Tuesday, April 30, 2013

On Labor Power and Workers' Rights

. Tuesday, April 30, 2013
3 comments

Hot off the presses from International Studies Quarterly is this article (ungated version) by Darin Christensen and Eric Wibbels, "Labor Standards, Labor Endowments, and the Evolution of Inequality":

Proponents often recommend high labor standards as a means of reducing inequality between and within countries. Opponents suggest that labor standards exacerbate international and domestic inequalities. In this paper, we forward a simple argument whereby the impact of higher labor standards on domestic inequality depends on a country's labor endowment. We hypothesize that where labor is abundant, higher standards will exacerbate inequality. Where labor is scarce, higher labor standards might lower inequality. In both cases, the impact of labor standards on inequality work through an employment and wage effect. Using newly available data on labor standards around the world from 1981 to 2000, we provide evidence largely consistent with our hypotheses. Higher labor standards do, indeed, exacerbate inequality in labor-abundant economies. On the other hand, higher labor standards lower inequality in labor-scarce economies. We discuss the implications of these findings for work on labor market insiders and outsiders as well as the political economy of development.
Bangladesh is quite abundant in labor. Thus, the expectation is that increasing workplace regulations would worsen inequality.

Regulation Is More Complicated Than You Think

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Some of my research involves the regulation of bank capitalization, including the use of risk-weights. One of the things I constantly emphasize is that there are many misconceptions in the academic and policymaking communities about the relationship between banks and regulations. Here, for example, is Per Kuwoski complaining about the international Basel capital accords:
The first fact is that since banks are allowed to hold less capital, and therefore to leverage the risk-adjusted margins more on their capital, and therefore to obtain much higher expected returns on equity when lending to what is perceived as “safe” than when lending to what is perceived as “risky”, current regulations are completely distorting our financial system. 
That has caused banks to create excessive exposures to what was erroneously perceived as risky [ed.: I think he means "safe"], like in AAA rated securities, Greece, real estate, and to refrain from lending to those in the real economy perceived as “risky”, like small businesses and entrepreneurs.

The second fact is that the first fact is not even mentioned, much less discussed.
The point is that prior to the crisis banks were doing what they were supposed to do. The epicenter of the crisis was located in some of the safest categories of financial instruments: OECD sovereign debt and highly-rated securities, both of which were privileged in the risk-weighting scheme under the Basel accords. The crisis didn't occur because of junk bond trading; it occurred in part because everyone (including the banks themselves, apparently) thought banks were acting safely when they were actually concentrating evermore risk at the center of the global financial system. This means that increasing capital requirements under the current regulatory structure is likely to increase the exposure financial institutions have to these types of assets, these types of risk, and thus the sort of crisis that we've just experienced.

Was the risk-weighting system gamed? Of course it was*, particularly by the mid-2000s when the world's demand for "safe" financial assets denominated in dollars massively out-stripped supply. Safe financial assets were defined by the regulatory code, so there was quite a lot of money to be made by creating assets which would be considered safe by regulators and selling them. Was there outright fraud? Some, yes, although it's hard to find solid evidence that this was as pervasive a feature of the financial system prior to the crisis as many assume; it's even harder to demonstrate that fraud led to (or even contributed to) the crisis. It's much easier to see how gaming of the system could have.

But what banks were not doing is "racing to the bottom". That is, they were not bumping up against their minimum regulatory requirements by taking on as much risk as they were legally allowed to do*. Instead, they were piling into "less risky" assets because those were rewarded by the regulatory code. And the more that these types of assets are rewarded (or required) by the regulatory code, the more banks will game the system in increasingly opaque ways. It's what they're being asked to do, after all.

What is to be done? Some, like Kurowski and also Vice-Chairman of the FDIC Thomas Hoenig, want to abandon the risk-weighting system altogether. Their views are represented by new bipartisan legislation which was introduced into Congress by Brown and Vitter last week, which has the support of everyone from community bankers to Simon Johnson. The gist: force banks to fund some percentage of their investments with equity rather than debt, but let them (and their investors and counterparties) determine what assets are risky and what are not. Keep the system simple; the more complicated it gets, and the more beneficial it is to pursue profit through regulatory arbitrage, the more it will be gamed.

