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On July 20 2015 23:18 Noizhende wrote:
if you increase wages in germany prices for german products would increase, which would force germans to spend exactly what they get more, also their unemployment would increase
If wage increases would produce unemployment and wage cuts would reduce unemployment Greece would have negative unemployment by now. More wages means more demand means more jerbs.
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On July 21 2015 01:47 Nyxisto wrote:Show nested quote +On July 20 2015 23:18 Noizhende wrote:
if you increase wages in germany prices for german products would increase, which would force germans to spend exactly what they get more, also their unemployment would increase If wage increases would produce unemployment and wage cuts would reduce unemployment Greece would have negative unemployment by now. More wages means more demand means more jerbs.
More along the lines of "It's complicated and there i no simple answer." Under certain circumstances higher wages can lead to more jobs. Under other circumstances higher wages can lead to a loss of jobs. Stuff isn't always simple.
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Nah, not really along those lines of "it's complicated". We have had wage cuts all over Southern Europe with not a single country having successfully reduced their unemployed that way.
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you forget to consider exports vs imports or international competitiveness:
if you can export your products you don't need the domestic consumption lost by wage cuts to keep the number of jobs steady (germany)
if you can not export you need the domestic consumption to keep the number of jobs steady. so if you lower wages and cannot export still, you will destroy jobs. (greece)
edit: although we cannot really speak of "wage cuts" in the case of germany, they just didn't increase wages enough to not become too competitive compared to the rest of the eu
edit2: you could also argue btw that everybody in the eu should have increased their wages in much lower amounts, but then you would also have to set a lower inflation goal than 1.9 %
edit3: also i'm more or less just explaining in english what flassbeck said in the video i posted before(p.223), and i'm not sure if increasing german wages will magically solve everything, there are a lot of other reforms needed.
it just seems like a good framework to look at the situation we are in and to think about new solutions, because austerity clearly didn't work, sadly enough it will be all politics in the end, and we can only hope that merkel starts to make european monetary policy which benefits all of europe through germany, not only monetary policy which benefits germany alone.
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Relevant article from Habermas (worth reading even if you disagree) :
Merkel's European Failure: Germany Dozes on a Volcano
Under the imploring headline "We Germans Don't Want a German Europe," German Finance Minister Wolfgang Schäuble recently denied in a newspaper essay published simultaneously in Great Britain, France, Poland, Italy and Spain that Germany seeks a political leadership role in the European Union. Schäuble who, along with Labor Minister Ursula von der Leyen, is the only remaining member of Chancellor Angela Merkel's cabinet who can be characterized as a "European" in the West German mold, speaks from conviction. He is anything but a revisionist seeking to reverse Germany's integration into Europe, thereby destroying the basis for the stability of the postwar order. He is familiar with the problem that Germans must fear should it ever return. [...]
http://www.spiegel.de/international/germany/juergen-habermas-merkel-needs-to-confront-real-european-reform-a-915244.html
And an interview from the Guardian (" Jürgen Habermas’s verdict on the EU/Greece debt deal") :
Guardian: What is your verdict on the deal reached on Monday?
Habermas: The Greek debt deal announced on Monday morning is damaging both in its result and the way in which it was reached. First, the outcome of the talks is ill-advised. Even if one were to consider the strangulating terms of the deal the right course of action, one cannot expect these reforms to be enacted by a government which by its own admission does not believe in the terms of the agreement.
Secondly, the outcome does not make sense in economic terms because of the toxic mixture of necessary structural reforms of state and economy with further neoliberal impositions that will completely discourage an exhausted Greek population and kill any impetus to growth.
