It would have been useful if the NYT had made this point in an article that discussed the impact of global warming on the developing world. After noting the destruction caused by events related to climate change, like the typhoon that hit the Philippines and the droughts afflicted wide areas across Africa and the Middle East, the piece tells readers:
“The United States and other rich countries have made their opposition to large-scale compensation clear. Todd D. Stern, the State Department’s envoy on climate issues, bluntly told a gathering at Chatham House in London last month that large-scale resources from the world’s richest nations would not be forthcoming.
“‘The fiscal reality of the United States and other developed countries is not going to allow it,’ he said. ‘This is not just a matter of the recent financial crisis. It is structural, based on the huge obligations we face from aging populations and other pressing needs for infrastructure, education, health care and the like. We must and will strive to keep increasing our climate finance, but it is important that all of us see the world as it is.’
“Appeals to rectify the injustice of climate change, he added, will backfire. ‘Lectures about compensation, reparations and the like will produce nothing but antipathy among developed country policy makers and their publics.'”
The position that the United States finds it inconvenient to compensate poor countries for the damage it has caused them runs directly counter to the United States usual position in international forums where it typically is the strongest proponent of property rights. In this case the United States is effectively arguing that it will not compensate poor countries for the damage it has done to their property (and lives) because they can’t force it do so. It would have been helpful if the article had explicitly noted this departure from the normal U.S. position.
It would have also be useful to note that Stern is 100 percent wrong on the economics. For the foreseeable future the United States, along with most wealthy countries, face no realistic budget constraints. With economies operating well below full employment additional government spending would help to boost demand, employment, and growth. The only obstacle to more spending is a bizarre cult of budget balancers that dominates politics in the United States and Europe in defiance of all available economic evidence and theory.
It would have been useful if the NYT had made this point in an article that discussed the impact of global warming on the developing world. After noting the destruction caused by events related to climate change, like the typhoon that hit the Philippines and the droughts afflicted wide areas across Africa and the Middle East, the piece tells readers:
“The United States and other rich countries have made their opposition to large-scale compensation clear. Todd D. Stern, the State Department’s envoy on climate issues, bluntly told a gathering at Chatham House in London last month that large-scale resources from the world’s richest nations would not be forthcoming.
“‘The fiscal reality of the United States and other developed countries is not going to allow it,’ he said. ‘This is not just a matter of the recent financial crisis. It is structural, based on the huge obligations we face from aging populations and other pressing needs for infrastructure, education, health care and the like. We must and will strive to keep increasing our climate finance, but it is important that all of us see the world as it is.’
“Appeals to rectify the injustice of climate change, he added, will backfire. ‘Lectures about compensation, reparations and the like will produce nothing but antipathy among developed country policy makers and their publics.'”
The position that the United States finds it inconvenient to compensate poor countries for the damage it has caused them runs directly counter to the United States usual position in international forums where it typically is the strongest proponent of property rights. In this case the United States is effectively arguing that it will not compensate poor countries for the damage it has done to their property (and lives) because they can’t force it do so. It would have been helpful if the article had explicitly noted this departure from the normal U.S. position.
It would have also be useful to note that Stern is 100 percent wrong on the economics. For the foreseeable future the United States, along with most wealthy countries, face no realistic budget constraints. With economies operating well below full employment additional government spending would help to boost demand, employment, and growth. The only obstacle to more spending is a bizarre cult of budget balancers that dominates politics in the United States and Europe in defiance of all available economic evidence and theory.
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That is the only plausible way to interpret its assertion in an article on China’s decision to relax its one-child policy that referred to a “looming shortage of labor.” China has hundreds of millions of people unemployed, under-employed, or working in low productivity and therefore low wage jobs. If the labor market begins to tighten these people will be absorbed in higher productivity, higher paying sectors of the economy. That is the way economies develop.
The United States used to have more than half of its workforce employed in agriculture. This share shrank rapidly as better paying jobs opened up in manufacturing. The Washington Post undoubtedly would have said the United States suffered from a labor shortage during this period.
The piece also notes China’s aging population as a reason for relaxing the one-child policy. With productivity growing at rates of 6-7 percent annually, if only a small portion of these potential wage gains are taxed away, it could easily cover the cost of caring for an aging population.
That is the only plausible way to interpret its assertion in an article on China’s decision to relax its one-child policy that referred to a “looming shortage of labor.” China has hundreds of millions of people unemployed, under-employed, or working in low productivity and therefore low wage jobs. If the labor market begins to tighten these people will be absorbed in higher productivity, higher paying sectors of the economy. That is the way economies develop.
