De Grauwe, P., (2014), “Yes, it’s the economy, stupid, but is it demand or supply?”, Economic Policy, CEPS Commentaries, Centre for European Policy Studies, 24 Ιανουαρίου.
The change in policy strategy of François Hollande and his embrace of Say’s law are surprising on another count. As mentioned earlier, supply-side economics together with a rejection of demand management is based on an ideological premise that markets have self-regulating characteristics, and that unemployment will therefore disappear automatically provided that the markets are left free. This conversion towards a belief in the power of free markets is not something one would have expected from a Socialist president. The European Commission, the German government and other European leaders are cheering. Together, they are more than ever determined to fight an insufficiency in aggregate demand with supply-side measures.
I certainly do not want to imply that there are no supply-side problems in the eurozone. The existence of dual labour markets, which makes it difficult for young people to enter the labour market, is a major source of concern. The low labour participation in many countries is another. There is a lack of competitiveness of firms in some eurozone countries due to institutional features that slow down the introduction of new technologies. All these features call for structural reforms. But these reforms were also called for during the boom period. Introducing these structural reforms will raise the long-run prospects of the eurozone. They will do little, however, to boost aggregate demand.
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Σχετικές Αναρτήσεις
- Crafts, N., (2013), “The Eurozone: If only it were the 1930s”, VoxEU, 13 Δεκεμβρίου.
- Janssen, R., (2013), “Structural Reforms – Be Careful What You Wish For!”, Social Europe Journal, 20 Νοεμβρίου.
- Anderson, D., Hunt, B. and Snudden, S., (2013), “Fiscal Consolidation in the Euro Area: How Much Can Structural Reforms Ease the Pain?”, International Monetary Fund, Working Paper