Thursday, 24 August 2017
Silly article by Owen Jones in The Guardian.
He inveighs against austerity, which will bolster his standing as one of the political left’s darlings. Unfortunately he’s clueless.
He argues that Portugal has implemented some stimulus recently and the effects have so far been beneficial, and that allegedly shows that the austerity imposed on Portugal has been unwarranted. Well that argument would certainly be valid in the case of a monetarily sovereign country, i.e. one that issues its own currency.
Unfortunately Portugal (like Greece) is in the EZ and that means big problems, as Bill Mitchell (Australian economics prof) keeps pointing out. In particular the way the EZ deals with lack of competitiveness in a particular country is to impose austerity on it till it’s costs come down and it regains competitiveness. Of course that’s harsh, but if you have a better way of solving the latter competitiveness problem, you’ll get a Nobel prize. Otherwise shut up.
Put another way, a bit more stimulus in any country in Greece’s or Portugal’s position will bring a temporary rise in employment and GDP. Unfortunately it will also raise inflation which delays the solution to the basic problem.
Of course it could be argued and indeed has been argued that A BIT MORE stimulus would only cause minimal additional inflation, and hence that the benefits of that policy outweigh the costs. But that point is above the head of Owen Jones. Indeed, the word “inflation” does not even appear in his article.