Thirdly, the outcome means that a helpless European Council is effectively declaring itself politically bankrupt: the de facto relegation of a member state to the status of a protectorate openly contradicts the democratic principles of the European Union. Finally, the outcome is disgraceful because forcing the Greek government to agree to an economically questionable, predominantly symbolic privatisation fund cannot be understood as anything other than an act of punishment against a left-wing government. It’s hard to see how more damage could be done. [...]
http://www.theguardian.com/commentisfree/2015/jul/16/jurgen-habermas-eu-greece-debt-deal
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On July 21 2015 01:47 Nyxisto wrote:Show nested quote +On July 20 2015 23:18 Noizhende wrote:
if you increase wages in germany prices for german products would increase, which would force germans to spend exactly what they get more, also their unemployment would increase If wage increases would produce unemployment and wage cuts would reduce unemployment Greece would have negative unemployment by now. More wages means more demand means more jerbs.
Depends,
If you just increase wages there will be a surplus of "Work-Supply" (Unemployment), you have to increase the prices of goods aswell in order to stay at an equilibrium. So a wage increase can very well produce unemployment
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On July 20 2015 23:07 Noizhende wrote:
you have to put profits back into the system or they are useless.
wages are the only thing right now how you can control inflation in the eu, and that's the problem.
wages are set by employers and unions together, but the unions are not hardline enough right now, at least in germany, because they don't think macroeconomically ofc.
I don't think stagnant German wages are because German unions are not bargaining hard enough, I think it's more due to the structural imbalances created by the euro that you are mentioning. It's probably a combination of factors that include the global erosion of union bargaining power caused by increased globalization and competition from lower-wage areas including within the EU free-trade zone, the neoliberal assault on labour movements, and the fact that, as you correctly point out, the euro is not the optimum currency for Germany but is undervalued, leading to an export-oriented economy which also results in decreased purchasing power for its workers.
but if you have the rest of the eu trying to be like germany too, which was basically the goal of the euro, and copying german policies, then thinking germany centered when you make german policies is not enough, you are shooting yourself in the foot longterm, because like i said not everyone can be exportweltmeister at the same time and make profits based on undercutting foreign wages. it just leads to useless competition and lower and lower wages + deflation everywhere if everyone in the eurozone would start undercutting every other countries wages.
and that's what schäuble doesn't get, he cannot have every country in the eu mimicing germany if germany goes for export oriented strategy, because who is going to buy all the stuff?
either germany has to try to get exports/imports ~ 1, then he can demand that everyone do the same as germany, and then the euro is going to work.
or germany puts its profits into programmes to increase consumption in countries who can't compete.
Exactly. Germany has tried to implement economic policies for the EU which have been successful for it but cannot be successful for the EU as a whole. The German model has been an export-oriented economy running high trade surpluses. Unfortunately it's impossible for Europe to all run trade surpluses with each other. Germany's economic model has even been criticized by the US government as damaging to the EU.
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On July 21 2015 05:51 DrCooper wrote:Show nested quote +On July 21 2015 01:47 Nyxisto wrote:On July 20 2015 23:18 Noizhende wrote:
if you increase wages in germany prices for german products would increase, which would force germans to spend exactly what they get more, also their unemployment would increase If wage increases would produce unemployment and wage cuts would reduce unemployment Greece would have negative unemployment by now. More wages means more demand means more jerbs. Depends, If you just increase wages there will be a surplus of "Work-Supply" (Unemployment), you have to increase the prices of goods aswell in order to stay at an equilibrium. So a wage increase can very well produce unemployment
If demand is lower than what it "should" (so that our actual growth match potential growth) - as suggested by the keynesian concept of equilibrium of under employment of the capacities of production (labor and capital) - then an increase in wage create an increase in demand and a decrease of unemployment.
If there is no under employment of the capacities of production, then an increase in wage create inflation (the increase in wage is compensated by an increase in the price of goods and services - and thus has no impact on real economy according to the idea of the dichotomy).
Now, in reality, not only equilibrium does not exist (Sonnenschein - well it actually can "exist" but we can't even know when and it is very unlikely that our economy is at equilibrium), but if it does exist, it exist only with a very limited set of caracteristics (that are basicaly impossible to find in reality - Arrow, Debreu), and in fact we cannot even aggregate offer and demand so who the fuck care (Sonnenschein, Mantel, Debreu). All this is neoclassic economic bullshit, you cannot explain nor understand the impact of an increase in wage in an economy everything equal with a simple sentence - but considering that our demand is way below our capacities of production (just consider the fact that 10 % of the labor factor in europe is unused !) then we can safely assume an increase in wage could have a positive impact on our economy.
