From a leading commentator in Ireland’s best-selling Sunday broadsheet:
“Much though I hate to disagree with our esteemed President, on Hayek, I have to. Far from being discredited, Hayek is our inspiration now. It was he who showed how state intervention — the US Fed and Bank of England setting ultra-low interest rates in the Twenties — contributed to the Great Depression, and how, far from causing recovery, Keynesian economics resulted in the US economy sliding back into recession in the late Thirties. Likewise, low interest rates and sub-prime mortgages a decade ago caused this crisis. Last week’s temporary pick-up in US growth is less a sign of recovery and more a sign that quantitative easing has moved from being a needed and justifiable tool to save the US financial system to an unsustainable counter-productive tool for pump-priming US domestic demand.”
Is he saying Keynesianism is “low interest rates” in the middle of an economic boom? Or is he saying that higher interest rates and more tightly regulated lending would have been necessary state intervention? Does it really matter, except that this is what passes for economic discourse amongst a depressingly large part of Irish society?
Not only is the historical example laughably incorrect (it could only be correct in a reductively simplistic view of the whole decade), but he also seems to then misplace the term ‘counter-productive’ for ‘counter-cyclical’, while having used an example of totally un-Keynesian pro-cylical fiscal policy to point to the unsustainablity of the approach he’s ostensibly promoting. WTF?
You could say he has something from a valid point about demand, as from the opposite side of the political spectrum on the environmental left (yes, it exists!) we should really be moderating our demand in order to create a globally sustainable, equitable economy, so I’m uncomfortable with more consumption being touted as the left-wing solution to the crisis in Europe or anywhere else. However, as the right-wing austerity project is simply to drive down pay and conditions low enough to reduce the marginal cost of ‘job creation’ for wealthy corporations and businesspeople, it ultimately has to rely on consumer demand just as much. Hence consumption - much like confidence in financial markets - is merely the necessary means to an end we have yet to choose.
Here’s what our esteemed President actually said:
“The crisis is … also an intellectual one. Decades of Keynesianism have given way to decades influenced by the theories of such as Friedrich von Hayek, to unrestrained market dominance. A new dominant paradigm emerged. That paradigm has consequences for all institutions including universities. It is a paradigm that makes assumptions and demands as to the connection between scholarship, politics, economy and society. It has fed off and encouraged, I suggest, an individualism without responsibility. It not only asserts a rationality for markets, but in policy terms has delivered markets without regulation.
As a consequence, the public world is now a space of contestation. It is a space that sets what is democratic in tension with what is unaccountable. Much ground has been lost in terms of the public space, the public world, the shared essential space of an independent people free to participate and change their circumstances, to imagine their future, be it in Ireland, Europe or at global level. Intellectuals are challenged, I believe now to a moral choice, to drift into, be part of, a consensus that accepts a failed paradigm of life and economy or to offer, or seek to recover, the possibility of alternative futures.
