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January 3, 2023 - 8:15am
The managing director of the International Monetary Fund, Kristalina Georgieva, gave a sobering warning to welcome in the New Year. A third of the global economy will be in recession in 2023, she said, with the European Union to be hit particularly hard. The IMF expects half of the bloc to be in recession this year.
Yet even as Europe faces up to harsh economic realities, there’s no agreement about their underlying cause. Countries have been battered by various self-inflicted and self-exacerbated economic shocks, from Covid lockdowns to the current energy crisis, while economic orthodoxies have left them unable to take effective action to counter the risk of recession. But governments keep on interpreting monetary problems through the narrow lens of party politics.
The scapegoats for recession vary. In the Czech Republic, which is already in a “mild recession” according to the nation’s finance minister, blame is habitually pinned on the profligacy of the previous government. Current leaders insist that only their approach resisting “populist pressure” for more interventionism has saved the country from a worse fate.
Meanwhile in Hungary, where inflation soared to 22.5% in November, hard times are portrayed as the inevitable result of sanctions on Russia. Viktor Orbán claims 2023 will see the EU trying to avoid a recession “arising directly from the war and Europe’s participation in the war, which they call sanctions”.
Both Prague and Budapest downplay the role of policies which they introduced or supported. There is little mention from the strongly pro-Ukraine Czech government of the economic damage wrought by sanctions, however morally justified those sanctions may be. In Budapest, there’s no apparent reconsideration of a long-standing predilection for intervention in the market, from prized energy and fuel price controls to more recent price caps on foodstuffs introduced using emergency powers.
The powers that be seek out easy answers. In Slovakia, coalition chaos and rogue ministers are being blamed for hard times; in Germany, Putin’s aggression against Ukraine is presented as the root problem, rather than Berlin’s previous cosy relations with the Kremlin which left the EU’s largest economy catastrophically vulnerable. Clear-headed analysis of the interplay of economic problems isn’t possible, because authorities refuse to acknowledge and discuss factors for which they share culpability.
This is most clearly shown in the refusal of governments everywhere to admit the role of Covid lockdowns in the current economic downturn. Many of today’s problems — havoc in the energy market, inflation, loss of productivity — emerged before Russian tanks rolled into Ukraine in February 2022. But as almost all governing and opposition parties supported lockdowns, all are equally happy to brush their long-term effects under the carpet, preferring to highlight less personal explanations which have presented themselves since.
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SubscribeI just don’t get this.
Recessions are a normal part of a free market economy which is naturally cyclical. For every boom, there’s a bust (or should be).
It is childish to pretend otherwise.
It is in attempting to pretend that recessions are avoidable and pursuing reckless policies (near zero interest rates, QE) in the vain belief that they day of reckoning could be indefinitely postponed that we’ve made this one worse (plus a bit of help from Covid and Russia invading Ukraine – but these are minor factors in the long game).
They also serve a useful purpose in cleaning out unviable companies (reallocating resources to more productive areas) and exposing and cleaning out the fraud that buils up during booms (FTX …).
So the idea that “someone is to blame” seems absurd.
If anyone is to blame it is the public for believing in the free lunch of the last 20-30 years.
Yes, government and regulator policies can make things worse than they need to be. But they can’t stop the tides. Not forever.
I agree. Blaming the government or local council is like blaming the weather in a sporting fixture. Governments are easy targets, whether left or right or central.
Ultimately, the electorate is at fault – by not listening to policies before elections, by not voting, by developing wasteful ways of living, by complaining and protesting when anyone does try to take the initiative..
Every energy choice has its NIMBYs. Every development for profit is met by cries of ‘Big Business Strikes Again’. Every tax proposal is wrong by definition. Each positive action is met by a hundred negatives….. Nuclear power, wind farms, tidal power … all fail because the electorate will not change. People get the governments they deserve.
I agree that local politicians can stop the tide. But politicians weren’t even pushing against the tide. Covid was used as an excuse to print money and keep interest low for way longer than needed. Had interest gone up in 2019 and no lockdowns the crisis would be a lot smaller than what’s coming now. I agree QE is the problem and so was people believing that you could just pause the world for 2 years with no consequences.
Realistically, I think most regular people are very much at the mercy of those who are supposed to have more expertise with regards to economics. There are various explanations and theories being promulgated by different bodies, and most people have no real way, other than intuition, to know which are the most plausible or evidence based. And intuition is notoriously unreliable about this kind of thing.
Often the people who are most honest are just confused about who is right, others believe what fits with what they want, or whomever seems most convincing in the moment.
