January 07, 2004
European Financial Crisis?

Ed Hugh (who travels these days in the company of Sergio Leone rather than in that of a band of pygmy chimpanzees) fears that we are about to see the first financial crisis within the euro zone, as all those northern Europeans who have been lending Portugal an extra 10% of its GDP year after year wake up and say, "Why are we lending money to a poor country without visible growth that has a lousy educational system?"...

Posted by DeLong at 04:14 PM

November 09, 2003
European National Sovereignty and the "Stability and Growth" Pact

The Economist decides that in the end Europe's countries are probably still "sovereign"--that the European Union is still the tool and not the master of national governments, at least if the nations are Germany and France: Economist.com | Charlemagne: ...National control of interest rates came to an end with the arrival of the single currency. But the countries adopting the euro also approved rules limiting their sovereign control over decisions on taxing and spending. Unless a euro member is in a severe recession, it is not meant to run a budget deficit of more than 3% of GDP. Any country that breaches this ceiling for three years in a row is subject to sanctions, and ultimately to fines that can run to billions of euros. These strict rules, known as the "stability and growth pact"?, were adopted at the insistence above all of the Germans, who wanted an absolute assurance that countries with a long history of fiscal incontinence would not damage the euro-area economy. By a nice irony, however, a sustained period of low growth has meant that Germany itself is now unable to keep below the 3% mark. The latest forecasts from the European Commission suggest that...

Posted by DeLong at 04:31 PM

November 04, 2003
Czar Vladimir's Khodorkovshchina

The Financial Times's Martin Wolf tries to make sense of Russia: FT.com Home US: A clash between arbitrary power and illegitimate wealth. That is the conflict between Vladimir Putin, Russia's president, and Mikhail Khodorkovsky, estwhile chairman of Yukos. Power will surely win. The question is how it will use that victory. Will it support a market economy or lead to a new cycle of predation? Either way, Russia's progress towards what contemporary westerners regard as normality is to be measured in decades, not years. Secure private property is the foundation of both a market economy and democracy. Parliamentary control emerged in England because the Crown had to obtain the consent of the propertied to taxation. In time, the suffrage widened with the circle of those whose consent was necessary. In the Russia of Peter the Great, however, the state owned everything. When private property was granted, under Catherine the Great, it took the form of absolute ownership of the country's principal resource: its people. Inevitably, as Harvard's Richard Pipes notes, property "was widely viewed as an enemy of both freedom and social justice". The serfs were at last emancipated in 1861, only to be re-enslaved, after 1917, by perhaps the...

Posted by DeLong at 05:14 PM

November 02, 2003
Vladimir Putin

The Economist now believes that it is more likely than not that Vladimir Putin's reign will end in disaster: Economist.com | Russia: Mr Putin, it has become plain, is not the sort of politician who brooks either critics or rivals. He has shut down or stifled most of Russia's independent media. As the recent elections in Chechnya and St Petersburg illustrated so graphically, he has intimidated or bought his way towards ensuring that his preferred candidates emerge as winners of any vote. Few doubt that, by hook or by crook, he will retain majority support in the Duma after December's elections: it was, indeed, the approach of those elections that gave him reason to attack Mr Khodorkovsky now. Nor does anybody expect him to tolerate any serious challenge to his re-election as president next March. In other words, the arrest of Mr Khodorkovsky must be seen as only part of a broader pattern confirming that Mr Putin is no democrat. This, of course, may not upset the foreigners who have been pouring money into the country over the past couple of years. Stability and economic growth are what they, and arguably most Russian voters, want--and they are what Mr Putin...

Posted by DeLong at 10:16 AM

August 15, 2003
Little Fear of Accelerating Inflation in Europe

More bad news about the pace of economic growth in the euro zone. It leaves me, once more, scratching my head and trying to figure out what the ECB thinks that it is doing. WSJ.com - German Economy Shrank 0.1% In Quarter, Confirming Recession: FRANKFURT -- The euro zone, collectively the world's second-largest economy, stagnated during the second quarter, highlighting its relative weakness against the U.S. and even perennial laggard Japan. Although economists say the worst may be over, several major European nations -- Germany, Italy and the Netherlands -- saw their economies shrink, the European Union's statistics agency said. For Germany, it was the third straight quarter of contraction; Europe's largest economy is in its second recession in two years......

