Thomas Fricke (Chief Economist, European Climate Foundation) has a piece on INET blog. Well, as one of the commentator on the piece said “German economists? What is that?” Actually such pieces reflect on the evolution of economic thought which depressingly is becoming just American over the years. No economist is considered worthy of his salt if he has not studied and worked in US. Post-US experience, the whole world is open to you and people easily become govt advisers/ heads in their home countries. Whereas those who study and spend times in home countries just end up scratching their heads.
Now an increasing number of economists believe that debt reduction strategies work better when the economy is doing well – a view taken by US economists like Paul Krugman and Joseph Stiglitz
The majority of German economists support the European Central Bank in buying government bonds against the open resistence of the Bundesbank and leading orthodox economists in the country. Rising interest rates are not seen as a good instrument to fight against speculative bubbles.
Whenever asked to comment on US American economists Wolfgang Schäuble promptly reacts with a sour tone. The feeling is reciprocal. The Federal Minister of Finance has not learned anything from the crisis, complains Paul Krugman – hence, the Nobel laureate seems to be representative of the majority of his guild from the other side of the Atlantic and the English Channel: The Americans versus the Germans; the Germans versus the British.
Since the beginning of the financial crisis the trenches are steadily being dug deeper, so it seems. There we find the Anglo-Americans who are always in favor of providing cheap money to bring the economy out of the crisis. Here we find the keepers of strict monetary and fiscal policies, defending the Minister of Finance, who pin their hopes on higher interest rates and rapid cuts in the budget: those are experts like the Bundesbank president Jens Weidmann, the Director of the Munich based Ifo Institute HansWerner Sinn and the head of the official German Council of Economic Experts Christoph Schmidt.
Why is this happening? It is a story which resonates across most economies:
The question remains why Germany’s economists are so much more Anglo-American than they are believed to be. Of course, reality often differs from the appearance of things. Only a few economists actually are known to a broader public, and they are the ones shaping the image. Another explanation is that America still sets the standards academically. Anyone with career ambitions is expected to publish their articles in US journals. This is the reason why professors frequently relocate, at least temporarily. Only a few years ago, in 2010, nearly 45% of the respondents stated in the survey that they had never worked abroad. Since then the rate has dropped by nearly ten percentage points. Meanwhile two-thirds of the scholars have left the home country of regulation for a longer period of time.
Whoever has spent time in the USA seems to have come to appreciate one particular advantage: a professor of economics will find it much easier to go into politics and then return into academic life in the States than in Germany due to its complicated public services law. More than half wish that this would also be possible here. Of course, the odds are that our Minister of Finance will not appreciate such an extent of American influences.
One just does not know or understand why the whole thing has become so Americanised over the years. One obvious reason is American dominance in world economics and politics. So it is obvious that economic research will also be dominant but it is way too excessive. All that matters is some success in US shores and one’s glory in home country is more or less a done deal.
This obviously takes one to think of India’s role as well. There was some Indian economic thought as well but it has been just trashed. There was some thinking on how to drive India’s development during India’s independence but it is not relevant anymore. All the ideas have been dumped as wrong economic policy without a detailed explanation of why things went this way. What is even more ironical is when we compare India’s initial development to the history of early developed countries, there is not much difference. Infact, most developed countries themselves followed socialist models post world war -II. The entire narrative of Indian economic thought has been distorted leading to just no original thinking. All we are doing is copy what the west says and preaches. It does not help that most of India’s economists gain dominance just as Germans do – study and spend as much time as possible in US. Unlike German finance ministry who might not like American thinking, India’s finance ministry goes on its knees to draw foreign talent.
If one spends time reading history of economic though and economic history, you realise nothing is sacrosanct. Certain schools dominate for some period only to fizz out after some years. But if countries have their own thought intact, things do not go as bad. Much of dominance is also related to economic status of the country. As Asian economies like China and India surge. it will be interesting to see whether we can rediscover and develop some of our own original thinking.