“If anyone is to blame it is the public for believing in the free lunch of the last 20-30 years.”
But that does make the governments which borrowed and printed to blame for the mess caused by it, surely?
I agree. Blaming the government or local council is like blaming the weather in a sporting fixture. Governments are easy targets, whether left or right or central.
Ultimately, the electorate is at fault – by not listening to policies before elections, by not voting, by developing wasteful ways of living, by complaining and protesting when anyone does try to take the initiative..
Every energy choice has its NIMBYs. Every development for profit is met by cries of ‘Big Business Strikes Again’. Every tax proposal is wrong by definition. Each positive action is met by a hundred negatives….. Nuclear power, wind farms, tidal power … all fail because the electorate will not change. People get the governments they deserve.
I agree that local politicians can stop the tide. But politicians weren’t even pushing against the tide. Covid was used as an excuse to print money and keep interest low for way longer than needed. Had interest gone up in 2019 and no lockdowns the crisis would be a lot smaller than what’s coming now. I agree QE is the problem and so was people believing that you could just pause the world for 2 years with no consequences.
Realistically, I think most regular people are very much at the mercy of those who are supposed to have more expertise with regards to economics. There are various explanations and theories being promulgated by different bodies, and most people have no real way, other than intuition, to know which are the most plausible or evidence based. And intuition is notoriously unreliable about this kind of thing.
Often the people who are most honest are just confused about who is right, others believe what fits with what they want, or whomever seems most convincing in the moment.
“If anyone is to blame it is the public for believing in the free lunch of the last 20-30 years.”
But that does make the governments which borrowed and printed to blame for the mess caused by it, surely?
I just don’t get this.
Recessions are a normal part of a free market economy which is naturally cyclical. For every boom, there’s a bust (or should be).
It is childish to pretend otherwise.
It is in attempting to pretend that recessions are avoidable and pursuing reckless policies (near zero interest rates, QE) in the vain belief that they day of reckoning could be indefinitely postponed that we’ve made this one worse (plus a bit of help from Covid and Russia invading Ukraine – but these are minor factors in the long game).
They also serve a useful purpose in cleaning out unviable companies (reallocating resources to more productive areas) and exposing and cleaning out the fraud that buils up during booms (FTX …).
So the idea that “someone is to blame” seems absurd.
If anyone is to blame it is the public for believing in the free lunch of the last 20-30 years.
Yes, government and regulator policies can make things worse than they need to be. But they can’t stop the tides. Not forever.
Well, it was ever thus. But, as far as I am concerned, we have reached the point where their denial of responsibility is so implausible as to be grimly comic. They are behaving like children who expect me to believe one ludicrous story after another.
Why shouldn’t they? They have told us those stories and watched us lap them up. Why wouldn’t they believe that will continue? And what makes us think it won’t?
Why shouldn’t they? They have told us those stories and watched us lap them up. Why wouldn’t they believe that will continue? And what makes us think it won’t?
Well, it was ever thus. But, as far as I am concerned, we have reached the point where their denial of responsibility is so implausible as to be grimly comic. They are behaving like children who expect me to believe one ludicrous story after another.
I wonder if there is some commonality around our political/ruling/elites around milking the system by giving freebies in the good times rather than doing the “saving for the bad times” approach?
Shades of Gordon Brown with the “end of boom and bust”.
In my head pretty much all of us have benefitted from crazy cheap stuff (to keep us happy and quiescent), imports, low interest rates, inflated salaries (but not for the low waged) and from this a reliance on cheap labour whether this is in China, Vietnam, Bangladesh or our own countries.
Well, past profligacy and a desire to hide long term problems are coming home to roost. We (well, us relatively rich “Westerners”) could probably have got through one systemic shock but not both Covid and Ukraine at the same time.
Personally we factored in a 10% reduction in disposable income from the summer of 2020 when it became clear that somewhere down the line all the chaos from Covid would need paying for. At the moment with an increase in Tax bills and uplift in cost of essentials I am not sure I wasn’t being optimistic at 10%!
I wonder if there is some commonality around our political/ruling/elites around milking the system by giving freebies in the good times rather than doing the “saving for the bad times” approach?
Shades of Gordon Brown with the “end of boom and bust”.
In my head pretty much all of us have benefitted from crazy cheap stuff (to keep us happy and quiescent), imports, low interest rates, inflated salaries (but not for the low waged) and from this a reliance on cheap labour whether this is in China, Vietnam, Bangladesh or our own countries.
