Only rational expectations macroeconomics can explain self-fulfilling crises

Murray Rothbard vs. EU 1989!

Labour costs across the European Union

The Left is back in power in Greece

Unemployment rates across the OECD member countries

European integration explained in one easy chart

Iceland went bankrupt in 2008

#ISDS is saving the planet from global warming!

Greece’s possible currency outcomes, from today’s euro to the drachma

A Schumpeterian explanation of the recent rejection of the centre-left in Europe

Kiwiblog put me onto the story in the Guardian about how only one third of Europe’s population is governed by the centre-left and the left is lost all but one of the last 13 elections in Europe. The exception was Greece, which they may regret.

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Austria, Croatia, the Czech Republic, France, Italy, Malta, Slovakia and Sweden are the only EU members that are on the centre-left. In 2011, only 14.5% of the 28 countries’ total population was led by the centre-left. In 2007, it was nearly 45%.

The reason for the shift to the right can be explained by Joseph Schumpeter’s theory of democracy. Schumpeter disputed the widely held view that democracy was a process by which the electorate identified the common good, and that politicians carried this out:

  • The people’s ignorance and superficiality meant that they were manipulated by politicians who set the agenda.
  • Although periodic votes legitimise governments and keep them accountable, their policy programmes are very much seen as their own and not that of the people, and the participatory role for individuals is limited.

Schumpeter’s theory of democratic participation is that voters have the ability to replace political leaders through periodic elections.

Citizens do have sufficient knowledge and sophistication to vote out leaders who are performing poorly or contrary to their wishes. The power of the electorate to turn elected officials out of office at the next election gives elected officials an incentive to adopt policies that do not outrage public opinion and administer the policies with some minimum honesty and competence.

Power rotates in the Schumpeterian sense. Governments were voted out when they disappointed voters with the replacement not necessarily having very different policies. Greece is the exception to this.

John Oliver’s 3-minute explanation of Greece’s crisis

Greece (61st) is ranked one above the Russia in the World Bank’s Doing Business Survey 2015

Figure 1: Greek and Russian Doing Business sub-rankings, 2015

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Source: World Bank Doing Business 2015.

As long as you’re not in a construction or export business, and don’t mind waiting for your electricity, it’s better to do business in Russia than in Greece! The main difference between Russia and Greece is its membership of the European Union makes it easy to export?

In Russia, it’s easier to start a business, register property and enforce contracts than it is in Greece!

Tom Sargent keynote address Emergency Economic Summit for Greece (1 June 2015)

Who are the members of Euroland?

Maybe joining Euroland isn’t that bad after all

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