Wednesday, September 28, 2011

The European Union: A Prescient Sraffian Economist

"It is my view that the European project for arriving at economic and monetary union (EMU) should be regarded as the combined result of a radical change, since the late 1970s, in the principal economic policy objective of the major industrial countries - an epoch-making shift in emphasis away from unemployment and poverty to the objective of reducing inflation; and of the theoretical restoration that has occurred over the last twenty years, with the revival of pre-Keynesin conceptions in macroeconomic thinking. This view, which I have discussed elsewhere ..., makes it reasonable to believe also that the project's fortunes will reflect developments in these two ambits. Specifically, one can sensibly expect the EMU project to be definitively abandoned as soon as the social impact of actual unemployment will again make the pursuit of its reduction each government's main focus of concern, at the same time leading to a rejection of the 'natural' rate concept of the economy.

This process of gradual abandonment of the project, however, is likely to be delayed as regards countries in which the EMU is seen as a means of solving a 'commitment problem' in their national economic policies - an irreplaceable source of discipline, that is to say, with respect to inflation, government budget deficits and government debt." -- Massimo Pivetti (1999). "High Public Debt and Inflation: On the 'Disciplinary' View of European Monetary Union". In Value, Distribution and Capital: Essays in Honour of Pierangelo Garegnani (edited by Gary Mongiovi and Fabio Petri), Routledge.

I think federal systems are a good idea. I'm hoping a European government capable of conducting fiscal policy and issuing "euro-bonds" will emerge under the pressure of events.

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