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Are balanced budgets and export surpluses synonymous? I feel like many posters are interchanging the 2. The are stamping their feet crying that Germany is trying to force responsible revenue collection and spending on them when in fact it's just reality that governments needs to do business responsibly. Meanwhile they are offering the "solution" that Germany be more irresponsible like them to make them more competitive with their less privileged peers. It's the standard "How dare you excel, we should all have equality in mediocrity!" mantra.
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On July 21 2015 07:52 Wolfstan wrote:
Are balanced budgets and export surpluses synonymous?
They have nothing to do with each other. Balanced budget is government spending = income. Export surpluses are to do with a country's trade balance. Export surplus = exports > imports therefore normally meaning there is a net inflow of money into the country.
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On July 21 2015 08:01 Evil_Sheep wrote:Show nested quote +On July 21 2015 07:52 Wolfstan wrote:
Are balanced budgets and export surpluses synonymous? They have nothing to do with each other. Balanced budget is government spending = income. Export surpluses are to do with a country's trade balance. Export surplus = exports > imports therefore normally meaning there is a net inflow of money into the country.
Are austerity, balanced budgets and responsible government spending interchangeable then?
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On July 21 2015 08:06 Wolfstan wrote:Show nested quote +On July 21 2015 08:01 Evil_Sheep wrote:On July 21 2015 07:52 Wolfstan wrote:
Are balanced budgets and export surpluses synonymous? They have nothing to do with each other. Balanced budget is government spending = income. Export surpluses are to do with a country's trade balance. Export surplus = exports > imports therefore normally meaning there is a net inflow of money into the country. Are austerity, balanced budgets and responsible government spending interchangeable then?
No. Firstly because austerity means different things to different people. Secondly because a government with a balanced budget need not be either responsible or engaging in austerity. Last, because responsible government should be defined on whether its spending will increase the prosperity of its people long-term (which is why even those with balanced budgets often fail).
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On July 21 2015 07:36 WhiteDog wrote:
but considering that our demand is way below our capacities of production (just consider the fact that 10 % of the labor factor in europe is unused !) then we can safely assume an increase in wage could have a positive impact on our economy.
This depends who is the "we" you are talking about. Many EU countries, particularly southern ones, have just spent the last few years trying their hardest to drive down wages which had gotten out of alignment compared to northern ones, particularly Germany. What many economists have been writing is what would need to happen now is for Germany to tolerate higher inflation, and wage growth, in Germany while wages are held down in the southern countries.
Someone linked to this important article by Ben Bernanke, former Chairman of the Federal Reserve. He doesn't really explain the economic mechanisms at work but his words are clear: "Importantly, Germany's large trade surplus puts all the burden of adjustment on countries with trade deficits, who must undergo painful deflation of wages and other costs to become more competitive. Germany could help restore balance within the euro zone and raise the currency area's overall pace of growth by increasing spending at home, through measures like increasing investment in infrastructure, pushing for wage increases for German workers (to raise domestic consumption), and engaging in structural reforms to encourage more domestic demand. Such measures would entail little or no short-run sacrifice for Germans, and they would serve the country's longer-term interests by reducing the risks of eventual euro breakup."
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On July 21 2015 08:06 Wolfstan wrote:Show nested quote +On July 21 2015 08:01 Evil_Sheep wrote:On July 21 2015 07:52 Wolfstan wrote:
Are balanced budgets and export surpluses synonymous? They have nothing to do with each other. Balanced budget is government spending = income. Export surpluses are to do with a country's trade balance. Export surplus = exports > imports therefore normally meaning there is a net inflow of money into the country. Are austerity, balanced budgets and responsible government spending interchangeable then?