Posted by DeLong at 03:55 PM

July 08, 2003
Notes: Blanchard on Transition

Olivier Blanchard's view on the transition from communism to capitalism as of the mid-1990s. If I read his Economics of Post-Communist Transition right, the key problem was the absence of a Marshall Plan to keep demand high and employment high during transition. In the immediate aftermath of World War II in Western Europe, the Marshall Plan allowed countries to maintain high aggregate demand without worrying about balance-of-payments constraints. There was no similar inflow of hard currency in the early 1990s to allow transition governments to create the demand to rapidly reemploy those laid off from state industries. The Bush I Administration had, because of the Reagan deficits, "more will than wallet." As a result, Blanchard argues, high unemployment led to a fear of reallocation and restructuring, and the slowing of the entire process of reform down to a glacial pace. If only demand and employment could have been kept high during the initial stages of transition... And since the mid-1990s? Since Blanchard wrote his book, what has happened? If I read the data right, economic progress in Central Europe has been slow, in Eastern Europe has been very slow, and in the former Soviet Union (where there never was the...

Posted by DeLong at 03:28 PM

June 07, 2003
Under What Conditions Does the Euro Make Sense?

Michael Prowse of the Financial Times makes the interesting argument that it makes sense for Britain to enter the euro zone if and only if the European Union is committed to a long-term program to create a real United States of Europe: only if European political integration is going to proceed much farther will Europe become an optimal currency area, and the euro make sense. It's an interesting argument. It may well be a correct one: FT.com / Business: ... You may have noticed that people's attitudes towards the euro tend to correlate well with their political opinions. On the whole, those who are comfortable with the EU's political ambitions favour monetary union as soon as it is practical. The euro's opponents, meanwhile, tend to be deeply unhappy with plans for deeper European political integration and they regard federation as the ultimate evil. This division of opinion is more rational than it may at first sight appear. It is unthinkable that the EU could now dismantle the euro and reintroduce national currencies; this would be a recipe for chronic instability in an era of global capital mobility. Yet economists such as Martin Feldstein of Harvard also have a point when...

Posted by DeLong at 05:31 PM

June 05, 2003
The Economist Sounds... Shrill

The Economist sounds "shrill"... like Paul Krugman, in fact... as it contemplates the state of European monetary policy, the start of a new recession in the industrial core of western Europe, and the still-low but non-zero dangers of deflation. I wish it had come to the party earlier, but the refreshments the Economist is bringing are still very welcome: Economist.com: ...The euro-area economies are caught in a bind. The ECB has been consistently reluctant to use monetary policy to provide the sort of short-term stimulus which countries like Germany urgently need. Europe?s largest economy is now technically in recession, and the growth outlook for the euro area as a whole is grim this year and next. Careful examination of what the ECB has said about the role of monetary policy and what it has actually done shows that it has in the past been prepared to pay attention to broader economic objectives and not confine itself only to questions of inflation. Rate cuts have sometimes been implemented when inflation was above the target range. But what appears to be, at best, the ECB?s own confusion about its role has ensured that, on balance, monetary policy has been less effective in...

Posted by DeLong at 10:07 AM

May 19, 2003
Our Ancestors the [Fill in the Blank]

The MinuteMan (Just One Minute: Pension Reform in France) wonders what's going to happen to the social insurance state in western Europe if birth rates don't jump soon. At the moment western European populations look like they are shrinking at about 25% a generation. I used to think that the answer was "North Africans": move across the Mediterranean and get a first-world standard of living and a real education for your children in exchange for having to pay high payroll taxes and having to listen to your children repeat their lessons about how "our ancestors the Gauls" had nearly defeated Julius Caesar at Alesia (or about how "our ancestors the Lombards" had kicked some Byzantine *** and conquered the Po Valley). But now that the third millennium is almost 2 1/2 years old, it's no longer clear that this can happen......

Posted by DeLong at 05:29 PM

May 12, 2003
Notes: The Character of the Absolutist State in Western Europe

Perhaps the most interesting argument about why the demographic crisis produced by the Black Death did not lead to the reemergence of serfdom in Western Europe (as lords discovered that, with population down by 1/3, they would rather be labor lords than landlords) is that made by Perry Anderson in his book Lineages of the Absolutist State. Anderson argues, first, that the particular role of Western European towns made a formal reimposition of servile bondage impossible: "...the aristocracy had to adjust to a second antagonist: the mercantile bourgeoisie... towns... the intercalation of this third presence... prevented the Western nobility from settling its accounts with the peasantry in Eastern [European] fashion, by smashing its resistance and fettering it to the manor. The medieval town... hierarchical dispersion of sovereignties... feudal mode of production... freed urban economies from direct domination by a rural ruling class.... [Urban] economic and social vitality acted as a constant, objective interference in the class struggle on the land, and blocked any regressive solution to it by the nobles." Feudal lords could agree among themselves and with the king to reimpose serfdom, but they lacked the power to do so if peasants could still (as they could in Western...

