2013-05-31

Wynne Godley ir europietiškos problemos

Ralph Musgrave — European Commission tells the UK what do about youth unemployment.
That’s “European Commission” as in “we lot who have managed to create 50% youth unemployment in Greece, 50% in Spain and 36% in Portugal, so we obviously know what we’re talking about”.

See: Council Recommendation on the United Kingdom’s 2013 national reform programme

The European Commission’s – er – “advice” then descends from the ridiculous to the totally ridiculous: it tries to tell the UK what do about it’s deficit. Here it follows the standard IMF / OECD / Pete Peterson / Bowles and Simpson / Rogoff and Reinhart line, namely that a country should have a PLAN for deficit reduction.

The whole notion of a PLAN for reducing the debt or deficit is nonsense because it fails to get a point made by Keynes: “Look after unemployment and the budget will look after itself”.

In other words, a monetarily sovereign government should pitch it’s deficit (or surplus) at a level that reduces unemployment as far as is possible without exacerbating inflation too much. If the private sector happens to be in a fit of irrational exuberance, government may well need to run a surplus in order to confiscate financial assets from the private sector and quieten things down. Conversely, if the private sector is in subdued mood, government will need to run a deficit so as to boost demand and feed financial assets into private sector pockets.
And since it is impossible to predict what mood the private sector will be in in twelve months time (never mind three years time), it’s impossible to say what size deficit (or surplus) will be suitable in twelve months’ time or three year’s time.
Paskutinė pastraipa yra paprastas paaiškinimas, kodėl metinės BVP prognozės ir metiniai biudžetų planavimai negali būti "atsakingos" politikos dalimi. Prognozavimas tokiems laikotarpiams neveikia.

Jei kam įdomu, dedu nuorodą į 1998 metais publikuotą Wynne Godley ir George McCarthy straipsnį "Fiscal Policy Will Matter", kuriame jie

a) pademonstravo stock-flow consistent modelį, leidžiantį gana tiksliai prognozuoji JAV BVP pusę metų į priekį. Amerikos ekonomika didžiausia pasaulyje ir gana uždara, todėl tuos pusę metų galima laikyti ilgiausiu įmanomu prognozės laikotarpiu apskritai. Mažesnėms ir atviresnėms ekonomikoms prognozės būtų dar trumpesnės (jeigu dar būtų laiku prieinama joms reikalinga statistika;

b) suformulavo teiginį, dažnai vadinamą Godley teorema, pasak kurio bet kurios ekonomikos BVP augimui būtinas valdžios deficito plius eksporto santykio su mokesčiais ir importu augimas.
This concept of fiscal stance is not new. It is thirty years since Carl Christ, of Johns Hopkins University, had the brilliant insight that should an economy ever reach stationary equilibrium, all stock variables as well as all flow variables would be constant; and that if all stock variables, including government debt, were constant, government receipts would have to equal government payments. It would then follow that if the economy were moving toward stock-flow equilibrium and if taxes were levied as a proportion of income, the GDP of a (closed) economy would always be tracking, perhaps with a long lag, government outlays divided by the average tax rate – the very same concept that we call fiscal stance. Therefore, a necessary condition for the expansion of the economy, at least in the long term, is that the fiscal stance should rise: Government expenditure must rise relative to the average tax rate. If the tax rate were held constant, government expenditure would have to rise absolutely for output to grow; if government expenditure were held constant, the tax rate would have to fall.
Christ’s finding was confirmed in two famous articles, Blinder and Solow (1973) and Tobin and Buiter (1976). But this whole line of argument has never been influential in the policy discussion and now seems to have disappeared from the literature. Perhaps the notion of a stock-flow equilibrium is too much of a will-o’-the-wisp, and the lags that would lead the economy to it so long and complex that this concept of fiscal stance has been thought to have no operational significance. Our first major contention is that the Christ conclusion, suitably adapted, has a practical application of decisive importance.”
Jeigu jau pradėjom, pora papildančių nuorodų tekste:
The result of ignoring the accounting matrix is to forget we must have an ever increasing deficit in order to for the economy to grow. Reading through the papers by Buiter and Blinder, it’s easy to they knew this at some point roughly 40 years ago, but have forgotten it now.

(Update: Ramaman provides us the links to the papers Godley mentions. Blinder and Solow is here :Does Fiscal Policy Matter? (1972). Buiter and Tobin: Long Run Effects of Fiscal and Monetary Policy on Aggregate Demand (1974) )
Grįžkime prie eurozonos realijų. Žinomame 1992 metų straipsnyje Maastricht and All That Godley prognozavo dabartines eurozonos problemas
Some writers (such as Samuel Brittan and Sir Douglas Hague) have seriously suggested that EMU, by abolishing the balance of payments problem in its present form, would indeed abolish the problem, where it exists, of persistent failure to compete successfully in world markets. But as Professor Martin Feldstein pointed out in a major article in the Economist (13 June), this argument is very dangerously mistaken. If a country or region has no power to devalue, and if it is not the beneficiary of a system of fiscal equalisation, then there is nothing to stop it suffering a process of cumulative and terminal decline leading, in the end, to emigration as the only alternative to poverty or starvation.
ir nurodė gilumines priežastis
The central idea of the Maastricht Treaty is that the EC countries should move towards an economic and monetary union, with a single currency managed by an independent central bank. But how is the rest of economic policy to be run? As the treaty proposes no new institutions other than a European bank, its sponsors must suppose that nothing more is needed. But this could only be correct if modern economies were self-adjusting systems that didn’t need any management at all.

I am driven to the conclusion that such a view – that economies are self-righting organisms which never under any circumstances need management at all – did indeed determine the way in which the Maastricht Treaty was framed. It is a crude and extreme version of the view which for some time now has constituted Europe’s conventional wisdom (though not that of the US or Japan) that governments are unable, and therefore should not try, to achieve any of the traditional goals of economic policy, such as growth and full employment. All that can legitimately be done, according to this view, is to control the money supply and balance the budget. It took a group largely composed of bankers (the Delors Committee) to reach the conclusion that an independent central bank was the only supra-national institution necessary to run an integrated, supra-national Europe.

But there is much more to it all. It needs to be emphasised at the start that the establishment of a single currency in the EC would indeed bring to an end the sovereignty of its component nations and their power to take independent action on major issues. As Mr Tim Congdon has argued very cogently, the power to issue its own money, to make drafts on its own central bank, is the main thing which defines national independence. If a country gives up or loses this power, it acquires the status of a local authority or colony. Local authorities and regions obviously cannot devalue. But they also lose the power to finance deficits through money creation while other methods of raising finance are subject to central regulation. Nor can they change interest rates. As local authorities possess none of the instruments of macro-economic policy, their political choice is confined to relatively minor matters of emphasis – a bit more education here, a bit less infrastructure there. I think that when Jacques Delors lays new emphasis on the principle of ‘subsidiarity’, he is really only telling us we will be allowed to make decisions about a larger number of relatively unimportant matters than we might previously have supposed. Perhaps he will let us have curly cucumbers after all. Big deal!
Prieš dvidešimt metų pažadėjo, kad murkdysimės ir paaiškino kodėl. Deja, neapsiriko.