The United States used to have more than half of its workforce employed in agriculture. This share shrank rapidly as better paying jobs opened up in manufacturing. The Washington Post undoubtedly would have said the United States suffered from a labor shortage during this period.
The piece also notes China’s aging population as a reason for relaxing the one-child policy. With productivity growing at rates of 6-7 percent annually, if only a small portion of these potential wage gains are taxed away, it could easily cover the cost of caring for an aging population.
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Paul Krugman tells us that Larry Summers joined the camp concerned about secular stagnation in his I.M.F. talk last week, something that I had not picked up from prior coverage of the session. This is good news, but I would qualify a few of the points that Krugman makes in his elaboration of Summers’ remarks.
First, while the economy may presently need asset bubbles to maintain full employment (a point I made in Plunder and Blunder: The Rise and Fall of the Bubble Economy), it doesn’t follow that we should not be concerned about asset bubbles. The problem with bubbles is that their inflation and inevitable deflation lead to massive redistribution of wealth.
In the case of the housing bubble in particular we saw millions of people lose much or all of their wealth from buying homes at bubble-inflated prices. The loss of housing wealth is especially devastating because housing is a highly leveraged asset even in normal times and it is an asset often held by middle and moderate income households. It was great that the bubble was able to spur growth and get the economy close to full employment, however the subsequent crash was pretty awful. It would be incredibly irresponsible to go through another round like this.
The second qualification is that it is reasonable to believe that aggregate consumption levels will depend at least in part on the distribution of income. The upward redistribution in the last three decades, from middle and lower end wage earners to the high end wage earners in the 80s and 90s, and to corporate profits in the last decade, likely had an effect in depressing consumption. The question here is whether the marginal propensity to consume out of income is higher for a retail clerk or factory worker than a doctor or CEO. I would be willing to argue that it is, which means that the upward redistribution of income over this period had a depressing effect on consumption. (As a practical matter, this depressing effect was offset by the asset bubbles in the 1990s and 2000s.)
The third qualification is that Summers and Krugman seem to be leaving net exports out of the picture. In the old textbooks, rich countries like the United States were supposed to be net exporters of capital to developing countries. This implies that instead of running trade deficits we should be running surpluses This would both mean a higher return on capital in rich countries and more rapid growth in developing countries, which would be able to use imported goods and services to build up their capital stock even as they sustained a decent level of consumption for their populations.
The real world never followed the textbook story very closely, but it followed especially badly in the years following the 1997 East Asian financial crisis. The harsh terms of the bailout (led in part by Larry Summers) led to a situation in which developing countries began to accumulate massive amounts of reserves to protect themselves from ever being dictated to by the IMF in the same way. Instead of being importers of capital from rich countries developing countries became huge exporters of capital. This meant that the United States in particular had a huge trade deficit that created a huge drag on demand.
Finally, as an alternative to trying to increase demand to deal with secular stagnation, countries could try to reduce supply. This should not sound too crazy. Western Europeans work on average 20 percent fewer hours a year than do people in the United States. These countries mandate paid vacation (at least four weeks a year), paid sick days, paid parental leave and other forms of paid time off. France has a 35-hour work week. Remember, the problem is too much supply not too little. Reduced work hours (i.e. more leisure) is an easy way to deal with this “problem.”
The long and short of the matter is that secular stagnation is really a story of too much wealth. It is absurd that this ends up impoverishing countries and leading to mass suffering. Keynes taught us how to deal with this problem almost 80 years ago. We know how to prevent the suffering; we just lack the political force to stop it.
Paul Krugman tells us that Larry Summers joined the camp concerned about secular stagnation in his I.M.F. talk last week, something that I had not picked up from prior coverage of the session. This is good news, but I would qualify a few of the points that Krugman makes in his elaboration of Summers’ remarks.
First, while the economy may presently need asset bubbles to maintain full employment (a point I made in Plunder and Blunder: The Rise and Fall of the Bubble Economy), it doesn’t follow that we should not be concerned about asset bubbles. The problem with bubbles is that their inflation and inevitable deflation lead to massive redistribution of wealth.
