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7/25/17

European Economy: A “Macroneconomic” Revolution? - byAnatole Kaletsky

Next month will mark the tenth anniversary of the global financial crisis, which began on August 9, 2007, when Banque National de Paris announced that the value of several of its funds, containing what were supposedly the safest possible US mortgage bonds, had evaporated. From that fateful day, the advanced capitalist world has experienced its longest period of economic stagnation since the decade that began with the 1929 Wall Street crash and ended with the outbreak of World War II ten years later.

Suppose, that the “progressive” economics of full employment and redistribution could be combined with the “conservative” economics of free trade and labor-market liberalization. Both macroeconomic and structural policies would then be easier to justify politically – and much more likely to succeed.

Could this be about to happen in Europe? France’s new president, Emmanuel Macron, based his election campaign on a synthesis of “right-wing” labor reforms and a “left-wing” easing of fiscal and monetary conditions – and his ideas are gaining support in Germany and among European Union policymakers. If “Macroneconomics” – the attempt to combine conservative structural policies with progressive macroeconomics – succeeds in replacing the market fundamentalism that failed in 2007, the lost decade of economic stagnation could soon be over – at least for Europe.

Read more: A “Macroneconomic” Revolution?

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