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There was talk about renaming the Krugman thread for this purpose, but that seems to be going nowhere. Besides which, I feel the Krugman thread should be left to discuss Krugman while this thread can be used for more general economic discussion.

Discuss:

  • The merits of competing theories.
  • The role of the government in managing the economy.
  • The causes of and solutions to our current economic woes.
  • Comparisons between the economic systems of different countries.
  • Theoretical and existing alternatives to our current market system.

edited 17th Dec '12 10:58:52 AM by Topazan

Fighteer Lost in Space from The Time Vortex (Time Abyss) Relationship Status: TV Tropes ruined my love life
Lost in Space
#20426: Oct 11th 2020 at 5:30:35 PM

Wow. I can't see that being abused. Or attracting certain types of people.

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"
SeptimusHeap from Switzerland (Edited uphill both ways) Relationship Status: Mu
#20427: Nov 9th 2020 at 3:16:46 AM

So, is someone familiar with Knut Borchardt's theses regarding the economic policy of Heinrich Brüning, German chancellor during the early 1930s? It's a bit of intricate economic history, and I am hoping someone understands it.

For the unwary, a lot of research effort has been put into establishing how Adolf Hitler could rise to power in Germany. One of the key factors identified was the Great Depression, which hit Germany particularly badly. A government headed by Heinrich Brüning ended up in office then, who under tolerance of the moderate left had the righ-wing president von Hindenburg decree a number of wages- and spending-cutting measures colloquially known as the "deflation policy". These greatly aggravated the crisis - lending him the nickname "hunger chancellor" - and together with other political disputes faciliated the rise to power of Hitler a few years later. Because of this, Brüning was eventually considered to have paved the way to Hitler's rise by aggravating the economic crisis, and his name is still used as a byword for misguided austerity policies.

Now, the thing is that Borchardt in the 1970s proposed that Brüning did not have the leeway to enact an "inflation policy" both due to the bounds of Germany's foreign obligations (Young Plan), the aftereffects of pre-Great Depression economic policy and the - in retrospective irrational - fear of inflation. So rather than destroying the German economy for no good reason he was forced to follow a bad economic policy.

What I am wondering about is how this debate has shaken out. Was Brüning's austerity-during-a-deflation-crisis policy inevitable and without alternatives, or not? From what I can tell it is still not considered to be good policy, the thing that is open for debate is whether there were alternatives.

"For a successful technology, reality must take precedence over public relations, for Nature cannot be fooled." - Richard Feynman
Fighteer Lost in Space from The Time Vortex (Time Abyss) Relationship Status: TV Tropes ruined my love life
Lost in Space
#20428: Nov 9th 2020 at 3:43:08 AM

I have no idea if it was inevitable, but if you're reading at that level of detail, you're way beyond my layman's knowledge. As I understand it, the major issue (other than the Great Depression itself) leading up to the collapse in Germany was WWI reparations and the hyperinflation that came afterwards, but the lack of a free-floating currency also eliminated a lot of economic options.

It is well-known that deflation was actually the immediate precursor to the rise of fascism, despite the common wisdom in Germany that fears inflation above all other things. From a modern perspective, one can declare that deflation was the wrong policy, but as for whether it was possible to do something else, I can't say.

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"
Redmess Redmess from Netherlands Since: Feb, 2014
Redmess
#20429: Nov 9th 2020 at 4:57:43 AM

That's what I understood from high school history as well, that it was mainly crippling war reparations that undercut the economy and bred resentment, allowing the rise of a populist like Hitler.

Hope shines brightest in the darkest times
Fighteer Lost in Space from The Time Vortex (Time Abyss) Relationship Status: TV Tropes ruined my love life
Lost in Space
#20430: Nov 9th 2020 at 5:46:09 AM

High school history focuses a bit too much on the hyperinflation, however. Yes, that happened, but it wasn't what got fascism going. That was the deflation caused by the government attempting to enact punishing austerity measures. This was before Keynesian thought got a foothold, so most people believed that austerity was the only way to correct a depressed economy.

