Preslišane lekcije Velike depresije

Soroden komentar mojemu današnjemu članku v Financah, v katerem Simon Wren-Lewis (Oxford) opisuje preslišane lekcije Velike depresije iz 1930. let, in sicer: (1) opustitev zlatega standarda (devalvacija valute)  ter (2) fiskalno stimuliranje gospodarstva. Ter seveda, da so v času premajhnega agregatnega povpraševanja strukturne reforme in višina javnega dolga brezpredmetni.

The Eurozone is currently suffering from a chronic lack of aggregate demand. The OECD estimates an output gap of nearly -3.5% in 2013. Monetary policy is either unable or unwilling to do much about this, so fiscal stimulus is required. This is the first lesson from the Great Depression that is being ignored. Instead of stimulus we have austerity imposed by the Stability and Growth Pact (SGP).

Within the Eurozone, we have a problem created by Germany undercutting pretty well every other economy in the 2000-2007 period. I am not suggesting this was a deliberate policy, but the consequences were not appreciated by any Eurozone government at the time. Some correction has occurred since 2007, but it is incomplete. The second lesson of the Great Depression and the Gold Standard is that achieving correction through deflation and trying to cut wages is both hard and unnecessarily painful.

The solution eventually arrived at in the 1920s/30s was a series of devaluations (leaving the Gold Standard). That is not possible within the Eurozone. However adjustment is much less costly if it is achieved by raising prices in the country that is too competitive, rather than reducing prices in those that are uncompetitive. In practical terms we are not talking about very much here: a period with inflation in Germany at 3%, and at a little above 1% elsewhere, should be sufficient. Instead we now have inflation in Germany of 1% and in the rest of the Eurozone only a little above zero.

At this point a sort of moral indignation overcomes economic logic in the debate. Many Germans say why should we suffer 3% inflation to help put right irresponsible policy elsewhere? This is illogical, because it sees inflation below the Eurozone average as a virtue rather than a sin. A country within a monetary union obtaining inflation below the average (as Germany did in the early 2000s) is not a sign of virtue but a sign of a problem, just as it is for other union members to exceed the average.

A country cannot undercut its competitors forever. Any country experiencing below average Eurozone inflation should expect that this will be followed at some point by above average inflation. If the Eurozone could achieve average 2% inflation over the next few years that would mean 3% inflation in Germany – that is part of the Euro contract. To the extent that German policymakers attempt to renege on this contract by either preventing the ECB using unconventional means to achieve its target, or insisting on maintaining the deflationary SGP, then they become directly responsible for the misery that the Eurozone is currently going through.

I have not mentioned at any point levels of debt or structural reforms. Both are distractions for the current problem of inadequate demand and below target inflation. They are relevant only in that they allow policymakers to distract attention from the basic issues. Two of the major lessons of the Great Depression are to use fiscal stimulus to get out of a liquidity trap, and that it is far too painful to insist that uncompetitive countries should bear all the costs of readjustment. The Eurozone has failed to learn either lesson.

Vir: Simon Wren-Lewis

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