French Entrepreneurs Revolt

Re:French Entrepreneurs Revolt by guelo on Tuesday October 09, 2012 @05:24AM (#4630662)

The problem in all of Europe is that the ECB has insanely decided to maintain tight money during a recession. This is slowing down economies across the continent and forcing governments into austerity budgeting which acts as a pro-cyclical intensifier of the recessions.

So being forced into an austerity budget you have two levers, cutting spending or increasing taxes. Both will hurt the economy, the question is which is worse. France being richer than, for example, Spain has a little more room to maneuver. Entrepreneurs like to look at the so-called supply-side arguments but the mirror demand-side argument is frequently ignored, if people don't have money to spend they're not going to buy what you're selling. Economics being the joke science that it is these issues are argued endlessly without resolution, though there is some evidence that tax policy does not have that big of an effect on economic growth. But what we can say for sure about cutting social services is that lower and middle class people will suffer more from these cuts than the entrepreneurs will suffer from tax hikes since normally the entrepreneur will have more personal money to absorb the hit.

Again, this could be avoided if ECB would adopt more pro-growth monetary policy.

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Re:French Entrepreneurs Revolt by fauigerzigerk on Tuesday October 09, 2012 @07:30AM (#4630946)

When you say "entrepreneurs" you must be thinking of the L'Oreal or Hilton heirs. I see lots of heavily indebted entrepreneurs in Europe taking on big personal risk, both financially and in terms of career risk. European entrepreneurs rely on bank loans much more than the typical U.S business. There's very little equity in many small businesses.

Enrepreneurs who are now wealthy often had to struggle for many years in poverty without much social security before they achieved that kind of success. Many fail as well. I think you're mixing up entrepreneurs and big corporations. Big corporations can absorb or avoid paying taxes in any particular country, but entrepreneurs often can't.

I do agree with you that monetary policy should be counter cyclical and it is. The ECB has tripled its balance sheet since 2007 and it has lowered interest rates to 0.75%, which is way below CPI. I agree that they should have been even more aggressive but there's a political reality as well.

Monetary policy is not the issue here. The problem is counter cyclical fiscal policy. It has to stand on both legs. If you don't run a surplus in boom times you're not going to be able to spend enough during downturns.

But our political systems seem to be structually pro cyclical. During boom times, the right wants to cut taxes or fund wars and the left wants to extend benefits. Nobody wants to run a surplus and pay down debt.

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