But so far the political discussion of this has often reduced to a simple lobbying story: banks don't want to be regulated, and they've got the power, so the regulation will be weak. This is both an incredibly simplistic view of regulatory politics, it is also wrong in at least some cases. Banks don't like some kinds of regulation, it is true, but bank preferences are not homogenous. All regulations have distributional consequences, so some firms will support them while others oppose them. We're seeing that with Dodd-Frank and Brown-Vitter and we've seen it in previous rounds of the Basel accords.

The point is that banks (and other financial firms) have asymmetric interests, and that these interests are conditioned by the regulatory environment. Just making the regulatory environment "tougher" won't necessarily punish large financial institutions (it'll often help them), and may concentrate risk in opaque parts of the financial system. This is arguably the worst possible result. Unfortunately, it may be the most likely under current policy.

*If by "game the system" you mean doing essentially what the regulatory code wanted them to do: invest in sovereign debt and asset-backed securities.

**If you doubt me, I can prove it. Part of the work is forthcoming in peer-reviewed form; other parts will hopefully find a home soon.

Monday, April 29, 2013

WTO Head Update

. Monday, April 29, 2013
0 comments

Recent reports have indicated that the new head of the WTO will hail from the Global South. After the latest round of elimination, the two remaining candidates are Brazil's ambassador to the WTO, Roberto Azevedo, and Mexican economist and former Minister, Herminio Blanco.


Read more here.

Zombie Idea: Creditanstalt Did Not Cause the Depression

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Brad DeLong and Barry Eichengreen have written the preface to a new edition of Kindleberger's The World in Depression. It is a very good introduction, except for this part:

Kindleberger’s second key lesson, closely related, is the power of contagion. At the centre of The World in Depression is the 1931 financial crisis, arguably the event that turned an already serious recession into the most severe downturn and economic catastrophe of the 20th century. The 1931 crisis began, as Kindleberger observes, in a relatively minor European financial centre, Vienna, but when left untreated leapfrogged first to Berlin and then, with even graver consequences, to London and New York. This is the 20th century’s most dramatic reminder of quickly how financial crises can metastasise almost instantaneously. In 1931 they spread through a number of different channels. German banks held deposits in Vienna. Merchant banks in London had extended credits to German banks and firms to help finance the country’s foreign trade. In addition to financial links, there were psychological links: as soon as a big bank went down in Vienna, investors, having no way to know for sure, began to fear that similar problems might be lurking in the banking systems of other European countries and the US.

In the same way that problems in a small country, Greece, could threaten the entire European System in 2012, problems in a small country, Austria, could constitute a lethal threat to the entire global financial system in 1931 in the absence of effective action to prevent them from spreading.
I've covered this before, so rather than restate it all I'll just point you to that and mention the gist here. Regarding the first paragraph, Creditanstalt was the largest and most well-connected bank in the Austro-Hungarian empire. Following World War I, it remained one of the most important banks in continental Europe. It was not "relatively minor". More importantly, the Depression was already underway before the Viennese institution went under. The New York Bank of the United States had collapsed several months before along with more than 600 other American institutions. It is just not the case that everything was fine right up until Creditanstalt went under. It is much more likely that the Depression caused the collapse of the Austrian bank and not the other way around.

Why is this important? Because contagion cannot emerge from anywhere. So the ramifications for the present day are not that Greece could destroy the entire European system, as Thomas and I wrote last year in Foreign Policy. The underlying research which motivated that article has now been released in Perspectives on Politics. We were right then, and the same intuition helped us to understand why the Cyprus meltdown was going to remain localized while others were talking about how it could drag down the entire global economy.

This matters because very smart people keep saying that contagion can emerge from anywhere at any time. At the recent International Studies Association annual meeting I heard one of the most prominent scholars in IPE say to a large audience that financial contagion worked like it did in the movie Contagion: anyone can become infected at any time. This was based on no research, just an intuition. Here are some other recent examples (1, 2).

But the intuition is false. This is not how the world works. The fact that the claim keeps being made is evidence that we in the social sciences really do not grasp dynamic complexity well at all. This clearly has major consequences not only for how we view the world, but how we govern it. We need to do better.

Saturday, April 27, 2013

Poor Timing: Military Spending and the Business Cycle

. Saturday, April 27, 2013
3 comments

First quarter GDP growth figures for the US released yesterday were disappointing, and the Commerce Department pointed to falling military spending as an important contributing factor. This is interesting from a broader perspective. My research on the economic consequences of military buildups indicates that the timing of large changes in military spending bears little relationship to prevailing economic conditions. Military spending rises in response to unexpected foreign military challenges and falls when the threat has diminished. As a consequence, large changes in military spending typically have been pro-cyclical.

