"Full Employment Was a Lucky Exception"

"To Taylor, calling full employment the general state and allowing one unlucky exception turns Keynes upside down. And look where this confusion has brought us, he adds. Take the current eurozone disaster. For two decades, the European Union bureaucracy in Brussels, the German Council of Economic Experts, and a chorus of others, branded Germany, the 'sick man of Europe,' as suffering from a sclerotic supply side: rigid labor unions, impediments to layoffs, a burdensome welfare state. But German labor costs to produce output sank steadily, and Germany generated huge trade surpluses—hardly signs of a sclerotic supply side. Yet growth has barely averaged 1 percent a year since 2000.
"The problem? Weak demand, according to Taylor. The chorus ignored demand because the mainstream says it cannot affect long-run growth and employment. But it does. Now the same chorus is telling southern Europe to institute 'reforms' like Germany. But if the German model doesn't work well in Germany, how can it work in Greece, Italy, or Spain? A misguided idea is undermining the European Union itself."

Jonathan Schlefer in The Boston Globe looks at John Maynard Keynes's influence on current economists.