Steve Keen recently gave a talk on Greece, austerity, and Post Keynesian economics for the Rethinking Economics student association at the London School of Economics. You can get more background and lecture slides here. The video is below.
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Couldn't Greece just massively improve its export competitiveness, thus shifting the problem elsewhere?
ReplyDeleteEasier said than done, Pithom.
DeleteGreek unit labor costs have declined by about 15% since 2010.
Other means of increasing competetiveness would include investment in more efficient capital, perhaps including public sector investment in infrastructure, and private sector investment in new technology or factories. Of course, the Greek government is prevented from major infrastructure work by the Nature of the Eurozone, and pre-existing debts, the Troika, etc. Meanwhile private sector investment is inhibited by the recession and deflation that is taking place.
You could conceivably improve conditions by improving government efficiency and then reducing taxes on the private sector. However, any surplus generated in this manner is just going to go to the bondholders instead of the taxpayers. This has already happened to some extent during the previous government.
Meanwhile, many of the most skilled greek workers are emigrating due to lack of work... this weakens Greek productivity.
So, I think it's not so easy to quickly change from a net importer to a net exporter within the Eurozone/EU.