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| Picture source: The Guardian |
Amartya Sen, Nobel Memorial Prize
Laureate and Professor of Economics and Philosophy at Harvard University has
described the binding together of reform and austerity as a solution to the
Eurozone crisis as not only intellectually confused but also a policy disaster.
This was disclosed when he delivered the academic opening year lecture
of Graduate Institute of International and Development Studies entitled “What’s
the use of Economics?” in Geneva October 3, 2012.
Prof. Sen stated that the
current strategy being imposed on European countries in financial difficulties
is not going to resolve the crisis. “The Euro crisis is not going to be
resolved by merely bailing out countries in financial difficulties”, he said
adding that “it is difficult to see how austerity can be a soundly reason in economic
solution to the European malaise today”. He expressed doubts whether austerity
will steer economies plunged in excessive public debts out of their immediate
problems. Prof.
Sen advised austerity is not the effective way of reducing public deficit. “It
may not be plausible way of reducing public deficit at all”, he stated adding
that "for the fact that it [austerity] hasn't led to that [reducing public
deficit] should not come as a surprise."
Making an exposition on
the financial crisis that has bedeviled European countries especially Spain,
Greece and Portugal, he argued that the implementation of austerity along with
reform has undermined the impacts of real reform. “One of the worst aspects of
the policy of austerity being comprehensibly imposed along with reform has been
undermining the feasibility of real reform”, Prof. Sen asserted while
explaining that “this has confounded two distinct agendas: reforms of bad
administrative arrangements such as people evading taxes, of government serving
using favouratism and for that matter preserving unviable conventions about
retiring age; and austerity in a form of ruthless cuts on public services and
social securities”. He advised there should be a clear distinction between
reforms of bad administrative arrangements and cuts in public services though
the requirements for a financial discipline have tendered to amalgamate the
two.
Professor Amartya Sen warned leaders
of European countries of the significant impact of austerity to outside
borders. He said the impacts of austerity are not felt only within the borders
of one country but in other countries through international trade and exchange.
He stated that “austerity is an odd way of trying to cut down deficit”
indicating again that “one country’s austerity is a dampener for the economic
outcome expenses of other countries as well”. He advised that a good trading system could
function alongside providing the necessary public services.
Meanwhile, The Guardian
[www.guardian.co.uk] reports on Thursday October 4 that Institute of
International Finance (IIF), an
influential group of international banks and insurers, has attacked political
leaders in Europe over their handling of the Greek
crisis, arguing that the singleminded pursuit of austerity has made the
situation worse. The Chairman of IIF, Charles Dallara in highlighting the
associated challenges of austerity is quoted as saying "The
world economy appears to be stuck at the crossroads, being pushed in one direction
by easier monetary policy, and pulled in another by fiscal austerity". "The
international financial community has a collective interest in reducing the
uncertainty that currently surrounds the global economic outlook. If we want to
lay the basis for a durable global economic expansion, then we need to see more
concerted action by the world's policymakers", said Mr. Dallara.
As part of efforts to curtailing the persistent crisis,
Eurozone finance ministers will meet in Luxembourg on Monday October 8 for the
inaugural meeting of the Board of Governors of the European Stability Mechanism
(ESM), bound to replace the European Financial Stability Facility as the
Eurozone’s permanent bail-out fund. German Chancellor Angela Merkel will also
visit Greece for the first time since the Eurozone debt crisis erupted this
week widely seen as a show of support for Athens.
Story
by: Stephen Yeboah, in Geneva, Switzerland [profstephenyeboah@gmail.com]
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