Kenneth Rogoff is back with more unscholarly stuff.
In a new article for Project Syndicate Europe’s Lost Keynesians, Rogoff subtly tries to belittle Keynesians and Keynes himself.
According to him,
The eurozone’s difficulties, I have long argued, stem from European financial and monetary integration having gotten too far ahead of actual political, fiscal, and banking union. This is not a problem with which Keynes was familiar, much less one that he sought to address.
Now, Keynes himself was aware of problems that arise in an open economy, the above quote tries to mislead the readers into thinking that neither Keynes nor his followers were aware of the problem.
It was in fact Keynesians who warned about the troubles the Euro Area would face. Last year, I dug out an article by Nicholas Kaldor from 1971 which shows how highly prescient he was. The article The Dynamic Effects Of The Common Market first published in the New Statesman, 12 March 1971 and also reprinted (as Chapter 12, pp 187-220) in Further Essays On Applied Economics - volume 6 of the Collected Economic Essays series of Nicholas Kaldor is written as if it was written yesterday!
Here is from the article:
… Some day the nations of Europe may be ready to merge their national identities and create a new European Union – the United States of Europe. If and when they do, a European Government will take over all the functions which the Federal government now provides in the U.S., or in Canada or Australia. This will involve the creation of a “full economic and monetary union”. But it is a dangerous error to believe that monetary and economic union can precede a political union or that it will act (in the words of the Werner report) “as a leaven for the evolvement of a political union which in the long run it will in any case be unable to do without”. For if the creation of a monetary union and Community control over national budgets generates pressures which lead to a breakdown of the whole system it will prevent the development of a political union, not promote it.
[italics in original]
To read more excerpts from the article please read the following two posts from this blog:
In fact Nicholas Kaldor had already figured that the kind of fiscal union Europeans were thinking was a kind of a pseudo fiscal union – as can be seen by reading the excerpts (see the second post above).
Also Wynne Godley – a close friend of Nicky Kaldor – also reminded the dangers of the Maastricht Treaty in his 1992 LRB article Maastricht And All That.
Kenneth Rogoff is being ignorant and unintellectual. First he writes as if Keynesians had no clue about the problem and secondly he is unaware of the fact that the kind of fiscal union in talks in Europe is a pseudo fiscal union which Keynesians such as Nicholas Kaldor have pointed out since 1971.
He ends the article by saying
… there still will be no simple Keynesian cure for the single currency’s debt and growth woes.
which is ignorant. The solution if it comes about is Keynesian and Keynesians had warned it will be difficult to resolve a future crisis because of political difficulties which arise.
Rogoff’s attitude is that of a person who ignores the doctor’s warning continuously and then ridicules the doctor when medical problems finally appear. Just like the cure will come from the doctor, so will the resolution via Keynesianism.