August 21, 2014
There are tens of millions of people in the United States who completely reject the theory of evolution and believe that humans were created more or less in their current form in the recent past. Similarly, there are many people who completely reject modern economics and insist that countries cannot suffer due to a lack of demand. In their creationist economics view, the main reason that economies experience economic stagnation is government protections for ordinary workers. These economic creationists apparently control reporting on the French economy in the New York Times.
A piece headlined “France acknowledges economic malaise, blames austerity,” effectively dismisses the idea that the economic malaise actually is attributable to austerity as a large body of economic research would suggest. While it does note that there is reason for believing that austerity has contributed to slow growth it concludes by telling readers that the real problem is France’s rigid labor market.
“On Wednesday, Mr. Hollande called on European Union leaders to make growth their priority, saying that the focus on raising taxes and slashing spending amid downturns had proved a disaster for the European recovery.
“But some saw his move as little more than a public relations ploy.
“‘Even though they’re taking so many painful measures, they have to explain to the French why the economy is not doing well and in fact is doing worse,’ said Famke Krumbmüller, a Europe analyst at the Eurasia Group in London.
“As a result, Ms. Krumbmüller said, Mr. Hollande appeared to be trying to shift blame to Europe, rather than trying to tackle more difficult overhauls in areas like France’s notoriously rigid labor market, which employers say constrains hiring and investment.
“‘The message is, we’ve done our job, now Europe needs to do its job, which is favoring growth,’ Ms. Krumbmüller said. ‘The interpretation is that is we’ve done everything we can do in the current political circumstances, and we won’t go further.'”
France’s weak growth is exactly what would be expected given the spending cuts and tax increases that have been demanded by the European Union. It is difficult to see why anyone familiar with economics would differ with the view put forward by Mr. Hollande. It will be very difficult for the country to sustain much growth in a context where it is making large cutbacks to spending and also increasing taxes. The weakness of the economy is compounded by the slow growth of its major trading partners, many of whom are also practicing austerity.
It really should not be hard for Mr. Hollande to explain this reality to the French people. It would be expected that a country that cuts its budget deficit in a weak economy would further weaken its economy. This is not an effort to “shift blame” as asserted by the NYT’s source, it is an effort to describe reality.
The piece also needlessly confused many readers by reporting quarterly growth rates instead of annualized growth rates. It told readers that Germany’s economy contracted 0.2 percent in the second quarter. It is standard practice in the United States to report growth at annual rates. (The figure would be 0.8 percent as an annual rate.) It is likely that most readers thought this figure was an annual rate since it was never identified as a quarterly growth rate.
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