments:

mijopo said...

"the problem is not about spending more, but putting in place a system of regulation so that the economic and financial catastrophe that the world is seeing does not reproduce itself."

Hardly sounds like an unabashed embrace of free market economics to me.

Note that just because one is a liberal it doesn't follow that one thinks that there's no problem Keynesian stimulus can't solve. Krugman is onside with many of the Europeans here. He's been complaining, quite bitterly in fact, that the Obama admin. is leaving the fundamental problems with the banking system unaddressed, which is what a lot of Europeans are also complaining about.

mijopo said...

"Forget inflation, stagflation, or any other bugaboo. If you're a liberal Democrat, this Keynesian spending stuff works."

this is a grossly inaccurate statement. Come on.

Erik said...

I agree with your point that it doesn't follow that political liberalism requires Keynesian butt smootching, to put it in an after 9:00 PM way. But mostly the correlation is pretty strong. I hear nary a whimper from the likes of left-leaning folk about the proposal to spend our way out of the recession. They defend this as stimulus, just as the Obama administration presents it. So the correlation is pretty robust (likewise, it's hard to find a card carrying conservative who thinks spending on health care during a massive recession is better than cutting marginal tax rates on small business).

Erik said...

Merkel, Sarkozy, they are worried about inflation. Used to be we could rely on the Fed to control inflation by manipulating short term interest rates. A few years ago, economists started noting that short term rates did not have the desired effect on long term rates. What will happen with inflation in this climate where central banks can't just stop inflation with monetary policy is what is keeping the Europeans up at night. We here in America seem to be much more sanguine.