Consider the three postwar military buildups since Korea (Vietnam, Carter-Reagan, and War on Terror). In these buildups, defense spending increased by between 25% and 50%, with most of the increase paid for by borrowing, and the deficit-financed buildup persisted for three to four years. The persistent deficits imparted a substantial demand shock, transforming ongoing economic expansions into economic booms.

Similar dynamics might characterize post-conflict demobilizations. Cuts in military spending should weaken macroeconomic activity and there is little reason to expect wars to end just as the economy requires restraining with a counter-cyclical fiscal policy. Military build downs might thus cripple an already limping economy.

We seem to be experiencing just such a pro-cyclical build down currently. Reports yesterday on first quarter growth indicate that reduced military spending--a fall of only 11.5% on an annualized basis--as the US disengages from Afghanistan and Iraq is undermining economic recovery. As the Washington Post reports

That shift in foreign policy is still trickling through the real economy. Compensation for military and civilian employees working in defense have fallen every quarter since 2012. Major contractors such as Lockheed Martin have laid off or bought out hundreds of employees, including top executives, and consolidated facilities in recent years.
Indeed, defense spending cuts (even prior to the impact of sequestration, which kicked in only on March 1) appear to have shaved .6 percent off GDP growth. This appears to be the second consecutive quarter in which large defense cuts have weakened the recovery. The current post-conflict military build down is thus poorly timed from a macroeconomic perspective.

There is a broader point. In the US, the logic of national security overrides the logic of rational macroeconomic management. Variation in US military spending has been driven by the perceived need to respond urgently to foreign challenges regardless of prevailing economic conditions. Because military spending constitutes so large a share of national income, the resulting variation in military spending has substantial macroeconomic consequences. We recognize these consequences at the extremes (e.g., WWII and the end of the Great Depression) and we recognize them when military spending falls. We don't seem to recognize this "military Keynesianism" as a more general phenomenon. We ought to, for national security has been the primary driver of US fiscal policy--and thus a major policy driver of US macroeconomic performance--since 1965. I am puzzled why this is not more broadly recognized.

Friday, April 26, 2013

Understanding the Bangladesh Tragedy with Political Science

. Friday, April 26, 2013
13 comments




Matt Yglesias is being raked across the coals for this. It's understandable. The best time to parrot an econ 101 line is not immediately following a tragedy. Yglesias now understands this. But neither is this the best time to completely denounce neoliberalism or engage in the sort of extreme wishful thinking through which it is suggested that Bangladesh could (or even should) have levels of labor protection equivalent to the U.S. That is quite literally impossible: Bangladesh's GDP per capita is about $2,000 per year. Taken together, U.S.-level unemployment protections, retirement accounts, safety regulations, and other programs which benefit labor are more costly than that. So it's impossible.

Let's take this situation as it is. Bangladesh is not a bastion of neoliberalism. It has only recently, and after a long struggle, been able to consolidate a democratic regime (hopefully) which is in any case quite corrupt. Bangladesh is one of the poorest countries in the world, but it has been able to grow fairly rapidly over the past few decades by exporting textiles and people to the rest of the world: exports and remittances are about 12% of the economy. Roughly 40% of the labor force is "underemployed", working only a few hours per week for very low wages. It is a poor country, which means it has low domestic savings, so to generate the sort of domestic investments it needs to continue to develop it must import capital and in particular foreign direct investment. Most of that goes into the production of textiles.

It is commonplace to hear folks say that multinational corporations encourage a "race to the bottom" in labor and environmental standards: if you regulate them, the thinking goes, they will go to another jurisdiction. To get the capital they need to develop, poor countries must therefore deny worker protections. Here's an application of the argument to Bangladesh. The story has a nice logic to it, but it is false.

This question has been studied quite a lot by political scientists. The state of the art in the literature (much of the best of which has been done at UNC by Layna Mosley) is as follows: multinational corporations tend to improve labor standards, and exposure to multinational production chains tend to raise countries' de jure labor (and environmental) standards. Through the pressure of global civil society advocacy groups, "California effects", and other processes, standards tend to go up rather than down. But quite frequently de facto implementation of these standards does not keep up with the de jure enaction of them. This is especially true when multinational corporations subcontract with local firms: MNCs almost always have higher standards than local firms, especially if the MNC is from a highly-developed country (i.e. not China). As countries develop, local labor practices tend to improve to meet the standards.

