A number of economic and political commentators speak and write great sense. This is reassuring for two reasons: a) Britain seems to be a country less and less willing to listen to arguments if they contradict certain orthodoxies and presumptions, and, b) We need people to keep the flame burning for reason and balance, especially in economic affairs.
While certain economic principles do not need debating, because the theory underpinning them is as agreed as 2+2=4, choosing overall economic policy is largely a matter of opinion. Economics is not a natural science, it is a social science, which means it is all but impossible to test theories in laboratory conditions; in short, and for example, we cannot isolate the effects of a tax increase on the overall economy because we cannot shut off all other factors that affect economic performance.
This is why it is fatuous to claim, beyond doubt, that so-called ‘austerity’ in the Eurozone is proven to be the wrong course of action because unemployment continues to rise, especially in those southern countries most adversely affected. It might be, but we cannot know beyond doubt. And it is noticeable that those speaking out against reductions in spending are those who tend to ignore the malign effects of the Eurozone.
But I mentioned other commentators, and it is one in particular I want to highlight who tends to speak more sense than most: Jeremy Warner. Below is just one extract I think makes it clear that questioning so-called ‘austerity’ is fine, but to ignore the elephant in the room of the Euro is just plain dangerous:
The UK also has still relatively low levels of unemployment and one of the best labour participation rates in the G7. We can all guess why the IMF has got itself into such a colossal muddle over the eurozone crisis. Europeans are still the dominant force within the fund.
Desperate for explanations, they’ve begun to wonder whether the fiscal medicine they’ve been applying is too harsh. Yet they still cannot bring themselves to admit the true explanation, the one that stares them in the face – it’s the euro, stupid.
Read the rest of his article here.