Counterparties: The global economy’s Scarlet A
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Less than a week ago, we suggested that austerity, Europe’s great experiment in cutting its way out of an economic slump, was coming to an end. Now every bit of economic data, including today’s news that Spain, like the UK, is officially back in recession, seems to come with a gigantic Scarlet A across it.
“The tide appears to be turning” on fiscal austerity, Reuters declares, as European Central Bank President Mario Draghi has called for a “growth compact” to complement the last two years of mass budget cutbacks. The ECB’s internal markets chief agrees and, in characteristically European fashion, is calling for a plan-to-make-a-plan for economic growth.
There’s a flood of anti-austerity op-eds. Larry Summers writes that Europe’s maladies were misdiagnosed: “High deficits are much more a symptom than a cause of their problems,” he argues – and calls for the world to make EU aid contingent on a plan for growth. Mohamed El-Erian slams austerity in Spain, and calls for a focus on both “the deficit containment (numerator) and growth (denominator).” Christina Romer, former top economic adviser to President Obama, argues for a “backloaded consolidation” version of budget cuts in Europe; essentially, spending cuts and tax increases that are slowly implemented as economic growth recovers.
Of course, all of this anti-austerity talk comes much too late. But there’s some reason for optimism: The European Investment Bank may get more funds for real, growth-driving investments. Marc Chandler lays out the early speculation, noting that EIB funds could rise to $264 billion, which could go to infrastructure, technology and renewable energy.
European spending of any kind is politically fraught, and the EIB’s is definitely not a quick fix. Compare, as Reuters did, the EIB’s reported size with the 1 trillion euros created by the ECB to prop up the economy. These are baby steps during a crisis, in other words.
And on to today’s links (scroll down for readers’ suggestions for Occupy Wall Street’s future):
#OWS’s Second Act: Your reactions
Last Thursday, ahead of mass protests planned in hundreds cities on May 1, we asked Counterparties readers to tell us the one issue the Occupy Wall Street movement should hang its hat on. We’ve included the best responses below; they’ve been edited for length. We’ll be sending along books from Felix’s desk to the winners!
It seems pretty clear to me that Occupy should, at least for the moment, sharply focus on student debt and higher education financing. The iron is hot, with the issue in front of Congress right now, so there is an opportunity to push through a substantive political victory that Occupy never quite had during the first go-round…That victory would also come on an issue that is acutely important to the constituency the movement is clearly going after – if you think back to a year ago, the “stereotypical” protestor was a recent graduate having trouble finding work, and weighed down by immense educational debts… By starting off the season with an issue of much more direct relevance to its strongest constituency, OWS can 1) make a difference, 2) demonstrate its commitment to effecting actual policy change, and 3) in the process, draw the people and positive media coverage that will give it serious political momentum moving forward.I don’t even like the Occupy, but I think it’s plainly obvious what they need to do.
Roger writes that it’s still too early for Occupy to rally around a single cause:
OWS and Tea Party together have public support approaching 75%, though neither alone has the power to produce anything meaningful. The forces of the status quo will continue to prevail unless and until both movements unite on a common theme. The movements are so ideologically different that their only area of common ground lies in opposition to the status quo. “Opposition” must, at this time, be the one and only objective of all insurgents. We’ll deal with what replaces the status quo AFTER the status quo has been displaced from power, not before then.
The one single issue that the OWS movement should concentrate on is very simple, but at the same time controversial, and that is the idea of debt relief. By removing at least a large percentage of the outstanding personal debt pile, OWS would be able to have an issue that is controversial for most media outlets and a significant amount of the population, but at the same time a serious proposal that resonates with a large minority of the population and actually works to decrease the last decades’ increases in inequality.