In the case of the housing bubble in particular we saw millions of people lose much or all of their wealth from buying homes at bubble-inflated prices. The loss of housing wealth is especially devastating because housing is a highly leveraged asset even in normal times and it is an asset often held by middle and moderate income households. It was great that the bubble was able to spur growth and get the economy close to full employment, however the subsequent crash was pretty awful. It would be incredibly irresponsible to go through another round like this.
The second qualification is that it is reasonable to believe that aggregate consumption levels will depend at least in part on the distribution of income. The upward redistribution in the last three decades, from middle and lower end wage earners to the high end wage earners in the 80s and 90s, and to corporate profits in the last decade, likely had an effect in depressing consumption. The question here is whether the marginal propensity to consume out of income is higher for a retail clerk or factory worker than a doctor or CEO. I would be willing to argue that it is, which means that the upward redistribution of income over this period had a depressing effect on consumption. (As a practical matter, this depressing effect was offset by the asset bubbles in the 1990s and 2000s.)
The third qualification is that Summers and Krugman seem to be leaving net exports out of the picture. In the old textbooks, rich countries like the United States were supposed to be net exporters of capital to developing countries. This implies that instead of running trade deficits we should be running surpluses This would both mean a higher return on capital in rich countries and more rapid growth in developing countries, which would be able to use imported goods and services to build up their capital stock even as they sustained a decent level of consumption for their populations.
The real world never followed the textbook story very closely, but it followed especially badly in the years following the 1997 East Asian financial crisis. The harsh terms of the bailout (led in part by Larry Summers) led to a situation in which developing countries began to accumulate massive amounts of reserves to protect themselves from ever being dictated to by the IMF in the same way. Instead of being importers of capital from rich countries developing countries became huge exporters of capital. This meant that the United States in particular had a huge trade deficit that created a huge drag on demand.
Finally, as an alternative to trying to increase demand to deal with secular stagnation, countries could try to reduce supply. This should not sound too crazy. Western Europeans work on average 20 percent fewer hours a year than do people in the United States. These countries mandate paid vacation (at least four weeks a year), paid sick days, paid parental leave and other forms of paid time off. France has a 35-hour work week. Remember, the problem is too much supply not too little. Reduced work hours (i.e. more leisure) is an easy way to deal with this “problem.”
The long and short of the matter is that secular stagnation is really a story of too much wealth. It is absurd that this ends up impoverishing countries and leading to mass suffering. Keynes taught us how to deal with this problem almost 80 years ago. We know how to prevent the suffering; we just lack the political force to stop it.
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Things seem to be spinning off the rails very fast here in Washington. The NYT has an article today explicitly comparing the rollout of the health insurance exchanges to President Bush’s response to Hurricane Katrina.
There is no doubt that the rollout of the exchanges has gone very badly, with people having great difficulty getting on the Obamacare website and buying insurance. And the opponents of Obamacare have been very effective in hyping stories, real or unreal, of people losing their insurance due to the Affordable Care Act. But the comparison to the response to Hurricane Katrina has to qualify as more than a bit over the top.
People died because of the failed response to Katrina. For whatever reason, President Bush was unable to organize a response to a hurricane hitting a major American city even though its course and ferocity had been accurately predicted a week in advance. People in New Orleans died because they could not get access to food, water, and medical care. It seems more than a bit over the top to compare the difficulties that people are facing arranging for insurance to this sort of catastrophe.
Things seem to be spinning off the rails very fast here in Washington. The NYT has an article today explicitly comparing the rollout of the health insurance exchanges to President Bush’s response to Hurricane Katrina.
There is no doubt that the rollout of the exchanges has gone very badly, with people having great difficulty getting on the Obamacare website and buying insurance. And the opponents of Obamacare have been very effective in hyping stories, real or unreal, of people losing their insurance due to the Affordable Care Act. But the comparison to the response to Hurricane Katrina has to qualify as more than a bit over the top.
People died because of the failed response to Katrina. For whatever reason, President Bush was unable to organize a response to a hurricane hitting a major American city even though its course and ferocity had been accurately predicted a week in advance. People in New Orleans died because they could not get access to food, water, and medical care. It seems more than a bit over the top to compare the difficulties that people are facing arranging for insurance to this sort of catastrophe.
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Those of us who are old enough recall the origins of the euro crisis remember that countries like Spain and Ireland had enormous housing bubbles, which were fueled by lending by incompetent bankers in countries like Germany and the Netherlands. When these bubbles burst, trillions of dollars in loans lost much of their value. In addition, the driving force for economies across Europe disappeared throwing them into severe recessions.