Austerity is normally taken to mean running a budget surplus to pay down debts: in general it refers to a program of cutting spending. You can have a budget surplus (austerity), a balanced budget, or a budget deficit (spending more than you earn: what most governments do.) Budget deficits are not necessarily bad: for one inflation erodes debt at, normally 2% a year so you can run a small budget deficit without increasing the long-run debt burden. Also there are times when it would be a good thing for a government to run a deficit for the economy: this is Keynesian economics. Keynes's idea was to smooth out the business cycle by having the government spend during recessions and save during booms. There is an enormous quantity of evidence to support this idea yet it is still not accepted by everyone, particularly Germany. The criticism of Germany's policy during this crisis is that it has been pro-cyclical: forcing governments to save during a recession has only made the recession deeper, turning it into a depression. This was warned of by economists when Germany began the austerity policy, and the outcome in Europe years later seems to be pretty convincing evidence that Keynes was right.
Responsible government spending isn't an economics term, it's in the eye of the beholder.
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On July 21 2015 08:28 Evil_Sheep wrote:Show nested quote +On July 21 2015 08:06 Wolfstan wrote:On July 21 2015 08:01 Evil_Sheep wrote:On July 21 2015 07:52 Wolfstan wrote:
Are balanced budgets and export surpluses synonymous? They have nothing to do with each other. Balanced budget is government spending = income. Export surpluses are to do with a country's trade balance. Export surplus = exports > imports therefore normally meaning there is a net inflow of money into the country. Are austerity, balanced budgets and responsible government spending interchangeable then? Also there are times when it would be a good thing for a government to run a deficit for the economy: this is Keynesian economics. Keynes's idea was to smooth out the business cycle by having the government spend during recessions and save during booms. There is an enormous quantity of evidence to support this idea yet it is still not accepted by everyone, particularly Germany. The criticism of Germany's policy during this crisis is that it has been pro-cyclical: forcing governments to save during a recession has only made the recession deeper, turning it into a depression. This was warned of by economists when Germany began the austerity policy, and the outcome in Europe years later seems to be pretty convincing evidence that Keynes was right. Responsible government spending isn't an economics term, it's in the eye of the beholder.
Keynes theory is a theory that does not work in practice. Keynes says the government should restrict spending in the good times and spend in the bad. The problem is with restrict spending in the good times. There is just no democratic government that can plausibly explain to average Joe why when there is a budget surplus and the economy is running we should not use this money to finance for example free education, health care, reduce taxes, etc.
Even if Keynes theory were enforced by rules - which could be done for the Eurozone in theory - it is very hard for a politician to not fall into the trap and make costly promises before elections. Who will be voted into office? The guy that will ensure free health care/education when he can argue the state has the money right now or the guy that says NO we have to follow Keynes and save money for more difficult times.
The real problem I have with Keynes is that his theory is always popular only when the times are bad...
To the argument that austerity will inevitably lead to recession I want to add that there are measures that increase government funding without impoverishing the whole population:
1. A reform of the administration to effectively collect outstanding taxes. If 30 Billion of outstanding taxes/year is correct for Greece even with an efficiency improvement of 10% they would gain 3 Billion/year. And also help to provide an even playing field for business competition. The guy who doesn't pay taxes will no longer get an advantage over the guy who does. The most important thing in this is that the population sees the tax system as fair. If you think your tax system is unfair you do everything to avoid paying.
2. Ensure that there is a level playing field for business - not only in taxes but also in regulation. So you don't need specific human connections first to get permission to build a factory, solar plant, etc in a timely manner.
3. Ensure you have a working land register so people who want to invest can be sure there won't be law suits about the land they want to build their hotel, factory, etc. on.
The argument I read from some people here in this thread is: "yes, true, but the troika could have enforced these changes which they didn't." For me this does not really count because in the case that there is sensible policy and things that obviously need correction a government working for its people should do this in any case and not wait for the troika to enforce it.
