DutchNews.nl - Opinion: Herb Prooy: Bad plan

Last Sunday, illusion won over reality in Greece and France. As if there is an alternative to the severe cutbacks needed to avoid the collapse of local economies and, in their wake, the euro. A scenario is emerging which promises to deal a devastating blow to the prosperity of large parts of Europe.

The Greeks are on a collision course and it is doubtful whether they will want to comply with the demands of the IMF and Europe. The new French president François Hollande wisely holds to the budget deficit of 3% but wants to get there by implementing fewer cutbacks and stimulating economic growth. It would mean no civil servants would have to be fired (in France 55% of gdp is spent on the public sector!) and the pension age, raised to 62 under Sarkozy, can go back to 60.

PvdA leader Diederik Samsom also believes this is the way forward and supports Hollande’s plan to add a growth paragraph to the European budget pact.

Eureka! It’s a miracle other European government leaders haven’t thought of this. Or have they? In 2007, at the start of the financial crisis, not only were the banks bailed out with taxpayers’ money but the economy was stimulated as well. The expense landed us with huge budget deficits and meanwhile the next crisis is looming on the horizon.

Government-led stimulation of the economy is largely inefficient and prohibitively expensive.

The growth we need so much will have to come from the real economy, from actual labour and production. From companies or, more specifically, from entrepreneurs.

Samsom and Hollande’s plan for growth is flawed because they can only make good on their promise to the electorate if entrepreneurs dare to invest and refloat the economy at their own expense.

But why would they when labour market reform is not forthcoming and stability and confidence in the market and the euro are far from making a comeback?

This asks for the kind of measures that neither Hollande or Samsom would win votes with.

Readers' Comments

Nobel Prize winning economists Joseph Stiglitz and Paul Krugman both support the use of government stimulus to grow the economy. They and countless other economists have written extensively on this topic. In fact, government stimulus is taught in Economics 101 classes as a means of fixing a broken economy.

So when an unknown, non-economist Herb Prooy writes, "Government-led stimulation of the economy is largely inefficient and prohibitively expensive," I find that hard to believe. Where is Prooy's evidence? How are we supposed to accept this statement? Are we just supposed to believe Prooy based on faith?

Who the hell is Herb Prooy? A software entrepreneur? What makes him worthy to print his opinion on economics? His opinions are so wildly different from what professional economists print. Perhaps Prooy can submit his writings to economic journals and show all these economists just how wrong they've been all this time. Somehow, I don't think that will happen.

By Chris V | 13 May 2012 11:32 AM

Agreed with the previous commenter. Why should anyone care to read Herb Prooy's ramblings? Shame on DutchNews.nl for circulating this as if Prooy's opinion had some actual merit or expertise.

By Jacob | 13 May 2012 12:21 PM

I agree this writer is quite lost. What we have come to is a system where wealth creation just doesn't need that many employees anymore. Automation and computers have landed us here. We can't expect "entrepreneurs" to create the needed jobs anymore. This is not a bad thing, the freed workers can work on the betterment of society, within government. This is just what the French and Dutch systems try to do, but this may not be evident to many Dutch citizens. So, what is needed is higher taxes for wealthy individuals, and larger government spending.

By C. Garcia | 14 May 2012 11:34 AM

You can not take a person's every view for granted because he/she won a Nobel prize in the past. (Both Robert C. Merton and Myron Scholes won Nobel prize in Economic Sciences in 1997, but their Hedge Fund Long Term Capital Management-LTCM, "lost $4.6 billion in less than four months following the Russian financial crisis requiring financial intervention by the Federal Reserve Bank, and the fund closed in early 2000")
Economics in general is not a positive science, and world of economics is not black and white...all the best

By Emrah | 17 May 2012 11:41 PM