And, as budget fans everywhere know, government budgets shift towards deficits when an economy goes into recession. The reason is that governments spend more money on things like unemployment benefits. They also lose tax revenue when people lose jobs and income. In short, in the real world, the euro crisis is about a collapsed housing bubble leading to a severe recession. The budget deficits were an outcome of this collapse.
But the NYT has decided to reinvent the history of the crisis. It told readers that the problem in the euro zone was overspending. In an article on a set of budget reviews issued by the European Commission, the NYT told readers:
“The announcement, by Olli Rehn, the European Union’s commissioner for economics and monetary policy, is aimed at keeping tighter reins on national finances to stave off the kind of overspending that fed a crisis that nearly destroyed the euro.”
In fact, of the current group of euro crisis countries, only Greece, and arguably Portugal, had a major deficit problem prior to the collapse. Italy’s deficits were not especially large and Cyprus, Ireland, and Spain all had budget surpluses on the eve of the collapse.
Those of us who are old enough recall the origins of the euro crisis remember that countries like Spain and Ireland had enormous housing bubbles, which were fueled by lending by incompetent bankers in countries like Germany and the Netherlands. When these bubbles burst, trillions of dollars in loans lost much of their value. In addition, the driving force for economies across Europe disappeared throwing them into severe recessions.
And, as budget fans everywhere know, government budgets shift towards deficits when an economy goes into recession. The reason is that governments spend more money on things like unemployment benefits. They also lose tax revenue when people lose jobs and income. In short, in the real world, the euro crisis is about a collapsed housing bubble leading to a severe recession. The budget deficits were an outcome of this collapse.
But the NYT has decided to reinvent the history of the crisis. It told readers that the problem in the euro zone was overspending. In an article on a set of budget reviews issued by the European Commission, the NYT told readers:
“The announcement, by Olli Rehn, the European Union’s commissioner for economics and monetary policy, is aimed at keeping tighter reins on national finances to stave off the kind of overspending that fed a crisis that nearly destroyed the euro.”
In fact, of the current group of euro crisis countries, only Greece, and arguably Portugal, had a major deficit problem prior to the collapse. Italy’s deficits were not especially large and Cyprus, Ireland, and Spain all had budget surpluses on the eve of the collapse.
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That would have been an appropriate headline for a Christian Science Monitor article on a poll of businesses sponsored by the Chamber of Commerce. The poll found:
“Some 31 percent of franchise businesses and 12 percent of non-franchise businesses say they have already reduced worker hours because of the law.
“About 27 percent of franchise businesses and 12 percent of non-franchise businesses have already replaced full-time workers with part-time employees because of the law.”
Of course this is what the businesses say they are doing. However the data say the opposite. The data say that businesses have actually reduced somewhat the share of their workforce employed for less than 30 hours a week.
This is not the only case where the businesses answering this survey seem to be contradicting the data. The survey finds:
“Some 41 percent of the non-franchise firms say they already see health-care costs rising because of the law.”
By contrast, the Kaiser Family Foundation found that the rate of increase in employer health insurance costs has slowed in recent years.
Note: typo corrected, thanks Mark.
That would have been an appropriate headline for a Christian Science Monitor article on a poll of businesses sponsored by the Chamber of Commerce. The poll found:
“Some 31 percent of franchise businesses and 12 percent of non-franchise businesses say they have already reduced worker hours because of the law.
“About 27 percent of franchise businesses and 12 percent of non-franchise businesses have already replaced full-time workers with part-time employees because of the law.”
Of course this is what the businesses say they are doing. However the data say the opposite. The data say that businesses have actually reduced somewhat the share of their workforce employed for less than 30 hours a week.
This is not the only case where the businesses answering this survey seem to be contradicting the data. The survey finds:
“Some 41 percent of the non-franchise firms say they already see health-care costs rising because of the law.”
By contrast, the Kaiser Family Foundation found that the rate of increase in employer health insurance costs has slowed in recent years.
Note: typo corrected, thanks Mark.
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Ezra Klein warned readers that “Obamacare is in much more trouble than it was a week ago.” The main reason is a bill being push by Senator Mary Landrieu that would require insurers to continue to offer plans that are in effect at the end of 2013.This bill is drawing support from a number of centrists and even liberal Democrats. Klein argues that this bill would risk seriously skewing the individual insurance market that would create a major problem of adverse selection, with healthy people staying on private plans outside of the exchanges.
