Alberto Mingardi  

Hatchuel on the new waves of statism

Treatment: A Little Cost-Benef... How shall we define 'liberal'?...

Romain Hatchuel, who is "managing partner of Square Advisors LLC, a New York-based asset-management firm", had a very good op-ed in the Wall Street Journal, "The World-Wide Undermining of Free Markets".

Mr Hatchuel's points will not sound new to EconLog's readers, but I think it is important they are made. He carefully reminds the reader that we are now witnessing a new surge of interventionism all over the world (from the Chinese "getting creative" in making sure stock prices can't but go up to the EU's stubborn efforts to prevent Greece paying the full price of her fiscal folly). The dominant narrative, as you know, is very different, and tends to stress the need for governments to bring back peace in unfettered, chaotic, crisis-prone markets. I think Mr Hatchuel's narrative is better grounded in reality than the prevailing one.

We are still in a "discoursive battle", as Marianna Mazzucato likes to say, on the role of government in society. I found this observation by Mr Hatchuel on the anti-austerity movement in Europe particularly profound:

More people need to question the anti austerity camp's real motives, which clearly stem from a distrust of markets. This is especially obvious when their attacks on fiscal discipline ignore the progress made by countries where austerity measures have been successfully implemented, such as the United Kingdom, Ireland or Portugal.

Do these fiscal doves care that much about unemployed Spaniards or Greek pensioners? Perhaps, but their ultimate goal, it seems, is to ensure that extraordinary post-crisis measures become permanent policy.

"Never let a good crisis go to waste" is a popular political strategy.

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CATEGORIES: Eurozone crisis

COMMENTS (5 to date)
ThomasH writes:

There is a grain of truth in that the botched response to the crisis has brought a lot of silly ideas out of the woodwork, but the ones on the "right" -- not encouraging countries with out-of line price levels like Greece to leave the Euro, arguing that periods in which the monetary authorities have let NGDP o even price levels fall below their pre-crisis trends (under pressure from you know who) is when we should move away from public investment with NPV discounted at the long term borrow rate greater than zero present, and fighting tooth and nail to allow banks to leverage themselves without limits -- have been for most damaging.

"Never let a crisis go to waste" is indeed the guiding principle of Messrs Cameron and Boehner.

TMC writes:

ThomasH: "Never let a crisis go to waste" was/is the credo of the Obama administration. The rest of you characterizations are equally accurate.

Alberto, world politics swing back and forth. Once we have paid the price for our statism, it will fall in disfavor once again.

ThomasH writes:

But is is Boehner and Cameron that have been able to use the crisis to achieve "austerity" (not carrying out activities that have positive NPVs, supposedly because of the deficit.)

Obama certainly let the crisis go to waste -- dallying in appointing sensible people to the Fed board, not fighting for Peter Diamond, way too small stimulus and too little of it directed to SL governments whose investment strike has been a big drag on growth.

Jesse writes:

I've never understood this: It seems that there is enough wealth held by those who believe Greece's bond prices are too high to come in and bid down the prices. If organized, I would think this institution could buy as many new bonds as it takes over the next several years to bring Greece back upright.

Why doesn't someone organize a progressive, pro-stimulus investment group to raise however many billions of dollars it would take to keep Greece afloat, let them do the government spending necessary to turn their economy around, all the while, making payments on their old debt held by the forces of evil? The best part is that the anti-austerity crowd would have a shining beacon for their future arguments, in addition to nice profits.

I've always wondered why something like this isn't considered. But I'm no economist, and definitely not a macroeconomist.

ThomasH writes:


I don't understand how your proposal is supposed to work and I think it may represent a misunderstanding of criticisms of the EU's handling of the Greek situation.

1. First is the way the losses on past foreign investments in Greece should be shared. Many people think there should have been a much larger write-down of those debts in 2010.

2. The various programs did not give sufficient (any?) consideration for how to maintain full employment while shifting resources from private and government consumption to net exports.

3. In consideration of these failings, many people think that Greece would have been and still would be better off leaving the Eurozone.

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