The continued historical misrepresentation of the economic problems that Germany faced keeps its government obsessively focused with controlling inflation (ordoliberalism), a mistake that nearly caused the collapse of the Eurozone during the Great Recession and ongoingly cripples effective responses to crises among member nations.

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"
SeptimusHeap from Switzerland (Edited uphill both ways) Relationship Status: Mu
#20431: Nov 9th 2020 at 6:01:42 AM

If my understanding is correct, there has been a debate recently about whether the Versailles reparations were actually all that damaging to Germany's economy. Mostly because it's not clear if the cut in military expenditure that resulted from the Versailles provisions would have sufficed to pay for them.

Also, I don't know if I would draw a connection between the German inflation of the 1920s and the Euro crisis, mainly because it has been seldom used as an argument. To me this looks more like a straightforward example of some Eurozone countries profiting off the lack of inflation/debt refinancing and thus obstructing inflationary policies, with a Paul Singer-esque moralizing rationalization thrown on top.

"For a successful technology, reality must take precedence over public relations, for Nature cannot be fooled." - Richard Feynman
Fighteer Lost in Space from The Time Vortex (Time Abyss) Relationship Status: TV Tropes ruined my love life
Lost in Space
#20432: Nov 9th 2020 at 6:05:11 AM

[up] That may be true but I've had several conversations about Eurozone issues in this topic and others, and every time someone from Germany brings up the "inflation BAD" card. These are ordinary tropers, not politicians. The belief is ingrained in the culture.

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"
Zarastro Since: Sep, 2010
#20433: Nov 9th 2020 at 7:32:49 AM

[up] I believe it has been pointed out to you several times that Germans dislike inflation not because of some historical trauma - the one that might still be resonating at all is how the Reichsmark became worthless after WWII - but because Germans have unusually high saving rates and low house ownership rates compared to countries like Italy. Thus inflation is far more damaging to them.

[up][up]

Keep in mind that while yes, the reparation payments could be mostly met with the previous military expenditure, it was ultimately money that went to foreign countries. Whereas the German army was an important economic factor and in some areas in fact the biggest employer. This was particulary hard felt in East Prussia and Pommerania, two provinces with little to show for otherwise, and who ended up as Nazi strongholds later on (this was of course not the sole reason). Some other aspects of the reparation agreement were also rather harsh - e.g. the amount of coal which had to be sent to GB and France. This caused coal shortages in some cold winters and was a stinging reminder to Germans about the defeat.

[up]x5 This discussion is still ongoing, although Burchardt's arguments have been slightly modified by his pupils. The current consensus seems to be that Brünnings' economic policies were wrong and made things worse - and it was pointed out to him at the time that this was the case - he really lacked the instruments to act otherwise. What he ultimately could have done was to lessen the damage, not increase it. One argument in favour of this is that when the Nazis did introduce their stimulus program, they had to resort to several illegal methods which would have been unthinkeable to Brüning.

Political and judicial restraints usuallly overwrite economic theories. Which is why it is pointless to argue whether or not e.g. Austerity was the wrong solution to the Eurocrisis. It was in fact the only solution that was available at the time which allowed the debtor countries to remain in the Euro.

Edited by Zarastro on Nov 9th 2020 at 5:21:56 PM

RainehDaze Nero Fangirl (4 Score & 7 Years Ago)
Nero Fangirl
#20434: Nov 9th 2020 at 7:46:14 AM

Political and judicial restraints usuallly overwrite economic theories. Which is why it is pointless to argue whether or not e.g. Austerity was the wrong solution to the Eurocrisis. It was in fact the only solution that was available at the time which allowed the debtor countries to remain in the Euro.

That's a completely ridiculous assertion. "Don't think about whether something was actually a good solution and if we can learn from it because we can pretend there was no other option"? That's a great way to never make any progress or handle future crises better.

Fighteer Lost in Space from The Time Vortex (Time Abyss) Relationship Status: TV Tropes ruined my love life
Lost in Space
#20435: Nov 9th 2020 at 7:48:45 AM

[up][up]When a man is driving his car off a bridge, it is not irrational to point out that he is driving his car off a bridge, even if he is constrained by law or custom to drive his car off a bridge.