There is actually much less risk here than appears. First, Republicans would be highly unlikely to support Landrieu’s bill since it would require insurers to continue to offer plans even if it is not profitable to do so. It is unlikely that the Republican House would approve a bill that could lead to major losses for many insurers.
The other factor to consider is that even if the bill were to be passed into law, the number of policies protected would be limited. As Klein’s colleague Glenn Kessler showed, almost two thirds of the plans that people hold in the individual market are typically in effect for less than a year. This means that whatever skewing might result from its passage into law would be relatively limited and gradually go to zero as these people’s circumstances changed (e.g. they get hired by companies with employer provided insurance).
Note: Robert Salzberg pointed out to me that the Landrieu bill would make the date where a plan must be in effect to be grandfathered December 31 of 2013, not January 1 as I had previously written.
Ezra Klein warned readers that “Obamacare is in much more trouble than it was a week ago.” The main reason is a bill being push by Senator Mary Landrieu that would require insurers to continue to offer plans that are in effect at the end of 2013.This bill is drawing support from a number of centrists and even liberal Democrats. Klein argues that this bill would risk seriously skewing the individual insurance market that would create a major problem of adverse selection, with healthy people staying on private plans outside of the exchanges.
There is actually much less risk here than appears. First, Republicans would be highly unlikely to support Landrieu’s bill since it would require insurers to continue to offer plans even if it is not profitable to do so. It is unlikely that the Republican House would approve a bill that could lead to major losses for many insurers.
The other factor to consider is that even if the bill were to be passed into law, the number of policies protected would be limited. As Klein’s colleague Glenn Kessler showed, almost two thirds of the plans that people hold in the individual market are typically in effect for less than a year. This means that whatever skewing might result from its passage into law would be relatively limited and gradually go to zero as these people’s circumstances changed (e.g. they get hired by companies with employer provided insurance).
Note: Robert Salzberg pointed out to me that the Landrieu bill would make the date where a plan must be in effect to be grandfathered December 31 of 2013, not January 1 as I had previously written.
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A NYT article on growing Congressional opposition to the Trans-Pacific Partnership (TPP) told readers;
“The T.P.P. as outlined is aimed at reducing barriers, cutting red tape and harmonizing international regulations,..”
It is not true that the TPP is designed simply to reduce barriers. The provisions on patent monopolies for prescription drugs and related protections like data exclusivity will almost certainly increase barriers and raise prices. This is likely to be the case with its copyright related provisions as well. The additional costs associated with increased protectionism in these areas may well exceed any savings associated with lower barriers elsewhere. Protectionism in the prescription drug industry in the United States add close to $270 billion a year (@1.6 percent of GDP) to drug costs.
The piece also refers to the opposition to TPP to the agreement as coming “sight unseen.” This is not quite right. While the Obama has been negotiating the TPP largely in secret, many members have seen portions of the draft text. Also portions have been leaked and are available on the web.
A NYT article on growing Congressional opposition to the Trans-Pacific Partnership (TPP) told readers;
“The T.P.P. as outlined is aimed at reducing barriers, cutting red tape and harmonizing international regulations,..”
It is not true that the TPP is designed simply to reduce barriers. The provisions on patent monopolies for prescription drugs and related protections like data exclusivity will almost certainly increase barriers and raise prices. This is likely to be the case with its copyright related provisions as well. The additional costs associated with increased protectionism in these areas may well exceed any savings associated with lower barriers elsewhere. Protectionism in the prescription drug industry in the United States add close to $270 billion a year (@1.6 percent of GDP) to drug costs.
The piece also refers to the opposition to TPP to the agreement as coming “sight unseen.” This is not quite right. While the Obama has been negotiating the TPP largely in secret, many members have seen portions of the draft text. Also portions have been leaked and are available on the web.
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In an interesting column discussing the splits on economic issues in the Democratic Party and how they affect Hillary Clinton’s prospects for 2016, Harold Meyerson noted progressives opposition to Larry Summers as Fed chair. He told readers:
“To the liberals, Summers’s sin was his central role in deregulating derivatives when he served as Bill Clinton’s Treasury secretary as well as his support for repealing the Glass-Steagall Act, a change that allowed previously safe depositor banks to use those funds for speculative investments.”
Actually the negative impact of the soaring dollar, which was a direct result of the bailout from the East Asian financial crisis that Summers helped engineer, dwarfed the impact of deregulating derivatives and repealing Glass-Steagall. The harsh terms of the bailout led countries throughout the developing world to begin a massive accumulation of dollar reserves to avoid ever being in the same situation.
