Unfortunately, at the point we arrived at, maintaining macroeconomic stability has once again become the primary concern.

It appears that Papandreou withdrew from this decision to hold a referendum. But he did not declare of the vote of confidence. The outcome of the voting was not definite when I have been writing these lines. Despite his step back, my view that Papandreou has made a wise maneuver did not change as I have stated in my previous commentary. He turned to Greek people and said, “It is your call” easing the burden on his shoulders. Although he did not call for a referendum, the public realized better what they are faced with. Also, he conveyed an important message to the opposition party implying that they have to shoulder the current bailout package together. Otherwise, the current opposition would come to power and have to shoulder the bailout. I guess, concerning last Thursday’s commentary, I was mistaken only about Venizelos. I have assumed that he will start to recover from the gastric disease. But he turned down this opportunity and opposed to the referendum. Anyway. My field of expertise might be open to discussion, but one thing is unquestionable: I am neither an expert of Greece, nor a politician. So, I will stop talking through my hat and rumor about macroeconomic stability.

The contents of textbooks are changing

Textbooks of macroeconomics started to change significantly in the 1990s. Subjects like how long term growth rate is determined, why developing countries (with some exclusions) could not catch up with developed countries in per-capita income and what steps should be taken to close the per-capita income gap  were either neglected or scanned in textbooks on macroeconomics. This was not because these subjects are overlooked by economists. On the contrary, for many economists there are only a few subjects that are as important as identifying the reasons for per capita income gaps between developed and developing countries. The main reason why long term growth was a subject rarely addressed in textbooks is that high inflation, instable unemployment rates and fluctuating growth were common phenomena for many countries. Therefore, textbooks concentrated more on understanding the main dynamics of the fluctuations in the level of economic activity or inflation and discussed whether it was necessary to take measures to tackle these problems. If there was an agreement that taking action was necessary, these books tried to answer the question as to which policies to implement.

Stability was a prior issue

By the end of the 1990s, inflation ceased to be a problem for many countries. Even a number of Latin American countries that had lived with hyperinflation in the 1980s took important steps to secure macroeconomic stability during the early twenty first century. Of course, fluctuations in the volume of economic activity prevailed as a key characteristic of market economies although these were more moderate. And again, certain economies continued to suffer from severe problems. For example, Japan somehow was not able to enable economic growth and at the same time was suffering from disinflation. However, many countries had achieved considerable improvements with respect to inflation, growth and unemployment. This phenomenon has evoked the view that economists were developed a better understanding about the causes of these problems and therefore were able to make more successful policy recommendations to policy makers. In the end, the opinion that most countries strengthened the fundamentals of their economies has gained prevalence. In such a climate, different subjects which in fact have been of higher importance for economists from the very beginning, such as the reasons of the income gaps between countries, started to get a larger share in macroeconomics textbooks. This indeed was a positive development as it helped economics students realize that the answer of this important question had not been found yet and that there had been many important questions to seek the answer of. Unfortunately, at the point we arrived at, maintaining macroeconomic stability has once again become the primary concern. We all are tracing the answer of the question how to maintain stability. Great Turkish poet Attila İlhan wrote, “Once you hit the road, you travel for a lifetime.” Then, let me chase the inflation issue on Tuesday, but this time with a different perspective. See you then...

This commentary was published in Radikal daily on 05.11.2011