Posted by DeLong at 02:02 PM

May 09, 2003
Be Careful: If You Look Into the Abyss

Morgan Stanley's Stephen Roach looks into the abyss that is the western European business cycle conjuncture, and emerges even more frightened and desperate than usual... Morgan Stanley: ...Therein lies the potential for a serious growth shock to Europe. Lacking in support from domestic demand, a sharply appreciating currency will likely deflate Euroland?s external growth cushion, unmasking the full extent of the weakness that has emerged on the domestic demand front. In that context, and with layoffs and unemployment back on the rise, it is all the more critical for policy makers to apply counter-cyclical stimulus in order to jump-start anemic growth in domestic demand. Unfortunately, those options have all but been closed off by the institutional constraints of the European Monetary Union -- the Growth and Stability Pact, which effectively rules out fiscal expansion, and the backward-looking inflation-targeting mandate of the ECB, which inhibits aggressive monetary ease.... And dramatic change is exactly what?s now in the air. The Federal Reserve said it all with its extraordinary policy statement of May 6: After nearly 18 months of steadfast denial, America?s central bank has finally conceded that the risks are now skewed toward deflation. With most of Asia in deflation and US...

Posted by DeLong at 01:58 PM

May 01, 2003
Bradford Is Not Annoyed, But Is Rather Impressed

However, there are also a large number of very, very nice moments in William Hitchcock's Struggle for Europe as well (William Hitchcock (2002), The Struggle for Europe (New York: Doubleday: 0385497989)). I am impressed by: William Hitchcock on the fecklessness of European left-wing intellectuals: p. 10: Simone de Beauvoir... Americans, she write, "approved of all Truman's speeches. Their anti-Communism bordered on neurosis; their attitude towards... France... arrogant condescension"... "we had loved them, these tall soldiers in khaki who had looked so peaceful; they were our liberty." Now they represented "our dependence and a mortal threat".... de Beauvoir's line of attack on the United States, echoed in the writings of hundreds... missed a crucial part of the overall picture. The Iron Curtain was quite real... a decidely nasty form of political order... could well have been visited upon France, Germany, and Italy, were it not for those tall U.S. soldiers in khaki. De Beauvoir failed to see--did not wish to see--the nature of the "people's democracies" being erected in Eastern Europe under Soviet coercion... distressed intellectuals did not publish memoirs and go on the lecture circuit; they wrote forced confessions and went to prison... William Hitchcock on what Stalin was thinking:...

Posted by DeLong at 09:58 PM

Bradford Is Annoyed II

I find myself annoyed beyond reason by two short passages in William Hitchcock's otherwise very nicely done Struggle for Europe (William Hitchcock (2002), The Struggle for Europe (New York: Doubleday: 0385497989)): The second is an even more truly bizarre passage on Decolonization: p. 171: ... The independence of Ghana now led British colonial officials to accept a new logic... independence... ought to be granted swiftly so as to preserve a modicum of control over the process.... Nigeria... 1960... Gambia... 1965.... In Kenya, a large white settler population resisted a swift withdrawal, and they had to be placated.... On balance, the British experience of decolonization in Africa was a successful one... swift, done with an earnest desire to promote viable African successor states, and carried out with a marked absence of violence... I don't think many Africans today would view decolonization as "successful": I think that they would say that power was handed over to the wrong people, in successor states that had the wrong institutions, in a manner that appears in retrospect as if planned and intended to destroy Africa's hopes for progress, development, peace, and happiness for at least a full generation. Julius Nyerere and his belief that Tanzanians...