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On July 21 2015 14:06 Banaora wrote:Show nested quote +On July 21 2015 08:28 Evil_Sheep wrote:On July 21 2015 08:06 Wolfstan wrote:On July 21 2015 08:01 Evil_Sheep wrote:On July 21 2015 07:52 Wolfstan wrote:
Are balanced budgets and export surpluses synonymous? They have nothing to do with each other. Balanced budget is government spending = income. Export surpluses are to do with a country's trade balance. Export surplus = exports > imports therefore normally meaning there is a net inflow of money into the country. Are austerity, balanced budgets and responsible government spending interchangeable then? Also there are times when it would be a good thing for a government to run a deficit for the economy: this is Keynesian economics. Keynes's idea was to smooth out the business cycle by having the government spend during recessions and save during booms. There is an enormous quantity of evidence to support this idea yet it is still not accepted by everyone, particularly Germany. The criticism of Germany's policy during this crisis is that it has been pro-cyclical: forcing governments to save during a recession has only made the recession deeper, turning it into a depression. This was warned of by economists when Germany began the austerity policy, and the outcome in Europe years later seems to be pretty convincing evidence that Keynes was right. Responsible government spending isn't an economics term, it's in the eye of the beholder. Keynes theory is a theory that does not work in practice. Keynes says the government should restrict spending in the good times and spend in the bad. The problem is with restrict spending in the good times. There is just no democratic government that can plausibly explain to average Joe why when there is a budget surplus and the economy is running we should not use this money to finance for example free education, health care, etc. Even if Keynes theory were enforced by rules - which could be done for the Eurozone in theory - it is very hard for a politician to not fall into the trap and make costly promises before elections. Who will be voted into office? The guy that will ensure free health care/education when he can argue the state has the money right now or the guy that says NO we have to follow Keynes and save money for more difficult times. The real problem I have with Keynes is that his theory is always popular only when the times are bad...
There is really minimal evidence he is correct in theory either (Great Depression being deepened in America during the Roosevelt/Hoover Spending Binge), and even less when you account for many governments in modern times having budgets that absorb such a high % of GDP.
Meanwhile, Singapore, Estonia, Hong Kong, Pre-1930s America...
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On July 21 2015 14:06 Banaora wrote:Show nested quote +On July 21 2015 08:28 Evil_Sheep wrote:On July 21 2015 08:06 Wolfstan wrote:On July 21 2015 08:01 Evil_Sheep wrote:On July 21 2015 07:52 Wolfstan wrote:
Are balanced budgets and export surpluses synonymous? They have nothing to do with each other. Balanced budget is government spending = income. Export surpluses are to do with a country's trade balance. Export surplus = exports > imports therefore normally meaning there is a net inflow of money into the country. Are austerity, balanced budgets and responsible government spending interchangeable then? Also there are times when it would be a good thing for a government to run a deficit for the economy: this is Keynesian economics. Keynes's idea was to smooth out the business cycle by having the government spend during recessions and save during booms. There is an enormous quantity of evidence to support this idea yet it is still not accepted by everyone, particularly Germany. The criticism of Germany's policy during this crisis is that it has been pro-cyclical: forcing governments to save during a recession has only made the recession deeper, turning it into a depression. This was warned of by economists when Germany began the austerity policy, and the outcome in Europe years later seems to be pretty convincing evidence that Keynes was right. Responsible government spending isn't an economics term, it's in the eye of the beholder. Keynes theory is a theory that does not work in practice. Keynes says the government should restrict spending in the good times and spend in the bad. The problem is with restrict spending in the good times. There is just no democratic government that can plausibly explain to average Joe why when there is a budget surplus and the economy is running we should not use this money to finance for example free education, health care, etc. Even if Keynes theory were enforced by rules - which could be done for the Eurozone in theory - it is very hard for a politician to not fall into the trap and make costly promises before elections. Who will be voted into office? The guy that will ensure free health care/education when he can argue the state has the money right now or the guy that says NO we have to follow Keynes and save money for more difficult times. The real problem I have with Keynes is that his theory is always popular only when the times are bad...
