Tuesday, March 17, 2009

Sciences Po Occupied

Sciences Po has been occupied by 200 students from universities and schools in the Paris region:

They assert that Sciences Po is a "symbole du système élitiste et hiérarchique dans l'enseignement supérieur français ... On veut nous enfermer dans des facultés qui tombent en ruine, alors nous nous enfermons dans l'école la plus riche."

It will be interesting to watch this one play out.

France and NATO

As seen by Judah Grunstein. Money quote:

France's return to the heart of NATO will certainly not spell the end of France's independence and autonomy, nor will it prove the alliance's undoing. But both will be changed, in ways that no one -- least of all Sarkozy -- can foresee. Rich in symbolism, profound in consequences, unpredictable in effect: The move is typical Sarkozy, for whom it is the deed, and not the outcome, that matters.

Cf. the last line of my post "Huh?".

France vaporized!

The loss of wealth incurred by American households in the crisis has been estimated at $11.2 trillion. Total French wealth is 12.15 trillion euros. According to this blog, what this means in terms of purchasing power parity is that the equivalent of one France has vanished as a result of the crisis--economically speaking, of course.

Worldwide, I might add, the loss of asset value has been estimated at $50 trillion. There goes Europe.


Merkel and Sarkozy today issued a joint communiqué calling for the EU to enforce the stability and growth pact. This is a) a direct rebuff to the Obama administration, which wants Europeans to spend more on economic stimulus and borrow accordingly and b) a direct denial of reality, since France is already in violation of the SGP and Sarko, on the very same day that he has called for enforcement, also said, "I wasn't elected to raise taxes." But he shows no sign of reducing spending any time soon--thank heaven, since we're in the midst of a crisis--so these two statements add up to a farewell to what the Bushies used to call "the reality-based community." Welcome to la-la land, M. Sarkozy. There you will keep company with some of your past heroes, including George W. Bush. But you have just alienated yourself from the United States you were courting just a few days ago with your return to NATO.

It's time for the real Nicolas Sarkozy to step foward. Do you have any idea what you're doing, Monsieur le Président? Or are you content simply to do, perpetually, and devil take the hindmost?

Wasmer: Use the Crisis Wisely

Etienne Wasmer recommends that G20 leaders use the crisis wisely to tax those "who have immensely benefited from three decades of deregulation and globalization" and ensure "that there is sizeable amount of ex-post redistribution through highly progressive tax rates on labour and capital."

My propositions may have sounded absurd just a few weeks ago given the credo on optimal taxation of factors. But the inability of European leaders to undertake coordinated action on the one hand, and the sudden collapse of the perceived of superiority of laissez-faire models on the other hand, give a unique window of opportunity to build a new post-crisis social consensus.

Rumblings on the Tax Shield

The bouclier fiscal, or tax shield, was always the most dubious part of Sarkozy's reform package, and lately there have been rumblings on the right about scrapping the shield, or parts of it, as a gesture of fairness in a time of crisis. René Couanau, a deputy and mayor of Saint-Malo, will file an amendment to that end, and he has been joined by others on the right, most notably Pierre Méhaignerie and Gérard Larcher, but the legislation is not likely to get very far.

Europe Needs More Economists

Charles Wyplosz thinks Europe needs more economists, especially of the "saltwater (pro-fsical policy) macro" variety:

Why, then, the growing divide between the US and Europe on how to respond to the recession? The size of public debts is one answer. Another answer is that the hallways of power in Washington (both in the Fed and the Treasury) are peopled with first-rate economists who happen to be of the saltwater variety who believe that fiscal policy works and have developed a clear view of what they want to see done. Several of them are also economic historians who have studied the Great Depression in great detail and concluded that, maybe, policy actions did not do as much good as is sometimes asserted, but that inaction under the Hoover administration transformed the financial crash into a full-blown recession.

Now look at the hallways of power in continental Europe, and you will not find many economists, even fewer first-rate economists, and certainly no one who can claim any in-depth knowledge of the Great Depression. Confused policymakers cannot develop a macroeconomic strategy on their own. On the other hand, microeconomic policies are more reassuring, because they do not seem to involve general equilibrium reasoning. Policymakers like partial equilibrium reasoning – because it is easier but mainly because they can believe that they understand what they do. Of course, we know that partial equilibrium is dead wrong and that you never get what you expect.

All this is true enough, but it's also true that one of our saltwater macroeconomists, Larry Summers, was deeply involved in removing and limiting the regulations on banking and financial markets. The remedy may thus lie in the malady, but I wouldn't say in this case that it's a blessing in disguise (I allude to Jean Starobinski's Le remède dans le mal, my English translation of which was published under the title Blessings in Disguise).