When Economists Flounder, So Do Our Economies: Few New Do’s from Lew

By Shlomo  Maital  


  In 1965, as an economics student at Univ. of Manchester,  I recall seeing a remarkable wood carving on display in the Seminar room, by Harry Johnson, who later became an eminent U. of Chicago professor.  It was a two-headed dog, and one head was biting the other. 

     This, today, is a perfect portrayal of Economics.  Half of all macro economists support austerity (budget cuts).  Half attack it.  And each half has strong arguments and experts of great stature.

    So what? Let the economists squabble in their seminars, let each head of the two-headed dog bite each other, so what?

    Problem is, when economists flounder, so do our leaders.  The new American Treasury Secretary Jacob Lew is touring Europe, telling the Europeans to quit the austerity and start spending again, like America did.  His evidence: America is growing, Europe is not (France’s GDP grew not at all in the last quarter). 

   What did the Europeans say? They listened, and politely (the French are always polite, the Germans not always) said,  get lost, Lew.   An inspired newspaper editor might write the headline:   Few New Do’s from Lew.

  As Anne Lowrey reports in today’s Global New York Times *:   “Mr. Lew pointed to evidence that increased government spending and looser monetary policy had helped the United States recover at a much faster pace than the Continent has. But even as some European leaders expressed concern about rising unemployment and deepening recession, it was clear that Europe’s political constraints — and Germany’s insistence that bringing down deficits and reassuring lenders was the best route to sustained growth — were preventing a more expansionary approach from taking hold.”

    Economics  wrecked the world twice. First, by its wholesale endorsement of free unregulated markets, that led to the 2008-12 crash.  Second, by its utter impotence in figuring out what to do to clean up the mess.   I wish I had studied medieval Swahili literature.


* Lew’s Visit to Europe Reveals a Wide Policy Divide  By ANNIE LOWREY