Although there are obviously important differences between the political-financial-economic crisis in Europe and the political-financial-economic crisis in the United States, there are nonetheless important themes in common. The people who caused the crisis are still in charge of its resolution; their proposed remedies reflect the same institutional biases that caused the crisis in the first place; and their proposed remedies are likely to fail, from the point of view of the interests of the majority of voters. When Illinois Senator Dick Durbin said of the U.S. Senate, "the banks own this place," he could just as well have been referring to the European Union, or the European Central Bank, or the International Monetary Fund.
In both cases, the debate about remedies boils down to this: should government be focused on direct measures to boost economic growth and employment, or should government be focused on belt-tightening, austerity, and debt repayment, in the hopes that this will eventually promote recovery in the future?
An important difference is that in Europe, there really is an objective government debt crisis, in the sense that Greece, for example, now has debts that it can't pay, whereas in the U.S. the government debt "crisis" has been wholly politically manufactured. The fact that the U.S. government has no trouble borrowing money at low interest rates shows that market actors don't believe that the U.S. government will have any trouble repaying its debts.
Nonetheless, the fact that we can have in broad measure the same stimulus vs. austerity debate in the U.S. shows the political power of the banks, not just their power to determine legislative outcomes, but their power to dominate public discourse: to the extent that we in the U.S. are talking about debt repayment rather than job creation reflects the political power of the banks. It suggests that in Europe, where the government debt crisis is real, the necessity of imposing the bankers' approved remedies is just as manufactured as in the U.S.; and therefore, maybe we have something to learn from the European debate.
While its policy choices are largely dictated by the power of the banks, and therefore in general very destructive to the public interest, one good thing about the IMF is that it believes in public debate; it's willing to engage its critics, in a way that other prongs of the economic policy decision-making structure are often too cowardly to do. You don't often see economists from the Treasury Department coming out to debate economists from the Center for Economic and Policy Research. But the IMF will send its economists to debate.
Last Saturday, CEPR’s Mark Weisbrot debated Luc Everaert, Assistant Director of the European Department of the IMF, on the "Eurozone Crisis." The debate is here.
Weisbrot argued for stimulus to boost growth and employment, noting that the experience of Argentina proves that a long period of stagnation and unemployment is not inevitable:
In response, Everaert argued that stimulus to increase employment was not politically feasible, essentially because of fears of inflation:
Rebutting Everaert's response, Weisbrot argued that the experience of Argentina and South Korea proves that moderate inflation is compatible with high growth, and that public education can eliminate unfounded fears of hyperinflation: