Tuesday, January 21, 2014
Wolfgang Munchau Is Not Pleased By France's Embrace Of Say's Law
Wolfgang Munchau interprets the embrace of Say's Law in France as indication that France is now aligned with Germany on economic policy. He believes that France's economic thinking is now back where it was 211 years ago when Say's dictum that supply creates its own demand was introduced to the world. It implies support for a conventional supply side approach to the problem of inadequate aggregate demand that is favored by Germany. France is now committed to cutting taxes and government spending that is consistent with the austerity program that dominates in the eurozone. It has captured the center left and center right political parities in the eurozone and it is only opposed by those on the far left and far right. According to Munchau, the U turn by France means that the policy debate in the eurozone has been concluded and that there will be little impetus for reform in the governance structure of the eurozone. This means that the nations on the periphery will continue to be forced to swallow the bitter medicine that has been prescribed to address their economic problems.