The resulting trade deficit created an enormous hole in demand in the economy. This hole was filled by demand generated by the stock bubble in the 1990s. When that bubble burst it gave the U.S. economy the longest period without job growth since the Great Depression. The economy only started creating jobs again when the housing bubble picked up steam and filled the demand gap created by the trade deficit.
While the decline in the dollar since 2002 has partially closed the trade deficit, it is still creating a demand gap of more than $500 billion a year. Absent another bubble, this gap can only be filled by large budget deficits. Since almost no one in a position of responsibility in Washington is prepared to advocate larger deficits, this means that Summers high dollar policy is likely to condemn the country to high rates of unemployment long into the future.
In an interesting column discussing the splits on economic issues in the Democratic Party and how they affect Hillary Clinton’s prospects for 2016, Harold Meyerson noted progressives opposition to Larry Summers as Fed chair. He told readers:
“To the liberals, Summers’s sin was his central role in deregulating derivatives when he served as Bill Clinton’s Treasury secretary as well as his support for repealing the Glass-Steagall Act, a change that allowed previously safe depositor banks to use those funds for speculative investments.”
Actually the negative impact of the soaring dollar, which was a direct result of the bailout from the East Asian financial crisis that Summers helped engineer, dwarfed the impact of deregulating derivatives and repealing Glass-Steagall. The harsh terms of the bailout led countries throughout the developing world to begin a massive accumulation of dollar reserves to avoid ever being in the same situation.
The resulting trade deficit created an enormous hole in demand in the economy. This hole was filled by demand generated by the stock bubble in the 1990s. When that bubble burst it gave the U.S. economy the longest period without job growth since the Great Depression. The economy only started creating jobs again when the housing bubble picked up steam and filled the demand gap created by the trade deficit.
While the decline in the dollar since 2002 has partially closed the trade deficit, it is still creating a demand gap of more than $500 billion a year. Absent another bubble, this gap can only be filled by large budget deficits. Since almost no one in a position of responsibility in Washington is prepared to advocate larger deficits, this means that Summers high dollar policy is likely to condemn the country to high rates of unemployment long into the future.
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That is what readers of a NYT piece on criticisms of German government policies from the European Union and the German Council of Economic Experts, a panel of economists that advises the government might conclude. Unfortunately the piece did not make clear that the criticisms were coming from opposite directions.
The European Union is criticizing Germany for refusing to take measures that would help to correct its huge trade surplus with other euro zone countries. The list of policies that would help bring about this adjustment would include stimulatory fiscal policy (i.e. larger deficits) and policies that would lead to higher German wages, such as a national minimum wage and measures that would increase the bargaining power of unions.
By contrast, the Council of Economic Experts was critical of measures that would raise wages. It wants Germans to suffer in the same way as other Europeans.
As a practical matter, if Germany does not take steps to raise the price of its goods relative to prices in other euro zone countries then it will continue to run large surpluses with those countries. It is likely that many of the loans needed to allow countries like Greece to pay for its imports will have to be written down in the future as has been the case in the past.
Apparently Germans prefer to give away their goods rather than sell them. That is a strange economic view, but it seems to be the preferred approach in Germany. It would have been helpful if the piece had made this point more clearly.
That is what readers of a NYT piece on criticisms of German government policies from the European Union and the German Council of Economic Experts, a panel of economists that advises the government might conclude. Unfortunately the piece did not make clear that the criticisms were coming from opposite directions.
The European Union is criticizing Germany for refusing to take measures that would help to correct its huge trade surplus with other euro zone countries. The list of policies that would help bring about this adjustment would include stimulatory fiscal policy (i.e. larger deficits) and policies that would lead to higher German wages, such as a national minimum wage and measures that would increase the bargaining power of unions.
By contrast, the Council of Economic Experts was critical of measures that would raise wages. It wants Germans to suffer in the same way as other Europeans.
As a practical matter, if Germany does not take steps to raise the price of its goods relative to prices in other euro zone countries then it will continue to run large surpluses with those countries. It is likely that many of the loans needed to allow countries like Greece to pay for its imports will have to be written down in the future as has been the case in the past.
Apparently Germans prefer to give away their goods rather than sell them. That is a strange economic view, but it seems to be the preferred approach in Germany. It would have been helpful if the piece had made this point more clearly.
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