Martin Wolf on The Great Economic Crisis

Martin Wolf

I would like to share an article that appears in yesterday’s (Nov 30^th 2011) Financial Times, by Martin Wolf, that paper’s chief economics commentator, and an associate editor.

To my thinking, this article encapsulates well where we are at the moment in terms of both Ireland and the global economy. Those whose job or inclination it is to look out for their particular national interests, especially politicians, need to understand that, no matter what their ideological position, we now live and work in a global economy, for better or worse. Actions that are taken or advocated without that in mind cannot make a useful contribution.

Two comments by Wolf stand out. They are

“Fiscal indiscipline did not cause this crisis. Financial and broader private sector indiscipline, including by lenders in the core countries, was even more important”.

and

“Ireland can adjust as a small, open economy by displacing tradeable output elsewhere, where necessary. If Italy and Spain both tried to do this, they would be engaging in a costly and probably hopeless effort at beggaring their neighbours: costly, because the main way to do so would be to drive down wages via yet higher unemployment; and now hopeless, because the competitive advantage of Germany is so strong”.

These stand out not because they allow us to further castigate bankers, builders and regulators, there’s been enough of that, but because they should provide confidence for those politicians and civil servants who are charged with guiding us through these stormy waters.

Wolf has convinced this writer that there is no easy answer to the current crisis. However, an understanding of what’s going on is a good place to start when looking for the solution.

Martin Wolf’s article can be read here. The link is to an online magazine in Australia (Business Spectator) which carries it. The Financial Times website sometimes requires registration, which will deter at least some potential readers.

This is an important article.