Keyword: economic order

Gunther Schnabl; Sebastian Müller

Abstract

The paper analyzes the effects of the increasingly expansionary monetary policies on the economic order in Europe and the European integration process. It is argued that a liberal market order and a tight monetary policy stance shaped in postwar Germany and in United Kingdom have long served as cornerstones for growth, prosperity and social cohesion in Europe. A prolonged loose monetary policy stance of the European Central Bank has undermined these orders, thereby diminishing productivity gains and growth. Combined with negative distribution effects, those monetary policies constitute the breeding ground for divergence forces in the European Union as heralded by the Brexit.

Keywords: Brexit, divergence, economic order, European Integration, Friedrich August von Hayek, inequality, Ludwig Erhard, Margret Thatcher, Monetary policy, political polarization.

JEL Codes: B25; E58; E65.

Erschienen in

The Economists’ Voice, 16(1).

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via Degruyter

Pablo Duarte; Gunther Schnabl

Abstract

Voters in the industrialised countries are increasingly expressing dissatisfaction by dissenting from the established political parties and candidates. Based on the concepts of justice by Hayek, Rawls and Buchanan, we argue that the growing dissatisfaction is rooted in the asymmetric pattern of monetary policies since the mid-1980s for two reasons. First, the structurally declining interest rates and the unconventional monetary policy measures have granted privileges to specific groups. Second, the increasingly expansionary monetary policies have negative growth effects, which have reduced the scope for compensation of the ones excluded from the privileges. As a result, the acceptance of the prevailing economic and political order is undermined and political instability increases.

Keywords: Buchanan, economic order, Hayek, inequality, Monetary policy, political instability, privileges, Rawls.

Erschienen in

The World Economy, 42(2), 2019, 614-634.

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via Wiley