Has the fiscal stimulus argument won the day?

At the end of 2008 a European challenge was erupting – stimulus or hands on heads.

French President Nicolas Sarkozy who voiced his aggravation with German Chancellor Angela Merkel for not implementing a measure of fiscal stimulus said, “While France is working, Germany is thinking.”

Is there not something philosophically pleasing about what he said; France as a nation of philosophers working with material means, inside a philosophically materialist frame (Comte, Debord, Deleuze, Derrida, Sartre, Badiou) whereas Germany exploring idealism – enlightened through thinking and pure thought (Kant, Schelling, Hegel, Fichte, Reinhold, Schleiermacher).

Merkel was actually remaining loyal to the “Stability and Growth Pact” (SGP) originally proposed by the former Finance Minister Theo Waigel at the beginning of the 1990’s and agreed at the EU summit in Dublin in 1997, the purpose of which was to tune the euro so it would be able to compete with the US Dollar and strengthen the stability of the euro-zone.

Now, in January 2010 we might be starting to see some early signs of this European challenge. The UK has had a surprise fall in unemployment figures – which may have part-time jobs to account for.

Two notions at play here need attention; firstly that old Keynesian misunderstanding (see Michael Stewart’s chapter on balance of payments in his book Keynes and After for more information as to why this is a Keynesian misunderstanding) that unemployment is a symbol of too little demand. If part-time work has been used as a means of curbing unemployment, then naturally it is safe to assume productivity won’t increase any more than if half of those numbers were all fully employed, so therefore it is wrong to assume that unemployment in itself is a marker of too little demand (just as it is wrong to assert that rising prices, according to Michael Stewart, is a marker of too much demand).

Second thing at play here is that just because unemployment is dropping in a country that employed a fiscal stimulus, and a country that didn’t employ such a measure that has increased levels of unemployment, doesn’t mean that this is the natural course of events of both implementations, just as the fact that photo of a criminal whose whereabouts are unknown is released and that criminal gets caught, that that photo had anything to do with the catching process.

The French Finance Ministry expects France to lose 71,000 jobs this year, mostly in the first half, despite the fact that the economy is expected to expand by 1.4% in 2010.

One thing is for sure, as it stands, it does look good for Brown, who will be seen, before the election, to have saved people from unemployment, and not  doing what the Conservatives would’ve done by – well, nothing at all. Like in Berlin the doing nothing option was taken, and results have shown it to not be favourable.

This, as Larry Elliot put it today in the Guardian, will be a pre-election gift to Brown. Lets just hope he doesn’t have to anything in the mean time that could jeopardise his chances in the run up to an election, like by having to testify to the Iraq enquiry…oh dear!

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