ECONOMISTS ARE OUTRAGED!
Down with neoliberal dogmas! A new manifesto from France does away with false platitudes about the financial markets
By Rudolf Walther
[This article published in: Freitag, 2/7/2011 is translated from the German on the Internet, ]
In France, the Manifesto of Appalled Economists has triggered passionate debate. Of the four authors, Philippe Askenazy, Andre Orlean and Henri Sterdyniak work in governmental research institutes. Thomas Coutrot is an academic advisor with Attac France4. They turn vehemently against the trivialization of the crisis and its causes in nearly all the media as though they involved unquestionable facts like the weather. In the economic press and on the talk-shows, they read and hear only the litanies of neoliberal orthodoxy. The authors are appalled because these prejudiced thought patterns appear under the flag of academia.
The Manifesto of Appalled Economists was signed by 700 economists working at universities and over 100,000 members of other professional groups. The authors understand their call as homage to the radical intellectual Pierre Bourdieu. They regard the crisis as a social crisis with “global ecological and political dimensions and not as a standard economic crisis and see symptoms of an historical breach. The Manifesto criticizes false economic platitudes and sketches concrete alternatives to the neoliberal dogmas. The first false platitude is: “the financial markets are efficient.”
UNTIL THE BUBBLE MAKES A “BANG”
Deriving the efficiency of financial markets in mobilizing capital from the speed of economic data transmission without convincing evidence is a short-circuit. Financial markets do not generate any realistic prices. Competition does not force adjustment of prices here. When the prices for securities or derivatives rise, demand and subsequent prices do not fall. The price spiral turns faster and promotes the formation of bubbles until they burst. As counter-measures, economists recommend prohibition on speculation for banks, reduction of speculation through controls, taxation on financial transactions and exclusion of certain transactions with derivatives and credit-deficiency insurance. These measures were urged unsuccessfully for two years in France.
The assumption that rising state indebtedness is caused by the social systems is popular. The facts are different than the popular refrain. In 2010 the deficit grew 7 percent and the state indebtedness rose from 66 to 84 percent of the GDP. What the Manifesto calls “the tax counter-revolution” is responsible, not only the crisis.
In France, tax gifts of 100 billion Euros were distributed between 2000 and 2010. Whether tax relief automatically brings more economic growth is doubtful. That they intensify social inequalities is indisputable. The Manifesto wants a coordinated European economic, financial and fiscal policy to remove the welfare differentials within the European Union, not any single-handed nation-state effort. This is a wise and not entirely new conclusion from the crisis.
“THE MANIFESTO OF APPALLED ECONOMISTS,” 32 pages, January 2011
PSEUDO “OBVIOUS FACT” # 1 : FINANCIAL MARKETS ARE EFFICIENT
PSEUDO “OBVIOUS FACT” # 2 : FINANCIAL MARKETS CONTRIBUTE TO ECONOMIC GROWTH
PSEUDO “OBVIOUS FACT” # 3 : MARKETS ASSESS CORRECTLY THE SOLVENCY OF STATES
PSEUDO “OBVIOUS FACT” # 4 : THE SOAR IN PUBLIC DEBTS RESULTS FROM EXCESSIVE SPENDING
PSEUDO “OBVIOUS FACT” # 5 : PUBLIC SPENDING MUST BE CUT IN ORDER TO REDUCE THE PUBLIC DEBT
PSEUDO “OBVIOUS FACT” # 6 : PUBLIC DEBT SHIFTS THE BURDEN OF OUR EXCESSES ON OUR GRANDCHILDREN
PSEUDO “OBVIOUS FACT” # 7 : WE MUST REASSURE FINANCIAL MARKETS IN ORDER TO FUND THE PUBLIC DEBT
PSEUDO “OBVIOUS FACT” # 8 : THE EUROPEAN UNION PROTECTS THE EUROPEAN SOCIAL MODEL
PSEUDO “OBVIOUS FACT” # 9 : THE EURO IS A SHIELD AGAINST THE CRISIS
PSEUDO “OBVIOUS FACT” # 10 : THE GREEK CRISIS WAS A SPRINGBOARD TOWARDS AN ECONOMIC GOVERNMENT OF EUROPE AND EFFECTIVE EUROPEAN SOLIDARITY