SOURCE: Milken Institute

April 21, 2015 16:36 ET

Milken Institute Review: Former Adviser to the President of the EU Commission Argues That Germany's Much Celebrated Economy Is No Model for Europe

LOS ANGELES, CA--(Marketwired - April 21, 2015) -  Philippe Legrain challenges the received wisdom that Germany's mix of wage discipline and focus on exports is the cure for what ails the rest of Europe. "Germany is using its clout in the European Union to try to reshape the Eurozone in its own image," he writes. "But far from being an archetype of success that merits imitation, a close look reveals that Germany's economy is dysfunctional in surprising ways." 

Also in this issue:

Staci Warden, the director of the Milken Institute's Center for Financial Markets, outlines a grim unintended consequence of the U.S. Treasury's effort to close the global financial system to terrorists. It's working -- but in the process it is shutting out friends as well as foes. "Financial integration is essential to the growth of emerging-market countries as well as to the decentralization of economic power within them, she writes, "and their exclusion from the global financial system runs counter to the United States' broader goals of peaceful international cooperation, poverty alleviation, and broad-based economic development."

Katharine Abraham, a former member of Pres. Obama's Council of Economic Advisers, slices and dices the employment numbers for clues to the fate of labor-force dropouts. "Some of these people could well return to the workforce if sufficient demand for their services were to materialize," she argues. "And the more of them there are, the more misleading the unemployment rate is likely to be as an indicator of labor market slack-and the more of a mistake it could be for policymakers to rely on the unemployment rate to gauge how much room there is for short-term growth that doesn't set the stage for inflation."

Noah Smith, the creator of the economics blog Noahpinion, lays out the unpalatable options before Japanese policymakers, who must manage the government's Olympian mountain of public debt. "Japan is dealing with problems no country has ever confronted before," he writes. "It faces an epochal choice: whether to take the sure path of continued stagnation and keep its promise to the Baby Boom generation, or whether to launch a bold and risky experiment of debt monetization that would relieve the burden on the young."

Robert Looney, an economist at the Naval Postgraduate School in California, takes a hard look at the new Nigerian government's prospects for dodging economic and social disaster. "When Nigeria faced an equally dangerous tipping point following its 1967-1970 civil war, the country survived -- thanks in part to the balm of oil-export revenues," he reminds. "Now, survival will largely depend on whether Nigeria has the societal strength to rein in rampant corruption, invest wisely in development infrastructure, and manage ethnic and religious strife."

Charles Castaldi, a former Latin America correspondent for NPR, visits Buenos Aires in search of explanations for Argentine particularism in the wake of the latest political scandals. "Argentina now holds the dubious distinction of having fallen further and faster than any other in modern times," he writes. "A century of dysfunctional government and economic mismanagement have kept it on a Sisyphean slope; each time Argentina appears poised for a comeback, another crisis sends it tumbling."

Michele Boldrin and David Levine, economists at the University of Washington in St. Louis, challenge the conventional wisdom that the current patent system is vital to sustaining economic growth -- or, for that matter, the idea that it does more good than harm. "It's not hard to convince people that the enforcement of patents is costly to them," they write. "The hard part is explaining that, in most cases, the inherent production and marketing advantages to being the innovator offers plenty of room for profit even without the benefit of patent protection."

Find the latest Milken Institute Review here:http://www.milkeninstitute.org/publications/view/681

About the Milken Institute
A nonprofit, nonpartisan think tank, the Milken Institute believes in the power of capital markets to solve urgent social and economic challenges and improve lives. Its mission is to increase global prosperity by advancing collaborative solutions that widen access to capital, create jobs and improve health.

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