Ten myths of the crisis

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Ten Myths of the Crisis is the title of a brochure by the German economist Heiner Flassbeck , which was published in January 2012 by Suhrkamp Verlag in Berlin in the Suhrkamp edition digital series. In this publication Flassbeck, a proven Keynesian , analyzes economic myths that emerged against the background of the financial crisis from 2007 and that have since blocked the change in economic conditions for the functioning of a modern market economy. Flassbeck suggests that the state must return to its task of managing the economy and that wages in Germany must rise in order to overcome the financial crisis in order to give the other countries with current account deficits the opportunity to reduce their debt. He rejects the austerity programs in the European Monetary Union because they are counterproductive.

The 61-page brochure was published in four editions by February 2013. In addition, Ten Myths was published as an e-book .

Myths

The myths that Heiner Flassbeck attacks are: financial markets are efficient and promote prosperity, governments act, the crisis is caused by national debts , we all live beyond our means; there is no euro crisis, the national debt of small countries is to blame; all states must save and get by without debt; the central banks cause inflation because they save the states; Germany will become Europe's paymaster and “Keep it up” is Germany's credo.

Central thesis

The central thesis of Heiner Flassbeck in this publication is that an economy cannot function without borrowing. Because someone is always saving and these funds are missing investments . In order to stimulate investment in the economy, investors would have to credit record and get into debt. The central bank must make the amount of money that consumers save and thus withdraw from the economic cycle available to companies for investment in order to keep a modern market economy going.

content

Flassbeck believes that the fact that the financial markets are effective and promote our prosperity is a myth. On the contrary, regardless of whether the assets are valuable or not, the financial market produces wrong prices. Not only are prices on the financial markets largely driven by herd behavior, but they are distorted over the long term. Those market participants who disinvest in good time instead of investing would be rewarded.

The governments, including the German federal government, would only give the impression that they are acting. According to Flassbeck, they would cultivate their own economic prejudices, would be under considerable pressure from lobbyists, and would tend to do very little economically. The government continues to reject the active role of the state and instead prefers debt reduction, although there are clearly threatening signals of crisis.

Flassbeck opposes the legend that the national debt is the real cause of the current crisis. Based on statistics, it shows that the national debt in the euro area only rose after the outbreak of the financial crisis in 2007 because of the bank bailouts by the states. The actual causes of the crisis are not addressed and the debt brake pursued by politics is destroying the basis of a functioning market economy; in addition, it would lead to recession .

“We live beyond our means” is a picture painted by Chancellor Angela Merkel - comparable to the “thrifty Swabian housewife” - and by the majority of politicians. If this underlying logic is followed, this leads to the fact that the state that has deficits in its current account has to save. The country that produces more than it consumes grants credit to the country that consumes more than it produces. A loan is given with the hope that it will be paid back. However, if you put the borrower in a position through strict restrictions that he cannot repay his debts and therefore have to constantly take out new loans, you are acting against your own interests and economic reason.

For Flassbeck, the euro crisis is the culmination of the suppression of the current cause of the crisis. He sees the monetary union primarily as an inflation community. For him, there is no close connection between national debt and developing inflation, rather inflation arises in connection with the development of wages and national labor productivity . Neoliberal forces countered this economic mode of operation with the independence of the national central banks, which resulted in the de-nationalization of the setting of the interest rate . After the EU treaties came into force, Germany had undermined the jointly agreed inflation level by continuously improving its competitive position by lowering wages. In the currency union, the other states would no longer have had the chance to defend themselves against this by devaluing their currencies. In the last 10 years, this behavior has led to the goods and services produced in Germany becoming 25 percent cheaper than comparable products in these countries compared to southern Europe and 20 percent compared to France. This destroys the basis for joint action and one should not be surprised if states have to leave the currency union and this leads to disintegration.

Contrary to popular belief, the state cannot justify its attempts to save with the consequence of the loss of confidence in private households, because households have no economic function. If the companies fail to stabilize the markets, the state's task is to intervene in the economy in a stabilizing way. Since this is not happening at the moment, Flassbeck notes that a disaster is looming here - comparable to the catastrophic consequences of Heinrich Brüning's emergency ordinances .

Individual economic and macroeconomic effects cannot be compared. Without borrowing, there would be no macroeconomic cycle. The stationary economy with zero growth aimed at by growth-critical parts of the Greens means zero savings, and thus zero investment. At best one could pursue ecological goals or the ecological conversion of the production apparatus.

