Matthias Matthijs

The Euro Crisis’ Theory Effect: Northern Saints, Southern Sinners, and the Demise of the Eurobond

Abstract Of the multiple narratives EU policymakers could have chosen at the onset of the euro crisis, why did austerity and structural reform win out over other plausible cures for member states’ problems? Arguably, sovereign debt pooling or more federalized economic governance would have been a solution to member states’ national deficits and competitiveness woes. To understand this puzzle, we draw on the sociology of knowledge literature. We argue that the response to the euro crisis was heavily informed by broader social logics that constructed the problem and the solution heavily toward ordoliberal and neoliberal ideas. Mapping the fate of the Eurobond proposals allows us to trace the complex entanglement of economic policy-making and parse out the ways in which social realities are shaped to make particular policy choices seem inevitable, even as they are themselves the product of social processes.

Powerful rules governing the euro: the perverse logic of German ideas

ABSTRACT Ideas are at their most powerful as an explanatory variable when they lead agents to go against any broadly reasonable interpretation of their material self-interests. They become even more intriguing when they are instrumental in actually causing a crisis, in which actors undercut their own stated goals and then continue to make matters worse by sticking to those same ideas, even in the light of clear evidence that the policies they inspire are not working. This contribution shows two dynamics between power and ideas to explain Germanys behavior during the euro crisis. The first dynamic examines the changing macroeconomic consensus on how to conduct monetary and fiscal policy that governed the euro from 1999 to 2012. The second dynamic shows how a strict adherence to Germanys ordoliberal ideas of budgetary rules and structural reform turned a containable Greek fiscal problem into a full-blown systemic sovereign debt crisis.

Black Swans, Lame Ducks, and the mystery of IPE's missing macroeconomy

ABSTRACT Britains BREXIT vote and Trumps victory in the US presidential elections sent shockwaves through the Western liberal establishment, including academia. Both events suggest yet another ‘rethinking’ of International Political Economy (IPE). Yet we have been here before. After the global financial crisis of 2008, ‘Open Economy Politics’ (OEP) was criticized for being unable to either anticipate or adequately explain the global financial crisis. Now that IPE has been caught short twice in a decade, any rethinking must go beyond critique and beyond OEP. To stop being surprised, we argue that IPE needs to shift its focus from micro-foundations back to macro-effects. IPE today strangely lacks an appreciation for the global macroeconomics that drives the outcomes it has such difficulty explaining, such as recurring financial bubbles, increasing levels of inequality, and the global rise of populism. Bringing the global macroeconomy back into the IPE, we argue, is a necessary corrective.

The Eurozone's 'Winner-Take-All' Political Economy: Institutional Choices, Policy Drift, and Diverging Patterns of Inequality

This article offers an institutional explanation for the conflicting trends in income inequality both across the Eurozone and within its member states. It argues that the euro’s introduction created different economic policy incentives for peripheral and core members. First, the euro’s design was a political choice skewed toward deflationary adjustment policies in hard times, leading to falling incomes and employment in the periphery. Second, the institutional incentives of the Eurozone are the opposite for export-driven coordinated market economies and demand-led mixed market economies during booms and downturns, respectively. During the euro crisis, the Eurozone’s Northern countries gained at the expense of the Southern ones, while at the same time seeing lower domestic inequality compared to increased inequality in the periphery. This diverging pattern of European inequality was exacerbated by EU economic policy drift, the lack of any real national democratic choice in the periphery, and the growing importance of organized financial interests in Brussels.This article offers an institutional explanation for the conflicting trends in income inequality both across the Eurozone and within its member states. It argues that the euro’s introduction created different economic policy incentives for peripheral and core members. First, the euro’s design was a political choice skewed toward deflationary adjustment policies in hard times, leading to falling incomes and employment in the periphery. Second, the institutional incentives of the Eurozone are the opposite for export-driven coordinated market economies and demand-led mixed market economies during booms and downturns, respectively. During the euro crisis, the Eurozone’s Northern countries gained at the expense of the Southern ones, while at the same time seeing lower domestic inequality compared to increased inequality in the periphery. This diverging pattern of European inequality was exacerbated by EU economic policy drift, the lack of any real national democratic choice in the periphery, and the growing importance of organized financial interests in Brussels.

The Three Faces of German Leadership

Germany has acted as enforcer, facilitator and benefactor in Europes triple crisis, but not always coherently.

When Is It Rational to Learn the Wrong Lessons? Technocratic Authority, Social Learning, and Euro Fragility

Why do bad policy ideas persist over time? We trace the development of the euro’s governing ideas over fiscal and monetary policy in the face of mounting evidence that continued adherence to those ideas was economically deleterious. We argue that a specific form of social learning, framed by a retrospective recoding in 2010–2012 of Europe’s experience with fiscal rules in 2003–2005, drove European elites to pursue policies that were economically irrational but politically rational. As a result, the Eurozone’s medium-term resilience has been made possible by the European Central Bank’s unconventional and loose monetary policies, which operate in direct opposition to the tight fiscal policies of its member states’ governments. We maintain that this self-defeating macroeconomic policy mix will continue as long as the lessons learned by policymakers are driven by the need to win what we term an authority contest, rather than provide better macroeconomic outcomes.

A Barbarous Relic: The Economic Consequences of the Euro

The main argument the author makes is that the euro shows striking similarities to the workings of the interwar monetary system. In an important sense, the euro suffers all the disadvantages of the interwar gold standard, without enjoying any of the advantages.

Roundtable on Ideational Turns in the Four Subdisciplines of Political Science

ABSTRACT On September 4, 2015, the Political Epistemology/Ideas, Knowledge, and Politics section of the American Political Science Association sponsored a roundtable on ideational turns in the four subdisciplines of political science as part of its annual meetings. Chairing the roundtable was Jeffrey Friedman, Department of Government, University of Texas, Austin. The other participants were Jeffrey Checkel, Department of Political Science, Simon Fraser University; Matthias Matthijs, School of Advanced International Studies, Johns Hopkins University; and Rogers Smith, Department of Political Science, University of Pennsylvania. We thank the participants for permission to republish their remarks, which they were offered the opportunity to edit after the fact.