Ackerman, Seth. Introduction: Europe against the Left. Jacobin. 2012 Spring; 6:31–36. Available from: http://jacobinmag.com/spring-2012/introduction-europe-against-the-left/.
In this introduction to a special section on the European Left for Jacobin magazine, Ackerman explores the economic dynamics underlying the development of the Left since 1970, and its implications for current Left prospects and strategy in Europe. Leftists in European governments became discouraged and abandoned their ambitious projects when they found that they could not control inflation under welfare-state capitalism without accepting high levels of unemployment. The dominant economic theory explaining this phenomenon used Milton Friedman’s concept of the NAIRU, or “non-accelerating inflation rate of unemployment”, which was supposedly determined by inefficiencies or “rigidities” in the labor market, and thus would be increased by any attempt to aid workers’ bargaining position vis-a-vis employers. Friedman’s theory on this topic was accepted not only by conservatives like Friedman himself, but even by mainstream liberals such as Paul Krugman. However, alternative theories did exist within mainstream economics; in particular, in 1986 Larry Summers and Olivier Blanchard advanced the theory that the NAIRU exhibits “hysteresis”. This engineering concept refers to the tendency of a quantity to retain its present value, whatever that value may be, rather than seeking a uniquely determined “natural” value. The hysteresis theory of the NAIRU would predict that government intervention to create full employment might initially cause high inflation, but the full-employment state would eventually become the new NAIRU and would not continue to cause inflation indefinitely. Ackerman suggests that the economic dislocations occurring since the financial crisis of 2008 are creating a new atmosphere of openness to the hysteresis theory and to government intervention.
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