Friday, September 23, 2005

Keeping your eye on the ball

Henry Farrell at Crooked Timber brings our attention to this Jeffrey Gedmin piece:
Germans know [that they face a fundamental choice over their economy]. But they still love their “social-market” economy and have not yet decided whether allowing more market forces can be in tune with their values. Until now, it has been too easy for Germans to defer painful choices. The country has been doing – simply put – too well. In Berlin, a city with 19 per cent unemployment, the cafes are packed with people ­drinking over-priced café lattes, the employed and unemployed alike happily indulging themselves. Will economic circumstances soon hurt enough to give people the swift kick they apparently need?
He's not keeping his eye on the ball. The point of growth is higher living standards. In so far as drinking cafe lattes is an indicator of those standards, Germany appears to be doing pretty well. In fact he says that: they are doing well by the standard of living, but not by *his* standards. And his standards are low unemployment and high growth. These obviously aren't bad goals, usually they are very good shorthand for living standards. In this case perhaps not. But it's very silly to keep focusing on these numbers (which are just shorthand) when they are sufficiently contradicted. Unlike Henry (Farrell) I don't think this is based on some other hidden (and malevelent or self-serving) motivation, it's just the typical IMF-style economics: focus on a few things which are usually good proxies and never ever be persuaded otherwise.

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