The economic crisis from a macroeconomic perspective24 July 2012
Interview with prof. dr. Joan Muysken
The grasshopper and the ants
“As a result of the economic crisis, macroeconomics has become very popular among our MBA students. This comes as no surprise. It’s been a long time since students were able test macroeconomic theories in practice like this and develop a thorough understanding of macro influences on economies. The direct cause, of course, is the current economic crisis. What began as a mortgage crisis in the United States now affects us all – something Europeans never thought would happen to them…
The bubble bursts
The reality, however, finally sunk in. Many Europeans are now keenly aware of the absence of good economic regulations. The cause can be traced back to the 1980s when Reagan and Thatcher, believing in the free market, abolished far too many rules. In the years that followed, however, most economies flourished. A new generation took the helm in many places, resulting in the further erosion of socioeconomic responsibility. In 2000, the first bubble burst as a mild recession ensued. US banks lowered their interest rates and those previously denied mortgages could now afford them. Europe began taking on its present form and the ECB began lowering its rates, largely to the benefit of southern Europeans. On the superficial level, the economy was booming and everything appeared to be under control.
In the autumn of 2008 we realised that the internal relationships in Europe were skewed and that banks were becoming nationalised. In 2009, we saw increasingly distorted consumption patterns between China and the US and between Northern and Southern Europe. The Netherlands and Germany, for example, were exporting far too much to Greece. We were soon coming to realise that a stable market requires stable macroeconomics and that the market itself does not always guarantee a stable macro environment. The crisis was forcing us to face these facts.
This situation bears some resemblance to Aesop’s fable about the grasshopper and the ants. In the winter, the grasshopper asks the ants for some food. In return, they ask him why he didn’t gather his own supply. When the grasshopper says he devoted the entire summer to singing, the ants laugh at him. Yet surely Southern Europe won’t suffer the same fate as the grasshopper? It is important that we create clarity from the perspective of solidarity. In other words, take large and viable steps; offer better perspectives; implement the Eurobonds; and provide better safeguards against the things that went wrong in the past, such as reducing home mortgage interest reductions in the Netherlands and increasing wages in Germany. In short: there is plenty of material to ensure interesting discussions with our MBA students. In the months to come we will analyse the views of different macroeconomists and examine the challenges facing their organisations.”
For more information on this topic:
Column Paul Krugman: http://krugman.blogs.nytimes.com/
European columns: http://www.voxeu.org/
Relevant Dutch columns: http://www.mejudice.nl/
Professor Joan Muysken studied quantitative economics in Groningen and graduated in 1972. He worked as a (senior) staff member at the University of Groningen, where he obtained a cum laude PhD degree. In 1984 he was appointed Professor of General Economics in Maastricht where he taught macroeconomics, monetary economics and labour economics. He has also worked as a research fellow and guest professor at the universities of Oslo, Buffalo, Louvain-la-Neuve and Newcastle (Australia). His research primarily focuses on unemployment, economic growth and macroeconomic policy. Muysken now teaches macroeconomics for the Modular Executive MBA.