There are some automatic Keynesian programs. Think about Welfare. When times are bad and lots of people are unemployed, the government through Welfare spends more to keep unemployed people from going hungry or being homeless. When times are good, less people are unemployed and thus the government doesn't have to spend as much on Welfare.
A smart government can craft many automatic Keynesian programs like Welfare so that spending automatically goes down when times are good (no cuts need to be made) and automatically spends more when times are bad (without the need for further political wrangling).
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On July 21 2015 14:38 RenSC2 wrote:Show nested quote +On July 21 2015 14:06 Banaora wrote:On July 21 2015 08:28 Evil_Sheep wrote:On July 21 2015 08:06 Wolfstan wrote:On July 21 2015 08:01 Evil_Sheep wrote:On July 21 2015 07:52 Wolfstan wrote:
Are balanced budgets and export surpluses synonymous? They have nothing to do with each other. Balanced budget is government spending = income. Export surpluses are to do with a country's trade balance. Export surplus = exports > imports therefore normally meaning there is a net inflow of money into the country. Are austerity, balanced budgets and responsible government spending interchangeable then? Also there are times when it would be a good thing for a government to run a deficit for the economy: this is Keynesian economics. Keynes's idea was to smooth out the business cycle by having the government spend during recessions and save during booms. There is an enormous quantity of evidence to support this idea yet it is still not accepted by everyone, particularly Germany. The criticism of Germany's policy during this crisis is that it has been pro-cyclical: forcing governments to save during a recession has only made the recession deeper, turning it into a depression. This was warned of by economists when Germany began the austerity policy, and the outcome in Europe years later seems to be pretty convincing evidence that Keynes was right. Responsible government spending isn't an economics term, it's in the eye of the beholder. Keynes theory is a theory that does not work in practice. Keynes says the government should restrict spending in the good times and spend in the bad. The problem is with restrict spending in the good times. There is just no democratic government that can plausibly explain to average Joe why when there is a budget surplus and the economy is running we should not use this money to finance for example free education, health care, etc. Even if Keynes theory were enforced by rules - which could be done for the Eurozone in theory - it is very hard for a politician to not fall into the trap and make costly promises before elections. Who will be voted into office? The guy that will ensure free health care/education when he can argue the state has the money right now or the guy that says NO we have to follow Keynes and save money for more difficult times. The real problem I have with Keynes is that his theory is always popular only when the times are bad... There are some automatic Keynesian programs. Think about Welfare. When times are bad and lots of people are unemployed, the government through Welfare spends more to keep unemployed people from going hungry or being homeless. When times are good, less people are unemployed and thus the government doesn't have to spend as much on Welfare. A smart government can craft many automatic Keynesian programs like Welfare so that spending automatically goes down when times are good (no cuts need to be made) and automatically spends more when times are bad (without the need for further political wrangling).
This may be correct now, but will it be correct in the future? A future where automation/robotics become dominant. And in a capitalist society they will become dominant because machines are cheaper than humans. So how should we define work in the future? Where will people get their money from once automation really kicked in in maybe 20-30 years from now?
In my opinion these are the big questions that should be taken into consideration and where I don't have an answer right now.
