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Home Publications Blogs Beat the Press The Austerians Take Over the NYT's News Pages: The Case of France

The Austerians Take Over the NYT's News Pages: The Case of France

Thursday, 16 January 2014 05:40

The New York Times news section praised the decision by French President François Hollande to cut social welfare spending and taxes in the same way that sports reporters trumpet the performance of the local team's quarterback. The article described the plan as moving in "a centrist direction" and said that "economic experts" were "gratified that Mr. Hollande finally seemed willing to wrestle with France’s intractable unemployment."

Really? Cutting spending when France's economy is still far below full employment is considered a pro-employment move by economic experts? Do these experts have any evidence to contradict the now vast literature, much of it produced by the International Monetary Fund, that shows such spending cuts will reduce growth and raise unemployment? (Paul Krugman does a nice job summarizing the case this morning. See also Mark Thoma.)

The point here is that the NYT is acting as a mouthpiece for the agenda of the right-wing in Europe. It is presenting a position that has been decisively defeated in the economic debates of the last five years as the consensus within the economics profession. If anything, the consensus view within the economics profession is that Hollande's program will slow growth and raise unemployment. France's economy needs more demand, not spending cuts.

Comments (12)Add Comment
written by Alex Bollinger, January 16, 2014 5:47
I don't have TV here but I was at someone's place when they had a roundtable discussion on the economy some time in December. There were 2 pols (1 center-left, 1 center-right), 2 journalists (1 TV airhead, 1 Politico-style neoliberal), and 1 economist from the EHESS, the top econ school in the country.

It took all of 10 minutes for the economist to start shouting that he was "concerned" about the conversation, about what both the pols were saying, about how the debate was how much to cut at the ZLB, about how the center-left pol was really saying that spending a few hundred thousand euro on "investments in technology" would end the recession because if France could invent something it would create jobs, and about how no one mentioned the overvalued currency and its effect on aggregate demand.

Then the rest of the roundtable went back to ignoring the economist. They had no intention of doing what's best for France, they just had their various agendas.

All that to say that politics here isn't much different from the US. Or at least TV politics isn't.
written by Alex Bollinger, January 16, 2014 5:54
Went over to Krugman's and he linked to Francesco Saraceno who has this quote from Hollande from 2 days ago:

"The time has come to fix the main problem in France: production. Yes, I just said production. We have to produce more, we have to produce better. So we have to work on the supply side. The supply side! It's not the opposite of demand. Supply actually creates demand."

The president of one of the biggest economies in the world in 2014. Don't forget that he's nominally a Socialist.
written by Kat, January 16, 2014 6:22
The uses of France. You know that the NYT likes this development because there was nary a "decaying" or "moribund" in the article.
He questioned whether Mr. Hollande’s Socialist Party would go along with the changes, but reflected that he might be more able to reduce social spending than a conservative leader.

You don't say.
Austerians, Certainty and Markets that Don't Clear
written by Last Mover, January 16, 2014 6:56

Simply outrageous isn't it. Thousands of influential
self appointed Austerian economists emerging since the economic crisis six years ago know, just know that micro and macro economics are permanently joined at the hip never to be separated don't they.

Paradox of thrift? If everyone saves aggregate demand falls? Bunk they say. Even if everyone saves at the macro level the result is claimed identical to some saving and some investing that savings below full employment at the micro level, until full employment is restored at the macro level.

In other words it's a tautology that automatically fulfills itself. Full employment is whatever it is after "markets clear" ... because it's not possible for markets not to clear. Even if everyone saves, falling relative prices will eventually kick in to spur investment and consumption spending won't they.

The Austerians know, just know this is how it works. If something is taxed at the micro level you get less of it individually as well as at the macro collective level.

Worse, if something is taxed from a productive "maker" resource (cough cough) and redistributed to an unproductive "taker" resource (cough cough), you get even less of what you already got less of for taxing it in the first place don't you.

From this stunningly simpleton early classical foundation of economics known as Says Law comes the fairy tale that supply creates its own demand through flexible real prices that clear all markets.

And when this fairy tale is interfered with - by "socialist" government spending designed to replace the absence of private spending that fails to achieve full employment as defined in the context of failed markets that will not clear, the claimed result is ...


Says Law was debunked long ago by Keynes, which resulted in the discipline of macroeconomics as a field of its own entirely separate from microeconomics. It was no less important than the discovery of gravity by Newton and its rediscovery by Einstein in a relative context.

