by William K. Black, New Economic Perspectives
It’s the curse of the commentator on commentators. I recently wrote nice things about Neil Irwin’s New York Times column about the Eurozone. On January 22, 2015, he wrote a column about the ECB’s adoption of quantitative easing (QE), that claimed it was “last, best hope” for the Eurozone. In fairness to Irwin, his column contains plenty of skepticism as to whether QE is even a poor “hope” for the Eurozone.
Irwin also has the right quotation from Mario Draghi, the head of the ECB.
“Mr. Draghi acknowledged that it would take more than an open spigot of money from the central bank to get Europe’s economy on track, and that political authorities across Europe must act as well. ‘What monetary policy can do is to create the basis for growth,’ he said at a news conference in Frankfurt. ‘But for growth to pick up, you need investment. For investment, you need confidence. And for confidence, you need structural reforms.'”
Yes, Draghi, seven years after the onset of the EU downturn, is still relying on what Paul Krugman aptly derides as the “confidence fairy.” Note that two concepts that economists overwhelmingly consider critical disappear from Draghi’s fable: inadequate demand and fiscal stimulus. Irwin does not make any of these points.
“Structural reforms” is a dishonest euphemism for a war on workers’ wages and more of the same deregulatory race to the bottom that helped create the criminogenic environment and turn the City of London into the global financial cesspool. The war on workers’ wages further reduces demand, but is designed to spark a eurozone-wide race to the bottom. The obvious goal is to increase corporate profits and CEO wealth, but the war on workers’ wages is rationalized as essential to winning the race to become the largest net exporters. Yes, neo-mercantilism, the bane of Adam Smith’s existence, is back. It is being spread by those who purport to be his devotees. We cannot, of course, all be net exporters.
