There also are bibliographies for some of thedefinitions; a picture gallery of diagrams from international economics; andlists of types of terms that occur frequently.
M.A. students must demonstrate reading competence in one foreign language other than English. International students who have English as a second language fulfill this requirement.
The proliferation of policies that seemed a good idea at the time was to shape the economy to perform as politics dictated. The objective was to establish “social justice” by redistributing the income once the economy has obediently produced it. Policy proliferation and redistribution are the obvious consequences of the primacy of politics. After a lapse of time that is quite short by historical standards, the result is clear. Each policy works to some extent, but their sum total brings overall failure.
At this point, the realization is dawning that, like a sick body saturated with an array of wonderful drugs to which it can no longer respond, the economy will not improve by subjecting it to a further overdose of remedial measures. Above all, historically high unemployment seems to have become chronic. It threatens the whole social order and, more importantly, the political survival of whatever shade of government happens to hold office. Desperate measures are suggested: the “available” work must be shared by ordering everyone to work shorter hours; business must be allowed to hire but forbidden to fire; it must be obliged to invest its profits rather than distribute them to fat cat shareholders; it must also be forbidden to delocalize to lower-cost countries; indirect taxes must be used to penalize imports; the state must pay the wages of young people in their first year of employment; and so forth. Some of these harebrained ideas are actually tried out, but either prove unenforceable or just do not work.
Partly as a result of the widespread teaching of vulgarized economics, it came to be understood that none of these iron laws had actually to be respected, except perhaps in the very long run when we are all dead. People saw that everything that was politically feasible or indeed necessary could be done to the economy without the sky crashing down on them. A democratic government always had the whip hand over business. The freedoms of property and contract could always be curtailed by appeal to the public interest.
The text, absurdly long at 360 pages in the French version, bears the hallmarks of verbose French rhetoric and cautious English fudge. Its ambiguities will prove a gold mine for tomorrow’s lawyers. However, for all its clumsy grandiloquence, it is bound to turn out to be a fascinating experiment for economists and political theorists to watch.
The other polar case is the mature welfare state. Its government need not be corrupt and usually it is not, or not in a big enough way to make much difference. However, it is a prisoner of democratic politics. Unless it wants to commit political hara-kiri, it must fashion policies that will buy it a majority of votes. This involves it in selecting a variety of interest groups, necessarily including the poor, the unemployed, the sick, and the old, who all will vote for whoever best looks after them. It also involves a scattergun approach hitting most groups, whereby resources are taken from all strata and used to buy the votes the government needs to survive. It must stretch itself to the limit of the country’s tolerance of redistribution, for if it left the least bit of slack in the system, its political rival could outbid it by promising to increase benefits by taking up the slack. The mature welfare state eventually ends up with a set of subventions, regulations, and entitlements to resource transfers to favored groups that is carved in granite and very difficult to change, let alone substantially to reduce. The net result is that mature welfare states tend economically to stagnate. Germany, France, and Italy are eloquent contemporary examples. The irony of this is that if they bore no excessive welfare burden, they would grow faster and be richer, hence a given welfare burden would no longer be so crippling.
It is a tenable proposition, supported by masses of historical evidence, that the main reason why any human society fails to attain the prosperity and material comfort that its endowments and culture should enable it to reach, is that its politics stifles and disrupts its economic potential. Moreover, it is likely that the gap between what would be possible and what is achieved tends to grow larger as technology advances and as political power expands and gets a grip on more and more aspects of people’s lives.
After Ukraine, whose turn will it be? A new doctrine is arising in educated opinion, which holds that it is not geography that qualifies a state for EU membership, but “shared values.” On the strength of this doctrine, Europe is in for limitless expansion across North Africa, Central Asia, and the Middle East, because if Turks share European values, who does not share them? An ever-expanding Europe straddling three continents would be politically impotent and probably quite harmless. Economically, it would be a good thing, for the larger a free-trade area is, the more good it can do by trade creation and the less harm by trade diversion.
Many economists have in recent decades come to be persuaded that there is a way to get the political incubus off the economy’s back. All you need is to devise the right rules. The idea has been formally developed by the school that calls itself “constitutional economics.” It maintains that if only society saw its best long-term interests and ignored short-term gains to be had from pressure-group politics, it would adopt a constitution that strictly limited the scope of collective choices, forbidding the government to go beyond the enforcement of law and order and maybe a welfare safety net to catch the genuinely helpless. Property would be secure from public covetousness, and full scope would be left for voluntary exchanges. Market solutions could not be interfered with except to facilitate manifest Pareto-improvements, if any are left to facilitate.
The German government is championing Turkish membership with an eye to its own 2.5-million-strong Turkish immigrant population and the votes of its second-generation citizens. The determination of the French government to support Turkey, despite the polls that show 65-68 percent of French people are opposed to its membership, looks very strange. Its hidden mainspring is the craving to make the EU into a political, economic, and military superpower under undisputed French leadership, enabling France to stand up to America as an equal and a counterweight to U.S. “hegemony.” Ever since the 1950s, this design never came anywhere near fruition, causing mounting frustration in Paris. Turkey has a standing army greater than any two of the largest national armies of the EU taken together. Bizarre as the idea may be in reality, the thought of half a million ferocious Turkish soldiers being added to the puny European forces seems to be too tempting to resist.