Tuesday, March 31, 2009

Micro-blog: The market and the state: Recrimination at the G20 summit

Well, recriminations have already started at the G20 summit. Lots of news organizations are covering it, but here's a good one, the BBC's take:


France is first out of the blocks, threatening a walk-out, if stricter financial regulations aren't introduced into the global economy. Already, a schism seems to be developing between the US, Britain, and Canada, on the one hand, and the European economies, on the other. The Anglo-Saxons want to pursue Keynesian-style stimulus, by pumping billions more into the economy, whereas the Continentals think that stimulus will be unhelpful or positively counter-productive unless much-needed reforms to the financial system are undertaken first.

These are two different takes on diagnosing the current mess, and starting on a corrective course. The Anglo-Saxons seem to be saying, basically, that the current balance between market and state, as exemplified in the regulatory regime that governs banks and the financial system, is working OK, and that our problem right now is a classic (note, I did not say "classical" -- sorry, inside economics joke!) case of unemployment due to deficient aggregate demand, and that we should dust off our copies of Keynes' General Theory and take it from there. The Continentals are suggesting that there are fundamental flaws in what is being called pejoratively Anglo-Saxon economics. Read, Thatcher and Reagan style deregulated capitalism as practiced in the UK, US, Canada (to a lesser extent) and other Anglo-inspired countries. It's interesting that the French President, when he was running for office, extolled the virtues of Anglo-American economic reforms for France, especialy its sclerotic labour market. Evidently, he's changed his mind on those.

So the battle lines are drawn. Stay tuned for more updates from the front lines, and from here in the trenches.

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