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On July 21 2015 14:06 Banaora wrote:Show nested quote +On July 21 2015 08:28 Evil_Sheep wrote:On July 21 2015 08:06 Wolfstan wrote:On July 21 2015 08:01 Evil_Sheep wrote:On July 21 2015 07:52 Wolfstan wrote:
Are balanced budgets and export surpluses synonymous? They have nothing to do with each other. Balanced budget is government spending = income. Export surpluses are to do with a country's trade balance. Export surplus = exports > imports therefore normally meaning there is a net inflow of money into the country. Are austerity, balanced budgets and responsible government spending interchangeable then? Also there are times when it would be a good thing for a government to run a deficit for the economy: this is Keynesian economics. Keynes's idea was to smooth out the business cycle by having the government spend during recessions and save during booms. There is an enormous quantity of evidence to support this idea yet it is still not accepted by everyone, particularly Germany. The criticism of Germany's policy during this crisis is that it has been pro-cyclical: forcing governments to save during a recession has only made the recession deeper, turning it into a depression. This was warned of by economists when Germany began the austerity policy, and the outcome in Europe years later seems to be pretty convincing evidence that Keynes was right. Responsible government spending isn't an economics term, it's in the eye of the beholder. Keynes theory is a theory that does not work in practice. Keynes says the government should restrict spending in the good times and spend in the bad. The problem is with restrict spending in the good times. There is just no democratic government that can plausibly explain to average Joe why when there is a budget surplus and the economy is running we should not use this money to finance for example free education, health care, reduce taxes, etc.
This is an excellent point which is both true and untrue. Just because no government can follow Keynes's prescription, it doesn't make his theories any less right. Forcing governments to save during a recession still deepens the slump: there are economic models to back this up as well as examples from real-world crises, including the current one.
But I completely agree with what you say. The greatest challenge, by far, of Keynes's prescriptions is actually following them and getting democratic governments to save and be responsible during boom times when all the incentive is to spend for short-term electoral gains. But it's not impossible, in fact experience shows it's very possible. In Anglo-Saxon countries, right-wing parties were typically associated with business interests and would typically be economically responsible savers reflecting their business allegiances. Left-wing parties were historically associated with being free spending and irresponsible, but in the past two decades that has changed as left-wing parties have moved to the centre and been desperate to prove that they too, are economically responsible managers, which has been referred to as the Third Way movement. So in Canada where I'm from we had the left-wing Liberal party which implemented harsh austerity in the 90's after decades of fecklessness (including from the previous right-wing government), put the budget into surplus, paid down the debt (during a national and global economic boom) and was rewarded with successive landslide victories. In the UK at the same time you had Tony Blair's Labour, a party of socialist origins, doing similar things, and in the US, Bill Clinton, running and winning on the slogan "It's the economy, stupid." All of these parties were rewarded for their economically responsible management with continued electoral victories. I think it's a reflection of the left-wing of the electorate moving away from its idealist-socialist origins and becoming less ideological as it has become wealthier and more middle-class.
To the argument that austerity will inevitably lead to recession I want to add that there are measures that increase government funding without impoverishing the whole population:
1. A reform of the administration to effectively collect outstanding taxes. If 30 Billion of outstanding taxes/year is correct for Greece even with an efficiency improvement of 10% they would gain 3 Billion/year. And also help to provide an even playing field for business competition. The guy who doesn't pay taxes will no longer get an advantage over the guy who does. The most important thing in this is that the population sees the tax system as fair. If you think your tax system is unfair you do everything to avoid paying.
2. Ensure that there is a level playing field for business - not only in taxes but also in regulation. So you don't need specific human connections first to get permission to build a factory, solar plant, etc in a timely manner.
3. Ensure you have a working land register so people who want to invest can be sure there won't be law suits about the land they want to build their hotel, factory, etc. on.
I'm fully in agreement reforms like these are needed in Greece (and I don't have a thorough knowledge of this subject but my understanding is that reforms like these are on the way when Merkel got her entire Christmas wish list including a pony, a yacht and an airplane agreed to by Tsipras.) The bottom line is if net government spending when all the stabilizers are accounted for is negative in a slump (austerity), according to Keynesian analysis which is the mainstream analysis, that is recessionary. In the case of Greece, the result has been a downturn so steep that it appears impossible to recover from without a let-up in austerity.
There is a time to save and pay off debts. That time is not in the middle of a Depression that is even worse than the one in the 1930's.
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pls stop using those extremly simplified theories, -they are nice and all, but don't apply to the failed state. Any amount of money they would receive would get immidatly lost (transfered to the outland). Through reformes the goverment creates an envirement in which investments can be made, because the goverment can be trusted.
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EPT
