French economist takes NYT columnist to task
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In a surprising opinion piece, a top French economist writes that Nobel Prize winner Paul Krugman’s recent New York Times column praising France’s economic model is inaccurate. France24.com takes a closer look.
It’s the latest French-American mini-spat, but with a twist.
Nobel Prize-winning US economist and New York Times columnist Paul Krugman penned a defence of French fiscal policy after bond-rating agency Standard & Poor’s downgraded France earlier this week. In a surprising response, French economist and Harvard professor Philippe Aghion wrote an opinion piece for French daily Le Monde expressing his disagreement with Krugman.
In his column, titled “The Plot Against France”, Krugman commended France for “[refusing] to play along” with “fiscal scolds….using debt fears to advance an ideological agenda”.
France is “performing as well as or better than most of its neighbors”, Krugman wrote, with productive workers, a falling budget deficit, a healthy birthrate and “a remarkable health care system” which is a “big fiscal advantage”.
According to Krugman, the reason why publications like British weekly magazine The Economist and figures like Olli Rehn, Europe’s commissioner for economic affairs, have criticised France’s economy is that they disapprove of the country’s tax hikes.
Praising France for resisting pressure to implement “tax cuts and deregulation”, Krugman concludes on an ironic note: “France has committed the unforgivable sin of being fiscally responsible without inflicting pain on the poor and unlucky.”
Taking Krugman to task
But far from echoing Krugman in his support of the French economic model against “France-bashing”, French economist Aghion took his American counterpart to task.
Aghion, who has worked as an economic advisor to French President François Hollande, begins his op-ed with a disclaimer: He is “not a defender of ultra-liberalism or a proponent of dismantling the state”, he writes, and he believes “it is necessary to protect the most vulnerable”.
But he goes on to say that he disagrees with Krugman that raising taxes does not necessarily have harmful effects on “employment and growth”. According to Aghion, international examples, especially Sweden, reveal that policies based on a reduction in public spending have been able to spur growth, whereas strategies grounded in tax hikes have led to “major, prolonged recessions”.
Moreover, Aghion accuses Krugman of ignoring the most recent studies and data when he says that economists don’t know for sure what helps economies grow.
“Instead of leading people to believe that economists have nothing to say on the link between structural reforms and growth,” Aghion writes, “Paul Krugman should offer another perspective, both on the experience of developed countries and on recent economic research.”