The Euro crisis and the need for an alternative economic policy package for the Euro area, with Engelbert Stockhammer

Wednesday, March 21, 2012 - 13:30

The Foundation for European Progressive Studies (FEPS) and the Global Progressive Forum (GPF) launched the Next Left Economic Circle in September 2011. The Next Left Economic Circle roundtables intend to gather progressive economists from European institutions, civil society organisations and private businesses insisting on the need to assess the theoretical bases underlying economic policy proposals. These roundtables have a double objective: to create and develop a network of progressive economists in Brussels and to show to which extent economic theory can enrich economic debates. Actually, people who were ardent advocates of the free-market ideology a few years ago now highlight the need of public intervention in these troubled times. It seems we are listening to messages which date back to the 1930s which sustained that a theory which supported public intervention was finally to be understood as a “Crisis theory” and not a “General” one. Everything is happening as if the crisis was a particular moment of time, following external shocks i.e. of political nature, given the faith in the self-regulatory character of the economy which could not be questioned. Nonetheless, every economic policy proposals is based on a vision of the economy deciphered through a theoretical corpus which should be made explicit.

In terms of participation, this time again, the Next Left Economic Circle doubled its number of participants, with more than 70 participants attending this third edition. Participants including a dozen of economists from the European Commission, including cabinet members, a dozen of representatives of permanent representations (both regional and national) , and some S&D MEPs, assistants and staff. It also included economists from civil society and business organisations, especially from national and European trade unions, as well as researchers and PhD Students. This high participation also shows that the failure of orthodox austerity policies to counteract and mitigate the current financial and economic crisis lead more and more economists and decision-makers to question the very fundamentals of the mainstream, neo-liberal analysis that underlines these policies.

In terms of content, this third roundtable focused on “The Euro crisis and the need for an alternative economic policy package for the Euro area” with guest speaker Engelbert Stockhammer, Professor of Economics at Kingston University, London. This presentation established the origins of the crisis to the neoliberal economic policy regime in the EU. Neoliberalism has given rise to two different, complementary growth models: one of debt-led growth and one of export-led growth. Both are built on wage suppression, and are ultimately unsustainable. European integration has been dominated by Neoliberalism, but a European welfare state based on coordinated collective bargaining that aims at higher wage growth in trade surplus countries, speed bumps for financial flows and a European social security system would be economically sustainable and prevent many of the imbalances that have led to the present crisis. 



Research Paper - Peripheral Europe’s debt and German wages: the role of wage policy in the Euro area


Engelbert Stockhammer obtained his PhD at the University of Massachusetts at Amherst in 2000. He joined Kingston in 2010. He is presently research associate at the Political Economy Research Institute at the University of Massachusetts at Amherst and member of the coordination committee of the Research Network Macroeconomics and Macroeconomic Policy. His research areas include macroeconomics, applied econometrics, financial systems and heterodox economics. He has worked extensively on the determinants of European unemployment, the demand effects of changes in income distribution and the macroeconomics effects of financialisation. He has published numerous articles in international peer-refereed journals including the Cambridge Journal of Economics, Structural Change and Economic Dynamics, the Journal of Post Keynesian Economics, the International Review of Applied Economics and the European Journal of Industrial Relations. In 2004 he published the book The rise of unemployment in Europe (Edward Elgar); in 2009 he edited two books, one together with E. Hein and T. Niechoj on Macroeconomic policy on shaky foundations. Whither mainstream economics? (Metropolis), and the other Heterodoxe Ökonomie (Metropolis) together with J.Becker, A. Grisold, G. Mikl-Horke, R. Pirker, H. Rauchenschwandtner, O. Schwank and E. Springler.

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