Saturday, 31 January 2009

Headline I never thought I would see ...

Jeff Sachs is Right! by William Easterly.

Actually the full headline is "Jeff Sachs is Right! (at least about one thing)", but that's one more thing than I thought Bill Easterly would say Sachs is right about. The headline links to an article by Easterly called Leaders Go Left, But Economists Get Back To Basics on Easterly writes:
The conventional view at Davos is that a previous consensus in favor of free enterprise has taken a huge beating from the Great Crash of 2008-2009. What is much less known is that many economists are not willing to play along.
Damn right we're not! Easterly continues:
Instead, the crisis seems to have scared many economists of all kinds--including some previously heterodox--to reassert the orthodox recommendations of Econ 101.

I knew something very different was going on among economists when the world's leading trade skeptic, Dani Rodrik of Harvard, the intellectual protector of protectionists, said on his blog on Dec. 31 that protectionism would be catastrophic right now.

A very diverse group of leading economists of all ideological stripes met at a preparatory conference for Davos in Dubai in November 2008. They said in a formal statement that one of their chief tasks is "advocating against the deregulation backlash." An update right before Davos by this same group stressed the importance of "openness to trade" and "competitive markets."

Then there's another school of thought that asks WWJD? What would Jeff do? Jeffrey Sachs has spent more than two decades calling for the U.S. government to spend huge sums on anything that moves, from Bolivia to Poland to Russia to global health to Africa to global warming. But on Wednesday, Jan. 28, as Davos opened, Sachs suddenly announced that he is now a U.S. deficit hawk.

"Without a sound medium-term fiscal framework, the stimulus package can easily do more harm than good, since the prospect of trillion-dollar-plus deficits as far as the eye can see will weigh heavily on the confidence of consumers and businesses, and thereby undermine even the short-term benefits of the stimulus package."

He sounds like one of those IMF fiscal austerity priests issuing a stern reprimand to some benighted land--like those that prior to Wednesday he derided at every opportunity. But on today's deficit dangers at home, I had to agree with Jeff Sachs for the first time in over a decade.
After that statement, I think I need a wee lie down.

1 comment:

Anonymous said...

Wow - cool that economist are starting to "get anrgy" and make some noise. We as a profession have been a bit quiet over the last decade letting others lead the debates.

Good to read you coverage of the US stimuls package and protectionist debate. Hopefully the world (EU and US) will have learned from the great depression and not go down the path of protectionism.