Yes, Germans are very fiscally prudent, yadda yadda. I get it. Germany's "fiscal prudence" is crippling the rest of the Eurozone because in order to hold its own inflation down, it is exporting deflation to other nations. Yes, Germany gets a nice stable economy out of the deal. Too bad about those other folks, I guess. They have to practice austerity so that German homeowners can keep their equity.

Edited by Fighteer on Nov 9th 2020 at 10:50:08 AM

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"
Zarastro Since: Sep, 2010
#20436: Nov 9th 2020 at 8:11:51 AM

[up][up] I am all for learning, I am just saying it is an ahistorical point of view, since it was never a possible alternative.

[up] Austerity has been to the benefit of the countries in which it was introduced, because it was the only way in which those countries could stay in the Eurozone. Which something e.g. the Greeks wanted even at the height of the crisis.

And it achieved that aim.

Edited by Zarastro on Nov 9th 2020 at 5:12:56 PM

RainehDaze Nero Fangirl (4 Score & 7 Years Ago)
Nero Fangirl
#20437: Nov 9th 2020 at 8:14:38 AM

A pyrrhic victory isn't a success, nor is succeeding at something that might have been a bad idea in the first place.

[up][up] I am all for learning, I am just saying it is an ahistorical point of view, since it was never a possible alternative.

I'm sure that's some sort of logical fallacy but I'm not sure which one it is. Seems close to appeal to tradition? "That was what happened so that was the only thing that could have happened", like people do not possess the ability to change laws or think their way out of them if nobody wants to enforce it.

Edited by RainehDaze on Nov 9th 2020 at 4:16:03 PM

Aszur A nice butterfly from Pagliacci's Since: Apr, 2014 Relationship Status: Don't hug me; I'm scared
A nice butterfly
#20438: Nov 9th 2020 at 8:33:00 AM

It just seemed like a "Sorry, can't do anything about it. Law says otherwise" as though law was Immutable, to me, if anything.

It has always been the prerogative of children and half-wits to point out that the emperor has no clothes
Zarastro Since: Sep, 2010
#20439: Nov 9th 2020 at 8:35:51 AM

[up] [up]I just see little point in discussing solutions that were never in any way realistic, especially when they have so many obvious drawbacks (case in point, look how Italy immediately stopped its' reform program when the ECB under Draghi introduced the clost thing to QE which was possible). Maybe as a thought experiment, but not e.g. when it comes to judging certain policies or politicians.

Of course austerity was not the only thing that could have happened. It would also have been possible to exclude Greece from the Eurozone (and probably EU). It is impossible to say with certainty what the results would have been, but there a lot of experts who predicted that Greece would suffer even worse and longer after Grexit. Furthermore they also feared that this could be a blow to the integrity of the EU, and who knows with Brexit later on the start of a chain reaction.

Austerity looked and still looks like the lesser of two evils.

Edited by Zarastro on Nov 9th 2020 at 5:37:57 PM

DeMarquis (4 Score & 7 Years Ago)
#20440: Nov 9th 2020 at 12:08:40 PM

The reason for discussing them is to examine the reasons why they were unrealistic at the time, with the expectation that it was mostly for political and cultural reasons, and therefore we can try to educate the public and ensure that more effective solutions are not unrealistic next time. Of course the main alternative was to forgive some portion of Greek debt, esp. once they covered the principle, and were only behind because of the interest.

I'm done trying to sound smart. "Clear" is the new smart.
Redmess Redmess from Netherlands Since: Feb, 2014
Redmess
#20441: Nov 24th 2020 at 4:16:31 PM

Robots invade the construction site: A new generation of machines is automating a tech-averse industry.

Automatisation is finally coming to the construction world, it seems, accelerated by the pandemic. Expect construction workers to be the new coal miners in the coming decades.

