Thursday, September 20, 2012

Professor Wynne Godley: The Man Who Foresaw the Euromess Twenty Years Ago

Lifted in toto from Steve Keen's Debtwatch:

Wynne Godley on the Euro in 1992
I mentioned Wynne Godley’s prescient observations about the Euro back in 1992 in a debate on the Mind Your Business program on Ireland’s RTE Radio 1 about half an hour ago. Godley’s remarks–no doubt seen as extremist when he uttered them–have proven to be utterly prophetic:
Some writers (such as Samuel Brittan and Sir Douglas Hague) have seriously suggested that EMU, by abolishing the balance of payments problem in its present form, would indeed abolish the problem, where it exists, of persistent failure to compete successfully in world markets. But as Professor Martin Feldstein pointed out in a major article in the Economist (13 June), this argument is very dangerously mistaken. If a country or region has no power to devalue, and if it is not the beneficiary of a system of fiscal equalisation, then there is nothing to stop it suffering a process of cumulative and terminal decline leading, in the end, to emigration as the only alternative to poverty or starvation.
The entire article can be read here:
I also wrote a feature on it for Business Spectator:
Leaving the Hotel Euro?
As I said in the intro to 2010's "London Times Obituary: 'Professor Wynne Godley: economist"'
One of the heavyweights.
Or, as the Times put it in their first sentence:
As Professor of Applied Economics at Cambridge, a civil servant in the Treasury and later as one of the Treasury’s panel of “six wise men”, Wynne Godley was the most insightful macroeconomic forecaster of his generation. He made major, though as yet not fully recognised, contributions to macroeconomic theory....