Thanks for visiting this blog, created in July 2012 out of great concern for the fate of the €uro currency area, once again on the verge of collapse due to the economically ill-advised and heartless austerity policies imposed on Greece, Spain and other heavily-indebted €uro area countries by a christian democratic German chancellor impressed with the budgeting skills of Schwabian housewives. Meant to reduce the public debt and put the countries back on a path to economic growth, these macro-economically idiotic policies are doing anything but cause "pointless misery" as Paul Krugman so aptly describes it (Bloomberg, July 23-29, 2012).

Instead of reducing public debt, the austerity measures set in motion a vicious cycle of economic contraction, rising unemployment and poverty, lower tax revenues, private capital flight, and rising public debt shares as the economy declines faster than the public debt. What’s more, the austerity-driven ‘blood, sweat and tears’ policies recommended to the European periphery derive from the same economic doctrine that brought us to the brink of disaster in 2008. These policies are not only misanthropic and counterproductive to economic growth and debt reduction in Europe, but will prove explosive for the €uro currency area unless a drastic change of course takes place - and soon.

While I do not pretend to have ‘the’ solution for the €uro crisis, I would like to offer alternative economic perspectives and views on current events, and hope to chart a more humane path toward a balanced, socially fair, and sustainable economic future for the €uro area.

On the origins of the 2008 Great Financial Crisis:
“90+% of traders are men, and they bet all of our bank deposits on liar loans which froze credit leading to 40% average losses passed on to ordinary taxpayers; then begged for trillion-dollar bailouts upon which they paid themselves 50% higher boni.”


Sunday, February 3, 2013

We need inclusive growth... and greater solidarity [IMF Managing Director Christine Lagarde]


As noted in my last post on Germany's and Britain's competitiveness dogma, there were also some positive developments in Davos. It was none other than the Managing Director of the much-maligned IMF who brought some reason and humanity back into the economic debate: Diplomatically but firmly, Christine Lagarde noted that while some structural competitiveness reforms and fiscal deficit reduction may be necessary, austerity measures are straining growth and should be moderated. Again and again, she stressed the need to focus on growth - not just any growth, but green growth, job-creating growth, and inclusive growth:  

     “Inclusive growth is one of the top priorities of policymakers. The top risk is severe income disparaty. Excessive inequality is corrosive to growth and it is corrosive to society. We, nor policymakers, have not paid enough attention to inequality ! All of us, including at the IMF, thanks to research that was conducted recently, have a better understanding that a more equal distribution of income allows for more economic stability, more sustained economic growth, and healthier societies with stronger bonds of cohesion of trust. This research is confirmed by empirical findings.”

       ..... "Gender inclusion is critically important and, frankly, too often neglected by policymakers. By raising the employment rates of women, we can attain higher rates of growth and employment. When women do better, economies do better."

       ...."We need greater solidarity between and amongst generations.....We need growth, we need green growth, we need growth that is inclusive, that is job-creating, and that is gender-inclusive."

Lagarde even quoted FDR: "The test of our progress is not whether we add more to the abundance of those who have much, but whether we provide enough to those who have little."

 ---> see the video of Christine Lagarde's Davos speech of Jan 23, 2013 here 

 What a couragious speech at a meeting of the fabulously rich global business and investment community and the highest echelon of government officials catering to this global money elite. It is one thing to consciously stay away from this 'happening of the rich and famous', but quite another to have the audacity to tell them in no uncertain terms that  they need to change and show some solidarity with others. 

Whether Christine Lagards's speech was just a genius stroke of PR or whether the IMF Managing Director  and her economists really mean it remains to be seen. Fact is:  her arguments were very well received by her colleagues Angel Gurria, General Secretary of the OECD, and Trevor Manuel, South Africa's Minister of Finance and Member of the G-20. Ms. Merkel, on the other hand, was not amused.
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