Remember, these are poor countries. The local standards tend to be very low before multinationals come in. The capacity of governments to engage in inspection and enforcement is weak. Often, corruption is rampant. (These are basically other ways of saying that the country is quite poor.) This is not a problem that invoking the neoliberalism bogeyman can fix, however, nor would it be likely to improve if the country was shut off from the global economy. The problem was not created by neoliberalism -- it existed already -- and the best hope for rapid improvement it will come from participation in the global economy rather than autarky. State capacity cannot improve until incomes are higher, which requires growth, which requires participation in the trading system. Over the past two decades, since it has begun producing for export in earnest, Bangladesh has grown at about 6% per year; it has a long ways to go, but shutting itself off would be the wrong move. It is on the path to development, at long last.

Enforcing the laws already on the books is a necessary step. But it is hard to ask multinational corporations to take responsibility for more than their own production floors. They do not have the local authority to do this, and I don't believe anyone wishes to grant it to them. This is the governments' job. If the government does not have the capacity to perform it, they may ask for outside help from the ILO or other NGOs which operate internationally. (Keep in mind that enforcement requires resources, which means additional taxes. Practicably speaking, some of these costs would be borne by labor.) If the government does not have the interest to do so, then the entrenched power structure needs to be overturned. The best chance for this happening is by increasing the market power of foreign capital and domestic labor -- the groups which would both prefer higher standards -- and eroding that of domestic capital -- the group which, according to recent example and careful political science research, most prefers low standards. Thus, various suggestions to boycott products made from Bangladesh, or otherwise isolate the country economically, would almost certainly make the problem worse rather than better.

It appears that the Bangladesh garment factory was locally-owned, and had been subcontracted to do production for MNCs. The building was in violation of many laws -- the problem wasn't de jure but de facto -- and it appears that the owners will be arrested and prosecuted (as they should be). The multinationals, for their part, had engaged international third-party inspectors under E.U. code to validate the safety of the factories. The factories themselves passed inspection, but the building which housed them was not examined by the foreign inspectors.

This is, sadly, pretty predictable from the point of view of political science research. And that research gives us some indication of what needs to happen to improve the situation: consolidate the democratic regime in Bangladesh, reduce the influence of local capital owners, try to maintain rapid economic growth, and have some measure of patience. It takes a long time for poor countries to become rich countries. It will take a lot longer if well-meaning folks on the left cut out their best means of development.

UPDATE: In the comments, Latinamericanist provides some links to research on the effectiveness of international advocacy groups that are worth looking at.

Thursday, April 25, 2013

Don't Abandon Materialist Conceptions of Politics Just Yet

. Thursday, April 25, 2013
0 comments

New research:

"Economics and Elections Revisited"
Richard Nadeau & Michael S. Lewis-Beck & Éric Bélanger3
Comparative Political Studies 46(5)
The economics and elections connection has been heavily investigated, although mostly through single-country studies. The first comparative, survey-based research on economic voting, by Lewis–Beck, found serious effects. Subsequently, other comparative scholars have explored this terrain. The most recent, and most ambitious, examinations are by Duch and Stevenson and by van der Brug et al. These impressive efforts arrive at opposing conclusions about the importance of economic voting. We carry out another major examination, with an eye to reconciling these differences. A carefully specified model of vote choice is estimated on a balanced survey pool (N > 40,000) from 10 Western European nations. Special pains are taken with issues of economic measurement, estimation, and endogeneity. The finding is that economic perceptions are formed from economic reality, and importantly influence vote choice. Besides enhancing our understanding of comparative political behavior, the strong result speaks to the functioning of government accountability in advanced democracies.

