It would be wrong not to have a thread on the latest unemployment and emigration data.
Together with the recent data on our consumer price level, relative to the rest of the EU, they show (as if there were any doubt on the matter) that even in small, open, flexible Ireland, the current poster boy for the EU’s preferred austerity/internal devaluation strategy, wage and price flexibility — while impressive — isn’t what certain macro theories assume it to be.
Here is the latest from Barry Eichengreen, who is a busy man since he will be giving his Presidential Address to the Economic History Association this evening. Congratulations Barry.
But do be careful Barry, go too far down this road and you’ll have the Irish Times accusing you of being on the far left or far right.
According to the Irish Times,
The pessimists argue the euro is going to collapse and that will make it all irrelevant, but these are the same people, from far right and far left, who urged burning bondholders, collapsing the banking system and refusing to accept the terms of the bailout.
So, if you are worried that the euro is facing an existential crisis and may be on the brink of collapse, if the right policy choices are not taken quickly, then you are on the far left or far right. Take that, Wolfgang Münchau! And you are also on the far left or the far right if you were not in favour of Irish taxpayers paying back unguaranteed bondholders. Take that, Morgan Kelly, Karl Whelan, and many others too numerous to mention! And of course, if you were in favour of not paying back unguaranteed bondholders, then this meant that you were either in favour of collapsing the banking system, or prepared to accept such a collapse as a consequence of the policies you were advocating (their wording is a little ambiguous here, but the last nine words of that quotation suggest that the former interpretation is what the IT had in mind).
(As an aside, who are these pessimists who argue that the collapse of the euro “will make it all (i.e. getting Ireland back to creditworthiness) irrelevant?” And should Irish policy makers not be thinking hard about what to do in such an event? Would it not be irresponsible for them to refuse to contemplate such an eventuality? And should we not be doing our bit to head off such an eventuality by pointing out to governments with more fiscal space than ourselves that the Irish experience clearly shows that even in a small, open economy the confidence fairy does not exist, and that a policy of generalised eurozone austerity will be disastrous?)
Nice to see such rigourous and nuanced thinking from the IT.
I’ve seen various explanations for the 2008 crisis: global imbalances, dodgy financial innovations, lack of proper financial supervision, the interaction of all of the above. And a few others besides.
But this is a new one to me, I must confess.
I agree with Ryan Avent when he says that “the current situation reinforces the idea that strong, well-anchored automatic countercyclical stabilisers—fiscal and monetary—are the best hope for avoiding prolonged economic crises”.
Unfortunately, these days in the eurozone you are more likely to read stories like this one.