Monday, September 3, 2012

"The Markets" as Imaginary Ogre

Charles Wyplosz argues that the much-maligned "financial markets" are actually more comprehending of the need for patience in restoring budget equilibrium than French political leaders are. I think this is correct, but it's worth asking why French leaders, including Hollande as well as Sarkozy, have been so eager to portray the markets as implacable monsters that cannot be reasoned with. If one envisions the need for implementing unpopular policies, it's of course easier to say "we have no choice, there is no alternative." So if wage restraints, benefit cuts, and general welfare state retrenchment are part of a government's overall plan, then it's always useful to have a bogeyman. What the markets want more than dramatic and draconian promises is a comprehensible and credible path, but for rhetorical purposes it's more useful to confront an Evil Empire than a battery of accountants.