Also:

"The Left and Organized Labor in Low-Inflation Times"
Marco Simoni
World Politics 65(2)

This article presents fresh empirical data showing that policy alignment between center-left governments and trade unions was a sustained feature of European politics between 1974 and 2005. This contradicts expectations of a wide delinkage between the electoral left and labor as a consequence of globalization, deindustrialization, and unionization decline. However, structural economic change has altered the policy field so that sustained policy alignment can no longer be explained by existing theoretical frameworks.
Based on a theoretical argument and a multivariate empirical test, the article contends that policy alignment is likelier to occur if labor plays an important role in economic management at the microlevel and the industry level and if unions are politically cohesive agents thanks to powerful confederation leadership supported by democratic decision-making practices. In making its case, the article bridges the literatures on comparative capitalism and party politics, in order to account for change and continuity in policy-making processes
The first seems like one of those "Yes, Virginia" moments, although it's nice to see a proper comparative large-N analysis of the question. The second is probably more interesting theoretically. Something that SBD thinks/writes a lot about is how many of our models work against each other. For example, models of partisan politics tend to expect left-wing governments of developing countries to tend to be more anti-capitalist and therefore anti-globalization. But labor is often the abundant factor of production in developing countries and would therefore benefit from trade, in which case trade openness should be supported by left parties in these countries. This article appears to be showing one way in which this could occur.

On similar questions, see previous work by Oatley here and here.


Saturday, April 20, 2013

People Should Care About This

. Saturday, April 20, 2013
0 comments

I'm breaking my self-imposed silence to pass along something which was recently passed along to me. Apparently supporters of Fidesz, the proto-fascist* party currently ripping up Hungary's constitution in a brazen move to consolidate power, has been using the symbol of Solidarność, the Polish group which opposed Sovietism during the Cold War**.


This makes me feel physically ill. The Solidarity movement was exceptional in many ways, but one of them was their powerful usage of imagery in street art, pamphlets, and other media. Lawrence Weschler has written extensively about the phenomenon; this (pdf) is an excellent article by him with many graphical reproductions, and here is one of his books. This is one of my favorite examples:




This was from the early 1980s. The dates correspond to flare-ups in the European resistance against Soviet oppression. The heartbeat crests and falls, but does not flatline: the resistance will eventually triumph, and Solidarity will hasten that day. Powerful stuff.

So where the hell does Fidesz get off expropriating this image? The ironies are many -- among them the fact that Solidarity was an internationalist movement of trade unionists while Fidesz is nationalist and anti-union, and that the remnants of Solidarity in Poland have mostly lost their popular support -- but for now it's enough to remain sickened by this:






Békemenet is a pro-government rally protesting almost any internationalism involving Hungary, e.g. that involving the European Union or IMF, as "colonialism". Here's one short discussion from last year. Here's a broader run-down of the Hungarian situation as of a few months ago titled "People Should Care About This", written by a very bright former student of mine.

Marton is correct: we should care about this. Europe has come a long way in a short time; we need to consolidate those gains, not cede them. The Solidarity movement was a great example of how that can be done profitably and beautifully. We should not allow their memory to be besmirched by embittered reactionaries.

*Not to be confused with Jobbik, the neo-fascist party in Hungary.

**Note for those in the NC Triangle: a former Polish Solidarity leader -- Zbigniew Bujak -- will be speaking at the UNC FedEx Center for Global Studies this Monday, April 22 at 5:30 pm in Room 4003, on "The Task of the Intelligentia". I encourage you all to attend. It should be a great discussion.

Monday, April 15, 2013

Some trade-related news

. Monday, April 15, 2013
0 comments


And then there were five:  Following up on an earlier post, there are now 5 candidates left in the running for WTO Director General.  Last time we posted about this, there was some discussion in the comments about the factors that might make certain candidates more or less likely.  One that is often emphasized is geography – i.e., there might be a preference for regional diversity among the leaders of key international organizations (OECD; UNCTAD; etc.).   If it’s true that regional representation matters, we at least now know that the next head of the WTO will be from Latin America or Asia-Pacific (more here and here).
One of those five:  A lot has been written about the relationship between the financial crisis, food prices and political unrest (e.g. Arab Spring).  One of the still-remaining candidates for the WTO’s DG position, Indonesia's Mari Pangestu, envisions a key role for the Doha Round in preventing food shortages in the future.  She warns that the status quo, wherein developed state “farm subsidies have artificially depressed world food prices, triggering a decline in production and a fall in global food stocks,” contributes to the potential for future food shortages.   And, the problem is exacerbated by many countries’ export restrictions.  Of course, it’s hard to be optimistic re: agriculture when talking about the WTO . . . even if there is recognition of the important second order effects of agri-protection.  See here.

