Lizoain, D., (2013), “Notes on Internal Devaluation”, Social Europe Journal, 27 Σεπτεμβρίου.
The Spanish government’s formula for exiting the crisis is called an internal devaluation. This is a euphemism. They are attempting a generalized reduction in wages that requires a weakening of collective bargaining. For this reason, it is worthwhile to explore the concept of internal devaluation in more detail.
The theory and the historical evidence is profoundly weak.
In order to justify the cuts, politicians could rely on the now discredited notions of “expansionary austerity” as well as the work of Carmen Reinhardt and Kenneth Rogoff. Internal devaluation does not enjoy the same academic fig-leaf. The proof mustered in its favour is paltry and depends on a few problematic cases from the Baltic. What we know for sure is that reducing salaries is a recipe for deflation, and difficult to carry out in a democracy. Mussolini managed a 20% reduction in wages, but fortunately his methods are no longer applicable.
Σχετικές Αναρτήσεις
- Krugman, P., (2013), “The Pain In Spain Is Not Hard To Explain”, The New York Times, The Opinion Pages, 22 Σεπτεμβρίου.
- Hugh, E., (2013), “Spain – The Recession May Be Ending But The Crisis Continues”, www.EconoMonitor.com, 9 Σεπτεμβρίου.
- Admati, A., (2013), “Five years of financial non-reform”, Project Syndicate, 13 Σεπτεμβρίου.