What Mladina & Demokracija Are Saying This Week: Climate & Economic Change vs Voodoo Economics

By , 04 Jan 2020, 10:33 AM Politics
What Mladina & Demokracija Are Saying This Week: Climate & Economic Change vs Voodoo Economics The weeklies' Facebook pages

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The covers and editorials from leading weeklies of the Left and Right for the work-week ending Friday, 3 January 2020

Mladina: Change ahead for the global economy in 2020

STA, 3 January 2019 - The trade war the US started three years ago could get a new development in 2020 which will be caused by Europe as it is transiting to cleaner technologies. To promote clean technologies as it pursues its CO2 commitments, Europe will have to resort to customs and taxes, "which changes everything", the left-wing weekly Mladina says on Friday.

Europe is rushing the change especially because of the interests of Germany, its No. 1 economic power which wants to be the leader, says editor-in-chief Grega Repovž, noting the German industry is expected to roll out this year many new materials and products, which will not be competitive at least in their first years.

The editor says there is some historical irony and a lot of symbolism in Europe starting the transition to cleaner industries and a new way of protecting its interests with steel.

Firstly, steel epitomises the old and dirty industry which used to turn entire regions in deserts, and secondly, the EU was in 1950 formed to protect its steel industry.

Ursula von der Leyen included the introduction of a CO2 tax in Europe in the programme of the new European Commission, thus highlighting a new/old way of protecting European interests in order to adapt to the climate crisis.

She believes Europe should not allow its market getting flooded by cheap Chinese steel which is possibly subsidised and produced in an environmentally contentious manner.

"This announcement clearly shows that Europe will change its economic behaviour, while other superpowers will not be just watching what is going on.

"The global economy could thus change significantly due to the climate crisis ...," Repovž says, adding that things may well not develop as Europe would like it.

The transition will cost a lot at first and there is no doubt that European countries and the EU itself will have to help companies financially.

Industries are thus in for several difficult years as production and markets gets adapted to new environmental standards.

This is not just an economic issue, but also a political one because such developments can cause political turmoil, Repovž concludes the editorial A Fight for New Economy.

Demokracija: Doubts about the multiplier effect of state investment

Ljubljana, 3 January - The right-wing weekly Demokracija disputes the argument that state investment in infrastructure projects has a multiplier effect on the national economy and economic growth, rubbishing an op-ed article in which economist Jože P. Damijan argued against the selection of Turkey's Cengiz as the contractor to build the Karavanke motorway tunnel.

In the latest editorial, headlined Jože P. Damijan's Voodoo Economics, Demokracija editor-in-chief Jože Biščak notes that the article appeared in Delo, the newspaper owned by the industrial concern Kolektor, whose construction arm was one of the bidders in the tender to built the Slovenian section of the tunnel.

"Since the deep state is facing the threat of a similar outcome in other public infrastructure tenders (...) Jože P. Damijan set out to 'scientifically' prove why the state should renounce (cheaper) foreign contractors (in particular the Turks), and explained to the executive how to get rid of them.

"Damijan is not just anybody, in a decade and a half the man went from being a young free market economist to an advocate of the command economy, becoming the darling of Forum 21 and the leading left economist," writes Biščak.

He says that in his "zeal Damijan applied his strongest weapon - the multiplier effect", which Biščak denounces as a myth, quoting economists Federic Bastiat and Friedrich von Wieser.

"This is not to say the national and local governments should not invest money into infrastructure (...) but they should do so with utmost care. Including by seeing to the cheapest possible implementation of an infrastructure project.

"Governments do not produce a market value (...) Even less has their investment multiplier effects. This has also been established in a working document of the IMF for 2014 (which Damijan often refers to) by economist Andrew M. Warner, who found few (empirical) pieces of evidence that infrastructure projects had multiplier effect or generated economic growth.

"The state can do most for the domestic economy by ensuring a functional rule of law and by allowing freedom to people. That should be Slovenia's reality if it wants to be a successful country."

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