Our call
Contrary to the argument set out by Wolfgang Schäuble (Opinion, June 3), we believe the social fabric of Europe cannot endure a return to “fiscal as usual” — the failed austerity policies of the past that transformed the 2008 financial shock into a prolonged recession. We need a new approach to fiscal policy, starting with a recognition that too little deficit spending can cause irreversible social, economic and environmental damage.
When the private sector is struggling, “fiscal discipline” can prompt a permanent fall in aggregate demand and output, which unnecessarily stifles employment and household incomes, while leaving future generations worse off.
Europe’s most recent experience of fiscal consolidation failed on its own terms, resulting in higher ratios of debt to gross domestic product due to permanent economic scarring and associated reductions in tax revenues.
Fiscal discipline, not expansion, widens the gulf between rich and poor (particularly in a downturn). Regressive taxes and deep spending cuts in Europe dismantled measures that support equitable growth, resulting in higher levels of poverty and inequality. Cuts to public investment also undermine the “just transition” and the fight against environmental breakdown and can lead to a wide array of environment-related financial losses.
A decade of unconventional monetary stimulus and missed inflation targets clearly failed to raise inflation expectations, indicating the author’s own concerns about inflation are misplaced. Olivier Blanchard, former IMF chief economist, who is unconcerned about possible inflationary effects, went on the record to correct Schäuble. Philip Lane, chief economist at the ECB, has suggested there is no alarm surrounding transitory inflation stemming from temporary supply side bottlenecks (instead of demand overheating).
Moreover, too little government spending can increase company bankruptcies and lead to less investment in research and development, hurting the supply side of our economies — potentially exacerbating inflationary pressures.
The EU has gone through a decade of demand stagnation, performing well below its productive potential. Inflationary forces of the 1970s are no longer intact, not least because of declining labour bargaining power, changing demographics, high inequality and private debt overhang. Without concerted fiscal expansion to scale-up investment and protect the vulnerable, aggregate demand will remain low and standards of living will stagnate.
Instead of fetishising fiscal discipline, we should prioritise more important social, economic and environmental outcomes — like creating well-paid green jobs, lifting millions out of poverty and implementing green infrastructure projects.
If there is one lesson from John Maynard Keynes for Schäuble it is “look after employment, and the budget will look after itself”.
Signatories
Frank van Lerven
New Economics Foundation, London, UK
Adam Tooze
European Institute, Columbia University, New York, NY, US
Stephanie Kelton
Professor of Economics and Public Policy, Stony Brook University, New York, NY, US
Simon Wren-Lewis
Emeritus Professor of Economics, University of Oxford, UK
Daniela Gabor
University of the West of England, UK
Philippa Sigl-Glöckner
Dezernat Zukunft
Rob Johnson
President of the Institute for New Economic Thinking
Benjamin Braun
Max Planck Institute for the Study of Societies
Shaheen Vallée
Director of the Geoeconomics Programme, DGAP
Philipp Heimberger
Vienna Institute for International Economic Studies
Dirk Bezemer
Professor, Faculty of Economics, University of Groningen
L Randall Wray
Senior Scholar, Levy Economics Institute
William H. Janeway
University of Cambridge
Rohan Grey
Willamette University College of Law
Jonathan Perraton
Department of Economics, University of Sheffield, UK
Dominik Leusder
London School of Economics
Christos Pierros
Senior Researcher, Labour Institute INE-GSEE, Athens Greece
Hanna Szymborska
Senior Lecturer in Economics, Birmingham City University UK
Jan Toporowski
SOAS University of London, Progressive Economy Forum
Steve Keen
Distinguished Research Fellow, University College London
Antoine Godin
Université Sorbonne Paris Nord, France
Michael Jacobs
Professor of Political Economy, University of Sheffield
Ronan Palmer
Director Clean Economy, E3G
Dirk Ehnts
Pufendorf-Gesellschaft Berlin e.V.
James Meadway
Director, Progressive Economy Forum
Sergio Cesaratto
Professor, Università di Siena, Italia
Rafael Wildauer
University of Greenwich
Daniele Tori
The Open University Business School
Andrew Watt
Macroeconomic Policy Institute, IMK
Neil Lancastle
Senior Lecturer, De Montfort University, Leicester, UK
Marco Veronese Passarella
Associate Professor, Link Campus University of Rome and Leeds University
Gracjan R. Bachurewicz
Edward Lipinsky Foundation, University of Warsaw
Andreas Maschke
University of Leeds
Ines Heck
University of Greenwich
José Pérez-Montiel
University of the Balearic Islands
Sue Konzelmann
Birkbeck, University of London, and Council Member, Progressive Economy Forum
Antoni Soy Casals
University of Barcelona
Plamen Ivanov
Lecturer in Banking and Economics, University of Winchester
Thibault Laurentjoye
Associate researcher, Robert de Sorbon Foundation, Paris
Ewa Karwowski
Senior Lecturer in Economics, University of Hertfordshire
Malcolm Sawyer
Emeritus Professor of Economics, University of Leeds
Biagio Bossone
International financial advisor, Rome, Italy
Benoît Lallemand
Finance Watch
Michael Vincent
Greentervention
Stanislas Jourdan
Positive Money Europe
Robert Calvert Jump
University of Greenwich
Nigel Dodd
