The dismay of the dismal science

22 Jun

Recently, a group of French economists have published a manifesto under the title of ‘dismayed economists’ (économistes atterrés). All four of the original authors of the manifesto are well-established economists, either within universities or employed as trained economists by the French state. Their starting point has been the surprising lack of debate by economists around some of the assumptions that ground the current Eurozone crisis. The manifesto challenges what its authors see as the basic parameters of ECB/EU policymaking: the efficiency of markets, the pursuit of economic growth through fiscal prudence, the Euro as a bulwark against economic crisis.

Given the paucity of public debate, their intervention is welcome. Going beyond the wide-spread criticism of bail-out packages and austerity measures, these economists take on the intellectual foundations of these policies. They argue, for instance, that financial markets are not the only or the best judge of a state’s solvency. Whether a state is solvent or not is based on an assessment of future trends. As a prediction of the future, it is both subjective and likely to be self-fulfilling: a negative assessment will produce a negative outcome, a positive assessment a positive outcome. They also argue that debates around public debt tend to assume that what matters is simply a government’s willingness to tighten the purse strings. The false analogy here is between individual households and government budgets. For governments, public debt is also a product of the relationship between growth levels and interest rates. When interest rates are higher than growth levels, debt levels will grow. Focusing on reducing debt, rather than boosting economic growth, can therefore be counter-productive. We see this in the problems faced by Southern European economies: whilst their austerity plans are aimed at reducing their debt levels, if these economies remain in recession then there is little that austerity plans can do. In Greece, a year of austerity measures has seen industrial production fall by 11% – no wonder that Greece has returned to the EU and the IMF for a second bail-out deal.

This manifesto is a welcome call to thinking about economics as a product as much of political decisions as about the ‘natural’ workings of the market. We need to see more of this in the contemporary reflections on political economy. Where this movement will go is itself politically unclear. It may well fall, if it hasn’t already, within the organizational clutch of the French Attac movement, curiously silent during the 2007-2008 financial crisis but rearing its head today as the European crisis deepens. One of the original authors of the manifesto, Thomas Coutrot, co-presides the Attac movement. Other Attac members, such as Jean-Marie Harribey (former co-president) signed the manifesto and is active on the public speaking circuit. Attac have not, in the past, been able to provide much intellectual depth to their mobilization. Their focus has been on attacking la pensée unique (what in English is referred to as TINA – There is No Alternative) rather than on any sustained assessment of current trends and their main contradictions. Perhaps this time it will be different. In any case, an intellectual critique of contemporary political economy is certainly what’s needed today.

One Response to “The dismay of the dismal science”

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  1. France’s heterodox economists « thecurrentmoment - January 31, 2012

    […] Back in June, The Current Moment blogged about a manifesto written by a group of “dismayed economists” in France whose critique of free market orthodoxies was beginning to gain ground. This past weekend, a long interview with one of the original signatories of this manifesto, the French economist André Orléan, was published in Le Monde. Focusing on the role of financial markets in macro-economic policymaking, Orléan makes a number of excellent points. […]

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