Posted by DeLong at 09:55 PM

April 20, 2003
Notes: William Hitchcock, The Struggle for Europe

Notes William Hitchcock (2002), The Struggle for Europe (New York: Doubleday: 0385497989). p. 10: Simone de Beauvoir... Americans, she write, "approved of all Truman's speeches. Their anti-Communism bordered on neurosis; their attitude towards... France... arrogant condescension"... "we had loved them, these tall soldiers in khaki who had looked so peaceful; they were our liberty." Now they represented "our dependence and a mortal threat".... de Beauvoir's line of attack on the United States, echoed in the writings of hundreds... missed a crucial part of the overall picture. The Iron Curtain was quite real... a decidely nasty form of political order... could well ahve been visited upon France, Germany,a nd Italy, were it not for those tall U.S. soldiers in khaki. De Beauvoir failed to see--did not wish to see--the nature of the "people's democracies" being erected in Eastern Europe under Soviet coercion... distressed intellectuals did not publish memoirs and go on the lecture circuit; they wrote forced confessions and went to prison..." p. 17: ...Under this agreement, some 2 million Soviet D[isplaced ]P[ersonds] were repatriated from the Western portion of Germany under Anglo-American control; to these may be added another 3 million in Eastern Germany already in Russian hands.... Of the...

Posted by DeLong at 11:45 AM

September 04, 2002
How Stands the Federal Republic of Germany?

How Stands the Federal Republic? The New German Problem By Brad DeLong As Germany prepares to elect its next Chancellor, the two main candidates, Gerhard Schroeder and Edmund Stoiber, agree on one thing: unemployment must be reduced. Over the past two decades, high unemployment has transformed Europe in general and Germany in particular into a sociological time bomb. What will the unemployed, especially the long-term unemployed with only dim memories of integration into the world of work, do with themselves and their time? What will happen to confidence in governments that can not solve the unemployment problem? We all try hard to forget that little more than 50 years ago Europe was and had for half a century been the world's most violent continent. Europeans had slaughtered each other on a scale unprecedented in human history. Against this backdrop, Western Europe after 1950 has been remarkably peaceful and stable, even taking into account the fall of the French Fourth Republic and the transitions from dictatorship to democracy in Portugal, Spain, and Greece. The most remarkable transformation of all was that of the Federal Republic of Germany. Anyone familiar with German history since 1800 is still astonished at the enthusiasm with...

Posted by DeLong at 07:33 AM

September 03, 2002
Europe's Economic Policy Dilemmas

Here Morgan Stanley's Eric Chaney gives his take on western Europe's current fiscal policy dilemma. Given that the European economies are on the edge of recession, it makes neither economic nor political sense for them to cut their short-run budget deficits. But neither the "Stability and Growth Pact" nor the discourse about European fiscal policy allows one to try what the Clinton administration wanted to try in 1993--a larger deficit now coupled with lots of planned reduction in the deficit in the future. Morgan Stanley: Euroland: The Arithmetic and Politics of Fiscal Policies - Part I...

Posted by DeLong at 12:49 PM

September 01, 2002
The New German Problem

Project Syndicate: The New German Problem: J. Bradford DeLong : September 2002 As Germany prepares to elect its next Chancellor, the two main candidates, Gerhard Schroeder and Edmund Stoiber, agree on one thing: unemployment must be reduced. Over the past two decades, high unemployment has transformed Europe in general and Germany in particular into a sociological time bomb. What will the unemployed - especially the long-term unemployed with only dim memories of integration into the world of work - do with themselves and their time? What will happen to confidence in governments that can not solve the problem? It is easy to forget that little more than 50 years ago, Europe was the world's most violent continent. Europeans spent the previous forty years slaughtering each other on a scale unprecedented in human history. Against this backdrop, Western Europe after 1950 was remarkably peaceful and stable, even taking into account the fall of the French Fourth Republic and the transitions from dictatorship to democracy in Portugal, Spain, and Greece. The most remarkable transformation of all was that of the Federal Republic of Germany. Anyone familiar with German history since 1800 is still astonished at the enthusiasm with which the nation that...

Posted by DeLong at 04:44 PM

August 19, 2002
A Single European Monetary Standard? Forward to 1913!

Daniel Davies has come up with a good solution to the "Should Britain join the Euro zone?" debate. As he points out, signing up for the euro is "...signing up for a currency which is run by the ECB, with an assymmetric inflation target ("below 2%") which is set on purely technocratic basis with no way of changing it by voting.... I don't like the technical design of the ECB's target; I think it has a deflationary bias. Second, I'm worried about the individuals in charge of ECB policy; I think that they have a deflationary bias..." The pound sterling, on the other hand, is controlled by an institution, the Bank of England, which is ultimately subject to electoral control. It is staffed by skilled technocrats who are not unduly attached to deflation for deflation's sake. And its mandated targets are sensible and sound. Once he has set out the situation this way, the solution is obvious: "Europe should adopt the pound sterling as its single currency." :-) D-squared Digest -- A fat young man without a good word for anyone: I think the problem is that, the idea, in principle, of a single European currency, is a good one....

