Herbert Grubel

Recent Opinion Pieces after middle 2008 (published and unpublished)




The Future of the EU after Lisbon and Ireland

Summary:  Discusses the use of subsidiarity as a basic feature of any constitution for Europe, considers the performance of Switzerland under this system, points to the role played by direct democracy - referenda in saving lower jurisdictions from encroachment by higher jurisdictions and suggests that Switzerland before the adoption of the present constitution consisted of separate cantons whose characteristics are much the same as those prevailing in Europe at turn of the Millennium.


The Financial Crisis and Sovereign Wealth Funds

Summary:  Most discussions of the effects of SWFs focus on the effects they have on financial markets and the ownership of politically sensitive firms.  This paper considers the implications of the fact that the accumulation of funds by SWFs has the same effect on aggregate demand as do fiscal surpluses of governments.  In countries with such fiscal surpluses and flexible exchange rates national central banks lower interest rates to stimulate real demand by firms and consumers to maintain aggregate demand consistent with full employment.  

The surpluses of the SWFs also need to be offset by lower interest rates and increased real spending.  In the event, the ECB did not allow interest rates to fall and the full burden for increasing real demand fell on the Fed.  Lower interest rates did not stimulate US manufacturing investment much because of the problems caused by competition from imports, primarily form China.  The real demand was created by the housing sector and consumers enjoying the increased wealth from their housing stock.  This housing boom eventually ran out of steam and created the fiscal turmoil of 2007-08.  

The paper concludes that the Fed should not be blamed for this turmoil, nor should the financial intermediaries that produced innovations that allowed the housing boom to develop.  The paper suggests that to prevent a repetition of the problems with the SWFs surpluses, the world needs coordinated monetary policies for the major central banks.  In the longer run the solution lies with the creation of a common currency for the world as a whole and one central bank to deal with global fiscal imbalances. 


Immigration Conference in Montreal

Summary:  This paper outlines the main issues raised at the Fraser Institute conference on the future of immigration policy in Canada, which was held in early June 2008 in Montreal.  The papers were presented by analysts from Britain, France and Canada and discussed the effects of mass immigration on public finances and cultural and social conditions.  The papers also discussed the merit of traditional arguments in favour of immigration, like the filling of job vacancies, the financing of social programs and the settlement of empty lands.  Some suggestions for reform of the immigrant selection process were made.


The Fiscal Burden of Recent Canadian Immigrants

Summary:  This paper was presented at the Fraser Institute immigration conference in Montreal in June 2008.  It estimates the fiscal costs imposed on other Canadian by the mass immigration of recent decades, seeks explanations for this phenomenon and suggests the need for a shift from the present immigrant selection process dominated by political considerations and bureaucratic procedures to one that relies on private markets guided by a framework set by the government.  


Recycling Petrodollars

Summary:  The problems caused by the recycling of petro-dollars have been identified and much discussed as the ultimate cause of global financial crises in the 1980s and 1990s.  It is curious, therefore, that this subject has not come up in the current debate over the causes of the present financial crisis, especially since there has been a record accumulation of dollars not only by petro-countries but also central banks and prepaid social program systems.

Recycling Petrodollar long paper

Organized Labourís Marxian Solution to the Current Crisis

Karl Marx had identified underconsumption as the fundamental cause of economic crises in capitalist economies.  His solution to the problem was the raising of wages and ultimately workers' appropriation of all capital.  The raising of wages has always been popular with unions and politicians.  Even leaders of industry favoured it and persuaded Herbert Hoover and Franklin Roosevelt to jawbone employers into raising wages during the Great Depression of the 1930s.  One estimate is that their policies raised the unemployment rate from 6.7 to 17.2 percent.  This analysis is relevant and important during the current crisis:  Labour unions are demanding higher wages using Marx's argument as a rationale.  Politicians promise policies that will also keep up or raise wages.  If these policies are enacted the recession will deepen and last longer than it would otherwise.

Not more Regulation , Please

Regulation of the economy has a very poor record of success.  The regulated often take over the regulator and use the system to their advantage at the cost of consumers.  Regulation of the financial sector during the last two decades aimed at preventing turmoil has not succeeded in preventing the current crisis.  The administration of the regulation always is costly, reduces freedom and creates inefficiencies.  Let markets sort out the problems; let us not have government make it more difficult to do so.   


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