Well, past profligacy and a desire to hide long term problems are coming home to roost. We (well, us relatively rich “Westerners”) could probably have got through one systemic shock but not both Covid and Ukraine at the same time.
Personally we factored in a 10% reduction in disposable income from the summer of 2020 when it became clear that somewhere down the line all the chaos from Covid would need paying for. At the moment with an increase in Tax bills and uplift in cost of essentials I am not sure I wasn’t being optimistic at 10%!
Any crisis is just another opportunity for politicians to trot out their families hobby-horses whether a left-wing nostrum or something else. No new thinking required.
Any crisis is just another opportunity for politicians to trot out their families hobby-horses whether a left-wing nostrum or something else. No new thinking required.
No mention of a decade of ridiculously low interest rates and Quantitative Easing, which have completely distorted European economies. The writer needs to widen his view of causing factors.
No mention of a decade of ridiculously low interest rates and Quantitative Easing, which have completely distorted European economies. The writer needs to widen his view of causing factors.
Tell me something new – everyone is blaming someone else (especially politicians)
> If those in power today can’t accept their share of the responsibility, voters will apportion the blame for them.
Yep, it’s called democracy!
“voters will apportion the blame for them.”
Water off a duck’s back for them.
“voters will apportion the blame for them.”
Water off a duck’s back for them.
Tell me something new – everyone is blaming someone else (especially politicians)
> If those in power today can’t accept their share of the responsibility, voters will apportion the blame for them.
Yep, it’s called democracy!
Finally someone speaks the truth about the causes of the current crisis.
Finally someone speaks the truth about the causes of the current crisis.
Odd how no one including the author of the article has mentioned the huge energy cost hike and its underlying cause – the gullibility of public and politicians alike regarding global warming, climate catastrophe and happy to give a free-ride to damaging policies thereto. No need to elaborate here as there is plenty of stuff online but it really all boils down to a general inability to grasp the fundamental nature of energy behind all human (and of course natural) processes – its not just another commodity.
But isn’t the IMF an unaccountable body of experts, and therefore to be widely derided by all true Brexiters?
Its zero to do with Brexit. When are people going to leave that behind and stop carrying that baggage around each day
The IMF knowingly had an unelected convicted criminal as its head for many years – that tells you all you need to know about that “Bankrupt” and discredited organisation
Its zero to do with Brexit. When are people going to leave that behind and stop carrying that baggage around each day
The IMF knowingly had an unelected convicted criminal as its head for many years – that tells you all you need to know about that “Bankrupt” and discredited organisation
But isn’t the IMF an unaccountable body of experts, and therefore to be widely derided by all true Brexiters?
Politicians ducking the blame hardly a new phenomenon. That’s partly of course because honesty isn’t always rewarded, but it’s not just that. Who easily admits in public they got it wrong? Anyway we have the ballot box when the time comes.
However at a macro level the article appears to suggest it’s all because EU Governments supported Lockdowns and then Ukraine. As often the case in critiques the Author dodges being clear on the decisions they’d have taken and the consequences that would then have arisen instead. It’s the classic rose-tinted view of the alternatives.
There are clearly some ‘reckonings’ which are for the good. In Germany many wish, often angrily, the Merkel era had not invested so much in Nordstream 1 and 2, or that an accommodation is reached quickly to end the War and they go back to cheap gas. Hardly a surprise there is some plurality of views though in a democratic country. But at same time the response to these changed circumstances is holding and a rebalancing underway. The fact Germany has reduced it’s energy usage by 20% already a remarkable and to be applauded response.
Covid and Putin have indisputably been major recessionary factors, but there are many national decisions that fail a hindsight test. Not unsurprising politicians seek initially to apportion blame to Covid and Putin whilst gradually moving their position and strategy.
The EU has at least a few examples around the World that show things could have been handled much worse. China for one, still in a dreadful mess with Covid. Putin himself of course. And then there’s the UK which has the added misery of a hard Brexit confirmed in its stupidity as the worst predicted performing economy in the G7 despite not being as reliant on Russian gas.
Your last sentence earned you an uptick from me; all the rest being in the neutral camp as far as I read things…
Covid: clearly the Great Barrington Declaration was the way to go: isolate the vulnerable from the virus instead of trying to ‘fight’ the virus everywhere. The vulnerable tucked away safely in remote refuges (awaiting a vaccine) and life continuing as normal everywhere else..
Ukraine: Surely it’s obvious that if NATO had kept its big bellicose nose out and we all let the Slavs/Rus sort themselves out we would have had either a peace deal with a 100,000 lives saved and low levels of destruction; OR a quick war with 50,000 lives saved and moderate levels of destruction. No rose tinted glasses required!