London School of Economics and Political Science
Felix FitzRoy
University of St. Andrews
Avner Offer
University of Oxford
Andrew Sayer
Lancaster University
Jo Michell
UWE Bristol
Nina Eichacker
University of Rhode Island
Roberto Veneziani
Queen Mary University of London
Jens van ‘t Klooster
KU Leuven
Imko Meyenburg
Senior Lecturer in Economics and International Business, Anglia Ruskin University
Cem Oyvat
University of Greenwich
Thiemo Fetzer
University of Warwick & London School of Economics and Political Science
Eckhard Hein
Professor, Berlin School of Economics and Law
Nikos Paltalidis
Associate Professor, Durham University Business School, Durham University
Wolfram Elsner
Professor of Economics, University of Bremen, Germany
Richard Murphy
Professor of Accounting, Sheffield University Management School
Engelbert Stockhammer
Professor, King’s College London
Roy J Rotheim
Skidmore College, New York
Ettore Gallo
The New School for Social Research
Paul Delaney
Positive Money
Bob Jessop
Emeritus Professor of Sociology, Lancaster University
Alexander Guschanski
University of Greenwich
Trond Andresen
Associate professor, Department of Engineering Cybernetics, Norwegian University of Science and Technology
Rens van Tilburg
Sustainable Finance Lab
Joerg Bibow
Professor of Economics, Skidmore College
Ladislau Dowbor
Catholic University of São Paulo
Marco Missaglia
University of Pavia
Matthias Kroll
World Future Council
Mark Blyth
Brown University
Emanuele Citera
New School for Social Research
Laurence Scialom
Professor of Economics, University Paris Nanterre
Wojtek Kalinowski
Veblen Institute for Economic Reforms
Karl Naumann-Woleske
Ecole Polytechnique Paris
M Kerem Coban
Independent researcher
Rosaria Rita Canale
Università di Napoli “Parthenope”
Peter Blom
Co-chair of the Sustainable Finance Lab and former CEO Triodos Bank
Luis Reyes
Director of MSc Sustainable Finance at Kedge Business School
Abderrahim Taamouti
Professor at Durham Business School
Sara Stevano
SOAS University of London
Irene van Staveren
Erasmus University Rotterdam
Markus Marterbauer
Chief Economist, Chamber of Labour, Vienna
François Morin
University of Toulouse-Capitole
Sheila Dow
Emeritus Professor of Economics, University of Stirling
Carlos J Rodriguez-Fuentes
Reader in Economics, University of La Laguna
Jim Jin
University of St Andrews
Gabriele Pastrello
University of Trieste
Thomas Lagoarde-Segot
Professor of economics and finance, KEDGE BS & SDSN France
Dimitri Papadimitriou
President, Levy Economics Institute of Bard College
Umed Temursho
IOpedia, Spain
Gilbert Achcar
Professor, SOAS, University of London
Jean-François Ponsot
Professor of Economics, Pacte Univ. Grenoble Alpes, France
Mevlut Tatliyer
Istanbul Medipol University, Turkey
Ben Fine
School of Oriental and African Studies (SOAS), University of London
Pia Malaney
Director, Center for Innovation, Growth and Society
Ewald Engelen
Professor of Financial Geography, University of Amsterdam
Sara Murawski
Sustainable Finance Lab and Alternative Trade coalition Netherlands
Wendy Brown
Class of 1936 Chair, Political Science, UC Berkeley
Jayati Ghosh
Professor of Economics, University of Massachusetts at Amherst, USA
Yannis Dafermos
SOAS University of London
Nicolas Dufrêne
Director of the Institut Rousseau, France
Asker Voldsgaard
University College London
Muhammad Ali Nasir
University of Huddersfield
Eric Berr
University of Bordeaux
Fadhel Kaboub
Associate professor of economics, Denison University
Eve Chiapello
EHESS, France
Hielke Van Doorslaer
Ghent University
Mark Sanders
Professor of International Economics, Maastricht University
Elisa Van Waeyenberge
co-Head of Department, Economics, SOAS University of London
Alain Grandjean
Fondation Nicolas Hulot
Ollivier Bodin
Greentervention
Hans Schenk
Emeritus professor of economics and business, Utrecht University
Bruce Littleboy
retired, formerly University of Queensland
Luca Visentini
General Secretary, European Trade Union Confederation
Matthieu Méaulle
Associate member, PHARE/CNRS, University Paris 1 Panthéon-Sorbonne
Luise Wimmler
University of Graz
Arjo Klamer
Emeritus professor of cultural economics, Erasmus University
Marc Lavoie
Emeritus Professor, University of Sorbonne Paris Nord
Jeremy Wates
Secretary General, European Environmental Bureau
Katy Wiese
Policy Officer, European Environmental Bureau
Carl Mühlbach
Chairman, FiscalFuture
Max Krahé, PhD
Dezernat Zukunft and Institute for Socio-Economics, University Duisburg-Essen
Andres Lazzarini
Lecturer, Goldsmiths University of London
Thorsten Beck
Professor, The Business School (formerly Cass), University of London, and European University Institute
Constantin Gurdgiev
Associate Professor of Finance, University of Northern Colorado, USA and Trinity Business School, Trinity College Dublin, Ireland
Andy Denis
City, University of London
Maria Nikolaidi
Associate Professor in Economics, University of Greenwich
Thorvald Grung Moe
Research Associate, Levy Economics Institute
Nikolaos Karagiannis
Professor of Economics, Winston-Salem State University, North Carolina, USA
Alberto Botta
Senior lecturer in Economics, University of Greenwich
Karl Petrick
Associate Professor of Economics, Western New England University
Antonio Fatas
Insead
George Evans
Professor of Economics, University of Oregon, and part-time Professor, University of St Andrews
David Cobham
Professor of Economics, Heriot-Watt University
Dimitri Zenghelis
Senior Visiting Fellow, London School of Economics
Andrew Jackson
University of Surrey
Jumana Saleheen
Chief Economist, CRU Group
Greg Hannsgen
Blogger and Economist, Greg Hannsgen’s Economics Blog