Inflation is currently not an issue for Flassbeck, because it arises when the economy picks up, resulting in high demand and rising costs and not, as the monetarists wrongly believe, that inflation arises from rising national debt. Incidentally, a strong economic recovery is not in sight.

Instead of helping to restore the competitiveness of the other countries, Germany has stepped into the supposed role of paymaster to such an extent that the country can no longer get out of the dilemma without suffering great economic damage.

The economic policy of relative wage restraint and the tax cuts for companies by politics in Germany, which have generated the high foreign trade surplus that has persisted for years , have resulted in foreign countries becoming heavily indebted. This policy is now coming to an end, because the foreign trade surpluses are not sustainable because no country can keep market shares in the long term. Likewise, no country can reduce deficits if everyone else wants to keep their surpluses. Therefore, wages in Germany would have to rise over long periods of time and companies would have to be forced by politics to reinvest inland.

Crisis assessment

Flassbeck assumes that neither economists who think traditionally nor politicians who are inclined to the market can currently assess economic crises without prejudice and take the necessary steps to resolve the crisis. He therefore sees economic changes only in the course of new economic crises. The economic crisis that is just beginning will also deprive many of the hope that the democratic state will be able to manage the economy socially in their favor. He sees democracy in jeopardy when the globalized economy "offers some incredible wealth and the rest of the world, at best, stagnation or a miserable livelihood".

Reviews

Dani Parthum criticizes on ndr-online that Heiner Flassbeck often omits important intermediate arguments. The strength of the ribbon is “that it provides plenty of food for thought and discussion material”.

According to a review by Klaus Ludwig Helf on saarkurier-online , Flassbeck succeeds “in an excellent way in presenting his view of the economy plausibly to laypeople and awakening desire for more information and connections”. He makes it clear that “there is no such thing as 'neutral' economic science and he calls for an open discourse”.

Wolfgang Lieb from the Nachdenkseiten considers the “Ten Myths of the Crisis” to be “a concise breviary that is well worth reading and that offers an alternative view of the causes of the current crises and makes clear why the current curing of symptoms must be so unsuccessful.” He thinks that The “experts” of the prevailing economic theory may consider it vulnerable due to the brevity of the argumentation. However, Flassbeck's extensive publications offer enough space to understand in more detail his theses contained in the Ten Myths of the Crisis .

Web links

literature

  • Heiner Flassbeck: Ten Myths of the Crisis . Suhrkamp Verlag, Berlin 2012, ISBN 978-3518062203 .

Individual evidence

  1. ↑ Flassbeck: Ten myths of the crisis . 4th edition. Suhrkamp Verlag, Berlin 2012, pp. 11-14.
  2. ↑ Flassbeck: Ten myths of the crisis . Pp. 15-17.
  3. ↑ Flassbeck: Ten myths of the crisis . Pp. 18-21.
  4. ↑ Flassbeck: Ten myths of the crisis. Pp. 22-25.
  5. ↑ Flassbeck: Ten myths of the crisis . Pp. 26-33.
  6. ↑ Flassbeck: Ten myths of the crisis . Pp. 34-37.
  7. ↑ Flassbeck: Ten myths of the crisis . Pp. 38-39.
  8. ↑ Flassbeck: Ten myths of the crisis . Pp. 40-41.
  9. ↑ Flassbeck: Ten myths of the crisis . Pp. 42-45.
  10. ↑ Flassbeck: Ten myths of the crisis . Pp. 46-50.
  11. ↑ Flassbeck: Ten myths of the crisis . Pp. 7-9.
  12. ↑ Flassbeck: Ten myths of the crisis . P.56.
  13. ↑ Dani Parthum: http://www.ndr.de/kultur/literatur/buchtipps/mythen103.html (Link not available) Political book: Ten myths of the crisis
  14. ^ Klaus Ludwig Helf: Heiner Flassbeck. Ten Myths of the Crisis ( Memento from June 23, 2012 in the Internet Archive ) Review on saarkurier-online.de from April 2, 2012, accessed on February 2, 2013
  15. ↑ Wolfgang Lieb: Flassbeck's “Ten Myths of Crisis” - a tilted image of the prevailing doctrine , review on nachdenkseiten.de from February 6, 2012, accessed on February 4, 2013