But the Austerians require certainty over all else, and certainty they will have won't they. Markets always clear when left to themselve to achieve full employment, so for the love of God get the hell out of the way with your socialist liberal government and just let them clear, won't you?
It really sucks everywhere
written by Jennifer, January 16, 2014 8:14
I'm old enough to remember when Socialists believed in government spending, and Hollande campaigned on a large tax increase for the wealthy.

"Economic experts, while gratified that Mr. Hollande finally seemed willing to wrestle with France’s intractable unemployment"

Exactly how does cuts to the safety net help unemployment? The confidence fairy?

written by dax, January 16, 2014 8:18
France is not big enough to change world demand. It can make its firms more competitive. So either it can keep French demand up (much to the delight of the Anglo-Saxons, who have their shoddy products to sell) or it can, like the Anglo-Saxons have already done, look after itself. Guess which it will do?
written by djb, January 16, 2014 12:59

yes Kat

unfortunately liberals are better able to cut programs

for example with no cost of living raise for 3 years and only a 1 percent raise this year obama has cut wages for all federal workers by about 7 percent compared to inflation

thats so the republicans wont criticize him

republicans dont have to do that because because the democrats will never criticize them for having federal workers pay keep pace with inflation

Say against Say: lower wages won't clear labor markets (It's the law!)
written by Sandwichman, January 16, 2014 2:00
L'offre crée sa propre demande (supply creates its own demand) does not mean the same thing as un produit terminé offre, dès cet instant, un débouché à d’autres produits pour tout le montant de sa valeur (the finished product offers, from that moment, an outlet for other products for the entire amount of its value). For starters, la loi des débouchés is an argument about heterogeneity, not simply about quantity. It is also an argument about proportion, with "the entire amount of its value" qualifying the extent to which any given finished product constitutes a demand for other products.

La loi is thus more robust than "supply creates its own demand" but also more ambiguous. Critics of Say's Law have faltered on its robustness while proponents have ignored its ambiguity. In an 1821 letter to Malthus, Say supplied ammunition to those who would champion a doctrinaire reading of the law. With the proviso, "supposing even they immediately find capitals to set them to work at a fresh business," Say sought to refute Sismondi's objections to machinery as a cause of unemployment. Say's reasoning may seem circular here but I think the error is more substantial even than a mere affirming of the consequent: a rigorous application of Say's law of markets would conclude the opposite of what Say assumes in his letter to Malthus!

How so? In assuming displaced workers "immediately" are set to work in a "fresh business," Say at once treats labor as a commodity in two incompatible ways. On one hand, Say treats labor as a differentiated "finished product" that can be displaced by a machine which substitutes for its speciality. On the other hand, though, labor (power) is assumed to be an undifferentiated general capacity that can readily be adapted to a new trade. The elixir for this fantastic transformation from leaden particularity to golden generalization is, presumably, the wage. Given a wage of zero in their former occupation and a positive wage, however low, in the fresh business, displaced workers can be counted on to make the transition. The only fly in this alchemical ointment is the stubborn aversion of workers to low wages.

Of course not every redundant blacksmith can make the leap to concert pianist, even given a low enough starting wage. But people are adaptable, so the thinking goes. For finished products, though, Say's law offers no such reprieve. There can be no general glut of overproduction, only overproduction of some products co-existing with underproduction of others. The "fresh business" idea would come in handy here. If there are too many overshoes produced, it is simply a matter of re-labeling them as flower pots, of which there happens to be a shortage!

Sarcasm aside, Say's segue from workers being displaced by machinery to workers set to work in fresh business, from the particular to the general, raises the spectre of a general glut in the labor market, which -- because all labor is treated as homogeneous -- is not amenable to "redirection" by wage signals from localized gluts to localized shortages. Furthermore, in some industries the substitution of machines for labor power would be irreversible other than, hypothetically, at a negative wage because of the sunk costs in machinery.

With regard to labor markets, the phrase "supply creates its own demand" is not only not Say's Law; it violates Say's Law!

written by djb, January 16, 2014 2:25


the real difference between says law and keynes is the possibility of inadequate demand

those who believe in says law and use it to justify ignoring the possibility of inadequate demand are in effect acting as though a monetary economy is a barter economy

try to find dudley dillards 1988 article , the illusion of barter

written by djb, January 16, 2014 2:31
The Barter Illusion in Classical and Neoclassical Economics

by dudley dillard
Barter illusion
written by Sandwichman, January 16, 2014 2:54
Dillard has a valid critique. There's just more than one way to skin this cat.
In Reality
written by Jeffrey Stewart, January 16, 2014 5:29
"The point here is that the NYT is acting as a mouthpiece for the agenda of the right-wing in Europe." -D. Baker

It may be that the NYTimes is acting as the official press organ of the capitalist class and their political minions.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.