Friday, November 15, 2013

How Economic Thinking In Germany Affects Economic Policy In Eurozone

There has been a lot of discussion about the economic problems in the eurozone and its distaste for the use of stimulative fiscal and monetary policies.  This is an article written before the September elections in Germany, that offers a description of the dominant economic perspectives in Germany.  Economic ideas in Germany are much less diverse than those in the US where Keynesian's and free marketers from Chicago often disagree about economic policy.  The economic consensus in Germany is called "ordoliberalism".  It owes much more to the ideas of Hayec than to those of Keynes.  It opposes cartels and monopolies and it uses government regulations to achieve the economic outcomes which would be consistent with that of perfectly competitive markets.  There is a technocratic preference for rigid rules and legal frameworks which place the management of the economy beyond the reach of democratic decision making.  The market may not be self correcting, as those from Chicago and Austria believe, but astute regulation may help to achieve the same end as a self correcting competitive market.  The German elections won't change economic policy preferences because the basic tenets of ordoliberalism are widely shared among the major political parties.

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