Re: May God - or those of good sense - rescue us from those

["Esteban Perez" <eperez@xxxxxxxxxxxx>]

So Stiglitz is saying a similar thing Pasinetti said in 1998. That is 5 years after. He finally realised?. See, The Myth (or folly) of the 3% deficit/GDP Maastricht parameter. CJE. Vol 22. No.1, January 1998. Not to mention Arestis and Sawyer, that have been critizing the stability pact for sometime now.

E. Perez
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<<< "Schulte-baeuminghaus" <schulte.baeuminghaus@xxxxxxxxx>  5/12  7:38p >>>
The article below by Joseph Stiglitz should be read, absorbed and its teachings applied by all of us in the months and probably years of economic and social crisis that lie ahead.


James Cumes
http://VictoryOverWant.org
http://crystaldreamspub.com/bios/authors/A-E/cumes_j.htm

> The EU stability pact destabilises by cutting spending in a downturn
>
> Joseph Stiglitz
> Friday May 9, 2003
> The Guardian
>
> France, Portugal and Germany are all flagrantly flouting the stability pact,
> the agreement among eurozone members to keep their deficits below a critical
> threshold (3% of GDP today, but lower, supposedly, in the future). France's
> prime minister, Pierre Raffarin, defends his government's position by saying
> that France was not prepared to impose austerity on its own people. If
> France will not, other European leaders must wonder, why should they?
>
> Mr Raffarin was right to say that austerity would result if France obeyed
> the pact's strictures, but in debates over economic policy, the truth is
> seldom appreciated. There is a long list of central bankers' homilies that
> are not supposed to be questioned. Do so and you are exiled from the circle
> of those who supposedly know how the world "really" works. Here are three:
>
> An independent central bank is necessary for sound macroeconomic policy. The
> truth: countries that do not have an independent central bank, such as
> India, manage to contain inflation as effectively as those with independent
> central banks. In Russia, an independent central banker, Viktor Gerashencko,
> could not be removed for years, though he tolerated both inflation and
> corruption. Generally, there is little evidence that countries with
> independent central banks grow faster, have higher wages, or generate higher
> incomes - indeed, that they perform better in any real sense than those that
> do not.
>
> Once inflation starts, it increases at a faster and faster rate, and the
> costs of reversing it are high. The truth: there is no evidence of an
> inflation precipice, or that the costs of reversing inflation (in terms,
> say, of pushing unemployment to high levels) are any greater than the
> benefits from inflation (in terms, say, of allowing unemployment to fall to
> low levels).
>
> Inflation is bad for growth and productivity. The truth: below a critical th
> reshold - a threshold far beyond the levels of inflation that now prevail in
> Europe and North America - there is no evidence of significant adverse
> effects from inflation. On the contrary, recent research by Nobel laureate
> economist George Akerlof and his colleagues suggests that pushing inflation
> too low may impede growth, and that the critical threshold is higher for
> countries, such as the post-communist transition economies, engaged in large
> structural changes.
>
> When an economy faces a downturn, one should engage in expansionary fiscal
> policies. But in a downturn tax revenues fall. Thus, debt must increase. But
> the EU's stability pact, as commonly interpreted, requires either that tax
> rates be raised (always difficult, especially in a recession) or that
> expenditures be cut. Either way, such policies will exacerbate the downturn.
>
> The stability pact put into place an automatic economic destabiliser. But
> the EU - indeed, every country - should seek stabilisers, policies that
> automati