Posted by DeLong at 12:35 PM

June 14, 2002
David Hale Sees Continental Europe Swinging Right--and to a Reformist, Not a Static Right

David Hale, Chief Economist at Zurich Financial Services, believes that right-of-center governments are likely to dominate continental Europe for the next five or ten years or so, and that these governments will be "reforming" governments rather than static governments. But I'm not sure why he believes this. Europe's governments have always seemed to me to have overwhelming continuity-of-personnel with the past (as opposed to the circulation-of-elites pattern of American governments), and this seems to me to make major reforms of any kind relatively unlikely. FT.com | ANALYSIS: Europe revisited, by David Hale Financial Times; Jun 14, 2002 The odds are very high that a majority of European Union countries will have centre-right governments this autumn. During the past two years, parties of the right have won victories in Austria, Italy, Spain, Portugal, Denmark and the Netherlands. France is poised to join them. And on the basis of current opinion polls, the right appears to be heading for victory in Germany during September and Greece next year. The victories for conservative parties in France and Germany are of potentially great significance because they could set the stage for the most aggressive programmes of microeconomic reform and tax reduction that the European...

Posted by DeLong at 02:48 PM

May 24, 2002
Why Has the IT Revolution Come Slowly to Europe?

The Economist reports on an OECD working paper--“The Role of Policy and Institutions for Productivity and Firm Dynamics: Evidence from Micro and Industry Data”, by Stefano Scarpetta, Philip Hemmings, Thierry Tressel and Jaejoon Woo. OECD working paper 329, 2002 <http://appli1.oecd.org/olis/2002doc.nsf/linkto/eco-wkp(2002)15/$FILE/JT00125006.PDF>--that tries to account for why both unemployment and productivity growth have been unsatisfactory in most of continental Europe over the past decade. Scarpetta et al. may finally have found the smoking gun linking labor and product market overregulation to poor economic performance...

Posted by DeLong at 02:25 PM

May 19, 2002
Thinking About European Unemployment

Surely the most thoughtful and brilliant macroeconomist trained in the late 1970s is M.I.T.'s Olivier Blanchard. In his Robbins Lectures he turns his mind to summarizing what he knows about the nature, causes, persistence, and prospects of and for European unemployment. [Olivier Blanchard (forthcoming 2002?), The Economics of Unemployment: Shocks, Institutions, and Interactions (Cambridge: MIT Press:).]

Posted by DeLong at 02:38 PM

May 16, 2002
The Fall of France, 1940

Josh Marshall writes: "I really, really, really want to recommend a book to you. It's called Strange Victory: Hitler's Conquest of France and it's by Ernest R. May, a highly respected diplomatic historian. There are two reasons why this book is so good. The first is that it is just a marvelously engrossing narrative of one of the most pivotal moments of the 20th Century..."

Posted by DeLong at 02:52 PM

April 30, 2002
International Productivity Comparisons

My main point, however, is that the world is complicated, and single statistics are bound to be incomplete. Anyone who presents to you one single number for a nation--and then draws sweeping conclusions from it--is interested in driving you into the corral as if you were a panicked sheep. Don't pay attention to such people....

Posted by DeLong at 03:28 PM

July 01, 1989
J. Bradford DeLong (1989), "Nassau Senior's `Last Hour' and the `Advances' Conception of Capital Revisited," History of Political Economy 21: 2 (Summer), pp. 309-310.

J. Bradford DeLong (1989), "Nassau Senior's `Last Hour' and the `Advances' Conception of Capital Revisited," History of Political Economy 21: 2 (Summer), pp. 309-310....

Posted by DeLong at 01:46 PM

September 01, 1987
J. Bradford DeLong (1987), "Review of Bernard Elbaum and William Lazonick, The Decline of the British Economy," Journal of Economic History 47:3 (September), pp. 792-795.

J. Bradford DeLong (1987), "Review of Bernard Elbaum and William Lazonick, The Decline of the British Economy," Journal of Economic History 47:3 (September), pp. 792-795....

Posted by DeLong at 11:37 AM

August 01, 1986
J. Bradford DeLong (1986), "Senior's `Last Hour': A Suggested Resolution of a Famous Blunder," History of Political Economy 18: 2 (Summer), pp. 325-333.

J. Bradford DeLong (1986), "Senior's `Last Hour': A Suggested Resolution of a Famous Blunder," History of Political Economy 18: 2 (Summer), pp. 325-333....

Posted by DeLong at 08:14 AM