“We need a bigger bazooka.”
The phrase was uttered on Thursday by the former Prime Minister of Great Britain, Liz Truss, to refer to this fact He could not implement his economic plan because he did not have the support of the media.
Truss is a British politician who was prime minister in 2022 and, as soon as she took office, she announced a tax cut that the market immediately took badly, triggering a run on the pound.
“He wanted to reduce taxes, the size of the state —Truss told Donald Trump’s former campaign advisor Steve Bannon on a cable program in the US, and all those people didn’t like my plan. The British economic establishment wanted to keep things as they were”.
“Wait wait wait Bannon interrupted, holding up the print editions of two British business newspapers. Was it the Economist that got you? Was it the Financial Times of London? the city of London?”.
Truss didn’t hesitate to say so. “These are the friends of the bureaucratic establishment —he replied, pointing to the covers of The Economist and FT—, They are friends of a deeper state. “We need a bigger bazooka.”.
Truss and Bannon crossed paths on the eve of the Conservative Political Action Conference in Maryland. One of the participants yesterday was Javier Milei. Another, Donald Trump. The umbrella that covers them all is to extend the functioning of the market to the greatest number of activities and services, restricting the role and action of governments for freedom.
But on that road, where there are many economists who pride themselves on being the guides to the Promised Land, other economists are beginning to appear who warn that their science lacks tools capable of offering generalizations for making economic policy.
In the last few hours, statements have arrived from two world-famous people, both economists, in this regard. Gita Gopinath, deputy director of the International Monetary Fund, and Dani Rodrik, professor at Harvard University.
The two agreed that solving the problems (Gopinath in the case of Argentina, Rodrik in general) requires pragmatism.
The IMF number two, after visiting Argentina this week, speaking with the president and the economic team, said: “We must work pragmatically to gain social and political support. It is essential to guarantee the durability and effectiveness of the reforms.”
The government suffered a setback in Congress with the Omnibus bill and a mega DNU. With both initiatives he sought to approve a series of shock economic reforms which, according to the President, aim to accelerate the arrival of investments and the creation of jobs. Faced with opposition and radicalism, Milei talks to Macri about a legislative alliance.
Rodrik, for his part, wrote a paper this week – published on the International Monetary Fund website and at Harvard – titled “Meeting the Challenges of a New Era: Against the Thumb Rule” (in Creole the phrase could be read ‘ for the eye of a good cubator’). Basically what the economist is saying is “be careful about copying and pasting in economics”.
“Analysis at the margin, aligning private incentives with social costs and benefits, fiscal sustainability, are abstract ideas.” which are not pigeonholed into the same remedies“Rodrik noted. “The most pressing economic problems of our time require pragmatic solutions closely adapted to the context”.
The article offers guidance on how to face (or rather how not to face) the main challenges that in his opinion are facing the world economy today: climate change, the erosion of the middle classes and international trade or globalization. In these three areas, countries are facing a rebalancing of forces, demands and supplies that generates tensions. Economists start from the premise that their models have the answers and politicians buy them, the economist noted.
One case that Rodrik has studied and followed closely in recent years is the debate over industrial policy in the United States and around the world. He argues that the problem of work today requires policies that go beyond traditional welfare state solutions. They need to be more direct, aimed at increasing productivity, complemented by minimum wages and regulations. There is talk of a period of “experimentation” and of stopping thinking about traditional industrialization for an era of productive jobs in services.
“In economics, the valid answer to almost all policy questions is ‘Depends’ —Rodrik says—. Economic analysis becomes important precisely when it analyzes contextual dependence: how and why environmental differences influence the results and consequences of policies”.
So, is it the newspaper covers that prevent reforms from taking place? Or do dogma, bazooka and chainsaw hide pragmatism?
Source: Clarin
