By Ben Cohen: The Economist Magazine is widely read in the business community for a good reason – it largely validates the world view of the rich and seeks to further the ideology of deregulated markets. In many ways, it’s a great magazine with succinct writing and comprehensive analysis and I read it regularly. But it is often gloriously wrong.
The magazine got their predictions about the state of the world in 2008 so badly wrong that it issued an apology in a article titled ‘About 2008: sorry‘. The Economist failed to predict in any shape or form the gigantic banking collapse that almost took the global economy down – a rather shocking lapse of judgment given its supposed expertize.
Most of the analysis in The Economist is written with the presumption that monetarism is the only proven economic ideology – the key problem that has lead to some very wrongheaded analysis. Every topic is tackled with the perspective that market discipline solves all problems and government that should do everything in its power to aid business.
Take the current election in France, where conservative Nicolas Sarkozy and socialist Francois Hollande are locked in a close battle for the Presidency. Sarkozy, like every other leader in Europe, has attempted to solve his country’s economic problems with austerity measures. He has cut state expenditures, cut taxes for the wealthy, and is promising more austerity in order to improve France’s recently downgraded credit rating if he gets re-elected. Hollande is promising to do the opposite – he aims to increase spending, renegotiate the EU fiscal pact, and close the budget deficit by increasing taxes on the rich, arguing that Sarkozy’s policies have made the country worse off.
In a deeply irresponsible article titled The rather dangerous Monsieur Hollande, The Economist argued the following:
Mr Hollande’s programme seems a very poor answer to all this [France’s economic problems]—especially given that France’s neighbours have been undergoing genuine reforms. He talks a lot about social justice, but barely at all about the need to create wealth. Although he pledges to cut the budget deficit, he plans to do so by raising taxes, not cutting spending. Mr Hollande has promised to hire 60,000 new teachers. By his own calculations, his proposals would splurge an extra €20 billion over five years. The state would grow even bigger.
The magazine offers absolutely no evidence as to why Hollande’s program is a poor answer to France’s economic problem, simply an assumption that austerity and markets are good, and government spending is bad. They don’t provide any figures proving France’s current policies are working, or that its neighbor’s ‘genuine reforms’ are proving successful either. Why? Because they have been a complete failure – a fact the magazine does not want to acknowledge.
The magazine concludes that because Hollande has not built his election campaign around helping big business, he is inherently bad for the country:
Mr Hollande evinces a deep anti-business attitude. He will also be hamstrung by his own unreformed Socialist Party and steered by an electorate that has not yet heard the case for reform, least of all from him. Nothing in the past few months, or in his long career as a party fixer, suggests that Mr Hollande is brave enough to rip up his manifesto and change France (see article)….one thing seems certain: a French president so hostile to change would undermine Europe’s willingness to pursue the painful reforms it must eventually embrace for the euro to survive. That makes him a rather dangerous man.
I’ve written extensively about this topic before – the blind faith in free markets and government austerity that seems to need no evidence for people to believe in – and it is getting tiring arguing the same point over and over again. But it must be done.
The Economist is an influential magazine, and its editorials help frame debate on an international level. Attempting to discredit Francois Hollande by calling him ‘dangerous’ without providing any evidence is beneath The Economist, despite its political and economic leaning.
The truth is that the policies advocated by The Economist and being implemented in Europe (largely at the behest of the conservative German government) are regressing economic growth throughout the continent. Hollande is offering an alternative to the status quo – an economic policy based on growth, and greater equality without cuts to vital services or industry.
Should Hollande win (and it looks likely) he will face a mountain of opposition to his economic plans, namely Germany’s Angela Merkel who has led the way in enacting austerity measures throughout Europe. In the EuroZone, the economies are closely linked together with monetary policy coming from the European Central Bank (ECB). While governments have latitude when it comes to fiscal policy, they do not control the money supply, and are therefore handicapped when it comes to providing stimulus money without high borrowing costs. Hollande will attempt to build coalitions abroad in order to rewrite the EU fiscal pact so that France (and other countries) can borrow money from the ECB at low interest and factor in a plan for growth. Germany is unlikely to give in without a fight, and Hollande may not get a chance to prove his economic model right.
If austerity continues, France’s economy, like others in Europe, will continue to decline and we’ll inevitably see The Economist and other right wing publications blame socialism for its failure.
It’s pretty easy when you don’t have to prove anything with facts.
Ben Cohen is the editor and founder of The Daily Banter. He lives in Washington DC where he does podcasts, teaches Martial Arts, and tries to be a good father. He would be extremely disturbed if you took him too seriously.