Raisin regs:  There is a case before the U.S. Supreme Court concerning the constitutionality of the Agricultural Marketing Agreement Act, a rationing-type program from the 1930s (here).  Under the program, raisins are expropriated from growers and then are given away or sold.  This is interesting for a couple of reasons.  First, it’s a trade case that made it to the Supreme Court.  Second, the ruling might have implications for other producers that are also subject to similar federal regulations.  Third, it's a nice reminder of how -- notwithstanding 75 years of changing economic circumstances for the industry in question -- policies can be very sticky (if that’s in any way a pun, it was unintentional).  
Serbia’s ban on GMOs:  As part of its progress toward WTO membership, Serbia has discussed dropping its import ban on genetically modified food (here).  In accord with WTO case law, countries cannot impose absolute bans on GMOs.  Serbia can still satisfy consumer preferences through less trade-restrictive means, such as through labeling and other requirements.  Plus, such modifications would be consistent with existing EU regulations anyhow (and that's another int'l organization Serbia wouldn't mind satisfying).  Here.  


Saturday, April 6, 2013

The ECB Is Not a Central Bank

. Saturday, April 6, 2013
1 comments

The European Central Bank should no longer be considered a central bank. Instead, it is a negotiating arm of Germany and (to a lesser extent) France. It is not surprising that the ECB does not act as normal central banks act. Instead of comparing the ECB to the Fed or any other central bank, we should compare it to the IMF.

The ECB is one arm of the Troika, along with the European Commission and the IMF. As such, it is involved in the negotiations during which bailout funds are extended to the European periphery in exchange for structural reforms. If the ECB eases monetary policy, then these structural reforms become less necessary in the short run. Indeed, this is what everyone who opposes current ECB policy is saying.

Given that, the ECB is not going to ease. It cannot, as to do so would be to cut out the leverage the European Commission has in forcing structural reforms. And the European Commission believes that without structural reforms the eurozone cannot last (absent perpetual transfers from the core to the periphery). The ECB is influenced disproportionately by the core euro countries, especially Germany. If the ECB does not keep Germany on its side, then its authority is likely gone.

So the ECB is not a central bank, and should not be considered as such. The ECB is a "lender of last resort" in the same way the IMF is, which is the way Bagehot intended: in a crisis, lend at a penalty rate. The penalty is structural reform. But the ECB is no longer tasked with stabilizing the European economy. That is no longer its remit, nor its goal.

Monday, April 1, 2013

Keynesian "Depression Economics" Does Not Apply to the Eurozone

. Monday, April 1, 2013
9 comments

I'm swamped with real work, but I have more posts on austerity politics planned. Anyway, to keep the lights on around here I thought I'd ask a simple question with (I think) a simple answer. First the set-up, then a factual observation, then the question:

The standard Keynesian case appears to be that policy blunders around the world are the result of a mistaken belief in expansionary austerity. The eurozone crisis is often provided as the exemplary case, which it would have to be because the rest of the world economy is doing more or less okay. The Keynesian case against fiscal consolidation is that it is contractionary, not expansionary, when monetary policy is at the zero lower bound (meaning interest rates are zero). That's when you get the liquidity trap, paradox of thrift, and all the rest of it. If you're not at the zero lower bound then the whole case evaporates, and what drives macroeconomic outcomes is monetary policy, not fiscal policy. If you're not at the zero lower bound then fiscal consolidation is "appropriate" (neutral actually) since it can be offset by monetary policy, although there will be distributional consequences. 

But the European Central Bank is not at the zero lower bound. In nominal terms it literally is not. Interest rates are not at zero. In fact, the ECB raised rates as the euro crisis worsened, and have since then held them steady. Quantitative easing programs have been "sterilized" by the ECB, which has taken pride in so doing. (I quote them on it in a forthcoming paper, about which more later.) All of the evidence which supports being in a liquidity trap -- sovereign yield at zero or even negative real rates, etc. -- at best only asymmetrically applies to the eurozone.

None of this is news, but so much eurozone commentary doesn't start from the position that the story is monetary rather than fiscal. So all this commentary ignores the fact that the entire Keynesian "depression economics" structure, which takes as a precondition the presence of a liquidity trap, does not apply to the eurozone crisis. Not one bit. The entire problem is monetary rather than fiscal, according to Keynesian economics. Belief or non-belief in expansionary austerity is a total non-issue.

So here's the question: why aren't we all talking about the distributional monetary politics within the eurozone rather than debating this or that fiscal policy?

International Political Economy at the University of North Carolina: April 2013
 
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