Hollande’s embrace of Say and the consequences
Wolfgang Munchau writes in his FT column that Francois Hollande embrace of Say’s Law (supply creates its own demand) is more than just a calamity of economic policy but an event of truly important political consequences. Munchau says that from a macroeconomic point of view, the shift was not necessary at all given the performance of the French economy and the position of the balance of payments. This is in a different category from Francois Mitterrand’s 1983 policy shift, which was mainly political and macro. The main consequence of Hollande’s shift is political and micro. France has now fully bought into the German supply-side consensus and established the principle that the only way to co-exist in a monetary union with Germany and the other Nordics is to become like them. That policy will shape the nature of the eurozone and of the adjustment process, and will make adjustment for several member statements in the periphery virtually impossible. It is also noteworthy that this supply-side consensus straddles almost the entire political spectrum, with the main centre-left parties now fully behind supply-side conservatism. The only way for a continental European to disagree with Say is to vote for parties on the hard right and the hard left. Munchau concludes that Hollande’s policy U-turn is another indicator that the eurozone policy debate has concluded, and that those who insisted on a new governance framework, which used to include the French, have lost the debate.