L’affaire demande

January 17, 2014

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“L’offre crée même la demande”.

With those five words François Hollande set off his second scandal in as many weeks. A French president having an affair is one thing, but for a European Socialist leader to state that “supply creates demand” is another entirely, particularly in the econoblogosphere.

In the same speech, Hollande said he will push for tax and spending cuts. The WSJ notes that, “market watchers appreciated the efforts, but bemoaned the lack of details”; his plan does reportedly include at least €30 billion in tax breaks. This is the man who ran on a platform of equality and controversially pushed through a 75% tax on salaries above €1 million, which caused Gérard Depardieu to give up his French passport and move to Russia. Hollande is also one of the least popular French presidents ever.

The New York Times writes that Hollande made “proposals to take France in a centrist direction”. However, Dean Baker takes issue with that characterization, accusing the NYT of “acting as a mouthpiece for the agenda of the right-wing in Europe”. Baker goes on to say, “the consensus view within the economics profession is that Hollande’s program will slow growth and raise unemployment”.

Francesco Saraceno points out that the French Statistics Office actually tracks whether French companies are having issues with supply, demand, or both. He writes, “The message seems to be clear: since the beginning of the crisis the trouble for French firms came from insufficient demand. Keynes: right; Say (and François Hollande, and the Commission, and Angela Merkel): wrong”. Here’s the chart:

Paul Krugman, meanwhile, wonders why the French seem so panicked when, in his words, “the numbers, while not good, just aren’t that dramatic”. Krugman has several charts showing France is in the middle of the European pack when it comes to growth and competitiveness. He adds that to the extent there is a major economic problem in France, it’s being caused by austerity, and thus probably won’t be fixed by more.

Kevin O’Rourke thinks that Hollande’s statement is evidence that the European left has been decimated. Ambrose Evans-Pritchard says Europe’s left is “so compromised by ideological defence of monetary union – a Right-wing project, or ‘bankers’ ramp’ as the Old Left used to say – that it cannot muster any articulate policy”. O’Rourke’s bigger worry is that Europeans let down by both the political left and the right will turn to the extreme. So far the evidence is on O’Rourke’s side. — Shane Ferro

On to today’s links:

No more monoliths: The average value of a tech company is decreasing – Tomasz Tunguz
Increasing income inequality, animated GIF chart edition – Center on Budget and Policy Priorities
Energy is decoupling from economic growth – Izabella Kaminska

Goldman moves to Utah: “They call us ‘high value,’ but what they really mean is ‘low cost'” – Lauren Tara LaCapra

Wealthy CEO Is deeply concerned about budget deficits – Josh Barro

Must Read
Our historically unprecedented, unsustainable corporate profits bubble – Chris Brightman

“You make your own luck? Success is never accidental? Bull!!” – Howard Marks

Right On
Work is better than not-quite-work – Sam Altman

Financial Arcana
Banks are being cagey about their mortgage legal reserves. Too cagey – Peter Eavis

FINRA keeps data on shady brokers to itself – Jonathan Weil

The depressing reason women are gaining labor market share – Shane Ferro

After just 15 months at Yahoo, the departing COO may get a $109 million payout – Brandon Bailey

Crime and/or Punishment
“Apple must refund at least $32.5 million to parents on the brink of disowning their children” – Lily Hay Newman

Burn Unit
“People upset with David Brooks include” – Mark Thoma
“In which we learn that that Ross Douthat has never understood Plato’s Euthyphro” – Brad DeLong

Faith/Humanity Etc.
When it’s bitterly cold, New Yorkers tip more for delivery – New Yorker

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