What we got in both cases was the worst of all outcomes thanks to the short-sightedness of craven governments too stupid and too scared to do the intelligent (drastic) things.
Putting the Ukraine issue to one side – I’m sure we can agree to disagree on that – Re: the GBD – the theory is one thing the practical way in which you’d do this another altogether. The key criticism of the GBD is that the proponents never moved beyond the generality into how you’d actually do it. Many suspect that’s because it’d unravel as a practical option v quickly and actually have as many, if not more, deprivation of liberty consequences.
(This doesn’t mean I agree with the subsequent closures/remote teaching of schools/Universities but I can see how during the initial phase of Covid it was unavoidable given how unprepared we were)
ITUs I can tell you weren’t full of 80yrs+ people. Rightly or wrongly they just wouldn’t get in there, They were full of much younger Covid positives, some with clear co-morbidities, some much less so. Were we going to quarantine all with a BMI score above average? The PM himself being a classic example. Where would he have hidden away for some months? (albeit that might have been a benefit I guess). So were it possible I’d also have v much welcomed it, but in reality I can’t see how it’d work, and GBD advocates lost some credibility when they failed to then set out details of how it’d work and be enforced.
Putting the Ukraine issue to one side – I’m sure we can agree to disagree on that – Re: the GBD – the theory is one thing the practical way in which you’d do this another altogether. The key criticism of the GBD is that the proponents never moved beyond the generality into how you’d actually do it. Many suspect that’s because it’d unravel as a practical option v quickly and actually have as many, if not more, deprivation of liberty consequences.
(This doesn’t mean I agree with the subsequent closures/remote teaching of schools/Universities but I can see how during the initial phase of Covid it was unavoidable given how unprepared we were)
ITUs I can tell you weren’t full of 80yrs+ people. Rightly or wrongly they just wouldn’t get in there, They were full of much younger Covid positives, some with clear co-morbidities, some much less so. Were we going to quarantine all with a BMI score above average? The PM himself being a classic example. Where would he have hidden away for some months? (albeit that might have been a benefit I guess). So were it possible I’d also have v much welcomed it, but in reality I can’t see how it’d work, and GBD advocates lost some credibility when they failed to then set out details of how it’d work and be enforced.
Your last sentence earned you an uptick from me; all the rest being in the neutral camp as far as I read things…
Covid: clearly the Great Barrington Declaration was the way to go: isolate the vulnerable from the virus instead of trying to ‘fight’ the virus everywhere. The vulnerable tucked away safely in remote refuges (awaiting a vaccine) and life continuing as normal everywhere else..
Ukraine: Surely it’s obvious that if NATO had kept its big bellicose nose out and we all let the Slavs/Rus sort themselves out we would have had either a peace deal with a 100,000 lives saved and low levels of destruction; OR a quick war with 50,000 lives saved and moderate levels of destruction. No rose tinted glasses required!
What we got in both cases was the worst of all outcomes thanks to the short-sightedness of craven governments too stupid and too scared to do the intelligent (drastic) things.
Politicians ducking the blame hardly a new phenomenon. That’s partly of course because honesty isn’t always rewarded, but it’s not just that. Who easily admits in public they got it wrong? Anyway we have the ballot box when the time comes.
However at a macro level the article appears to suggest it’s all because EU Governments supported Lockdowns and then Ukraine. As often the case in critiques the Author dodges being clear on the decisions they’d have taken and the consequences that would then have arisen instead. It’s the classic rose-tinted view of the alternatives.
There are clearly some ‘reckonings’ which are for the good. In Germany many wish, often angrily, the Merkel era had not invested so much in Nordstream 1 and 2, or that an accommodation is reached quickly to end the War and they go back to cheap gas. Hardly a surprise there is some plurality of views though in a democratic country. But at same time the response to these changed circumstances is holding and a rebalancing underway. The fact Germany has reduced it’s energy usage by 20% already a remarkable and to be applauded response.
Covid and Putin have indisputably been major recessionary factors, but there are many national decisions that fail a hindsight test. Not unsurprising politicians seek initially to apportion blame to Covid and Putin whilst gradually moving their position and strategy.
The EU has at least a few examples around the World that show things could have been handled much worse. China for one, still in a dreadful mess with Covid. Putin himself of course. And then there’s the UK which has the added misery of a hard Brexit confirmed in its stupidity as the worst predicted performing economy in the G7 despite not being as reliant on Russian gas.