Hope shines brightest in the darkest times
Fighteer Lost in Space from The Time Vortex (Time Abyss) Relationship Status: TV Tropes ruined my love life
Lost in Space
#20442: Nov 24th 2020 at 7:53:57 PM

For now, those robots cost a bundle, but economies of scale will kick in eventually. When they do, trade workers had better watch out.

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"
Redmess Redmess from Netherlands Since: Feb, 2014
Redmess
#20443: Nov 25th 2020 at 7:02:08 AM

Yeah, the article already noted that while workers found these robots cool and convenient, it immediately raises the question of "will this thing replace me?"

Hope shines brightest in the darkest times
SeptimusHeap from Switzerland (Edited uphill both ways) Relationship Status: Mu
#20444: Nov 25th 2020 at 7:25:57 AM

Me, I wonder more if the effect of increased automatization will be the same as that of free trade - real, below the line, wins that contrary to economists' original expectations are not in fact for everybody and a large amount of losers with no substitute job prospects in sight.

Edited by SeptimusHeap on Nov 25th 2020 at 4:26:08 PM

"For a successful technology, reality must take precedence over public relations, for Nature cannot be fooled." - Richard Feynman
Fighteer Lost in Space from The Time Vortex (Time Abyss) Relationship Status: TV Tropes ruined my love life
Lost in Space
#20445: Nov 25th 2020 at 7:35:21 AM

Automation also weakens unions, as it's harder to bargain for jobs that can be replaced by a robot. As this trend continues, we need stronger protections for minimum basic income.

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"
Silasw A procrastination in of itself from A handcart to hell (4 Score & 7 Years Ago) Relationship Status: And they all lived happily ever after <3
A procrastination in of itself
#20446: Nov 25th 2020 at 8:50:47 AM

It weakens unions for the replaceable jobs, it can strengthen them for the robot-managing/robot-programming jobs.

That’s the fundamental issue, we’re running out of necessary jobs, to counteract that we need to either make it okay to not have a job (we’ve gone in the opposite direction, from 1 worker households to 2 worker households) or create masses of new jobs (likely via expansion of government funded social support).

“And the Bunny nails it!” ~ Gabrael “If the UN can get through a day without everyone strangling everyone else so can we.” ~ Cyran
NativeJovian Jupiterian Local from Orlando, FL Since: Mar, 2014 Relationship Status: Maxing my social links
Jupiterian Local
#20447: Nov 25th 2020 at 12:17:06 PM

We're absolutely not running out of work for people to do. We may get there eventually, but it's certainly not an imminent concern. If people hanging drywall are replaced by robots hanging drywall, that's not the harbinger of the post-work economy, that's carriage drivers being put out of work by automobiles. The concern for the foreseeable future isn't "what do we do when there are no more jobs because robots do everything", it's the same "how do we enable people from a declining industry to find jobs elsewhere" problem that we've had for a long time now.

Really from Jupiter, but not an alien.
Redmess Redmess from Netherlands Since: Feb, 2014
Redmess
#20448: Nov 25th 2020 at 12:23:44 PM

It's not just about drywall, but construction jobs in general, like bricklaying, welding, etc. That is a pretty sizeable segment of the jobs market.

Hope shines brightest in the darkest times
Kayeka (4 Score & 7 Years Ago)
#20449: Nov 25th 2020 at 12:29:34 PM

One of the few industries where you could make a living without a college degree.

NativeJovian Jupiterian Local from Orlando, FL Since: Mar, 2014 Relationship Status: Maxing my social links
Jupiterian Local
#20450: Nov 25th 2020 at 12:55:09 PM

[up][up]I know, but that's besides the point. I wasn't saying "it's just drywall, that's no big deal, if it was more construction jobs being automated then that would be worth worrying about". Even if the construction industry ends up as heavily automated as, say, manufacturing (that's a long ways off yet, to put it mildly), that wouldn't be a sign of an emerging post-work economy.

I was arguing against the idea that "we're running out of necessary jobs", not the idea that the construction industry becoming more automated could result in the loss of jobs in the construction industry.

Really from Jupiter, but not an alien.

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