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SPRACHENZENTRUM
Fachbereich Englisch
UNIcert® IV - WS 14/15
WP 1
WRITING – ESSAY (120 minutes)
UNIcert® IV English Exam – Wednesday, January 28th 2015
Essay questions
Extra reading texts:
Europe will benefit from Greece being given a fresh start (Letter to the Financial Times 22nd Jan 2015)
Stimulus, not austerity, is the key to global economic recovery (Guardian, 1 st July 2013)
Answer ONE of the questions below only. You must write at least 500 words, though not more than 550 words.
Use the answer paper provided. When you have finished, count the number of words written and write the total at
the end of your essay.
Dictionaries (Eng-Eng and Eng-Other) are allowed.
Notes:
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This essay needs to be written in an objective academic style and organised accordingly, with a proper
introduction, paragraph structure and conclusion. There is no need to give numbers or titles to sections.
Arguments should always be backed up with logical reasoning and/or facts, quotations and statistics from the
source materials.
You should use these materials as sources to help you answer the question. Your essay should contain a
roughly equal balance of your own arguments and comments on materials from the articles, which should be
clearly signposted. Use line numbers when referring to the articles.
You should avoid lengthy direct quotations from the articles. It is preferable to use indirect quotations or to
build short direct quotations into your answers.
You should also aim to smoothly integrate the views of the article(s) with your own, for example through link
phrases such as: As the author of the article observes, …
Even better, it is possible to include elements of contrast, doubt, concession or agreement in these link
phrases, e.g. Although Merkel claims that …; Despite Vladimir Putin's assertion that...
Make it clear AT ALL TIMES WHAT YOU ARE TALKING ABOUT. Repeat names, institutions, corporations, etc,
as often as necessary so that the reader knows what it is you wish to say (about what).
The absolute requrements: word count, visible structure, references to reading texts.
Titles:
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2.
3.
4.
"The standard macroeconomic models failed to predict the risk of a major recession, and the predictions of
policymakers based on them have, by now, totally undermined their credibility". Discuss Joseph Stiglitz'
statement. (Reading Text: Needed – a New Economic Paradigm)
In connection with the world financial crisis, Stiglitz says that "the invisible hand was invisible because it was
not there". In your essay, discuss the significance of this statement for macroeconomic models and for the
way forward out of the crisis. (Reading Text: Needed – a New Economic Paradigm)
"Debt relief is a necessary (though not sufficient) condition for Greece to recover." Professor Stiglitz and his
colleagues believe that macro-economic stabilisation can be achieved through growth and increased
efficiency in tax collection rather than through public expenditure cuts. Discuss.
"If economics were only about profit maximisation, it would be just another name for business
administration. It is a social discipline, and society has other means of cost accounting beside market prices."
Discuss. (Additional Text 2).
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SPRACHENZENTRUM
Fachbereich Englisch
UNIcert® IV - WS 14/15
WP 1
Additional Text 1
January 22, 2015 11:45 pm
Europe will benefit from Greece being given a fresh start
Sir, FT columnists have recently acknowledged that debt relief is a necessary (though not sufficient)
condition for Greece to recover (Gillian Tett, January 17, Wolfgang Münchau, January 5, Peter
Spiegel, January 7). Only with such relief will it be able to develop a growing economy that makes full
use of the skills of its people to contribute to a united and democratic Europe.
5 On the vexed issue of debt resolution, the writers concerned are to be congratulated for taking an
ethical and pragmatic stance. Ethical in rejecting a dogmatic insistence on debt repayment in full
regardless of the social and political consequences - a dogma that is already dividing Europe.
Pragmatic in recognising the breathing space that debt relief will give to a government intent on
pursuing reforms - in challenging corruption and tax evasion and aiming at higher productivity - rather
10 than pursuing austerity per se. We would take such pragmatism further to suggest three forms of
financial restructuring that have practical precedents.
First, a further conditional increase in the grace period, so that Greece does not have to service any
debt, for example for the next five years and then only if Greece is growing at 3 per cent or more, and
until Greece has recovered at least 50 per cent of the gross domestic product it has lost since 2008.
15 Precedents for this include the “bisque” clause in the UK loan from the US negotiated by J M Keynes
after the second world war, where the UK did not service the debt until the economy met agreed
conditions.
Second, some debt reduction, especially of bilateral official debt, to further increase the fiscal space
available. Third, significant money for efficient investment projects, especially for exports. The
20 Juncker Plan could provide a good framework for such investment, to be funded, say, by the European
Investment Bank, EU Structural Funds and the German KfW. As well as increasing aggregate
demand, such a supply-side measure will also enhance future growth.
Debt relief is not a sufficient condition for this virtuous dynamic, however: Greece must itself carry
out reforms. We believe it is important to distinguish austerity from reforms; to condemn austerity
25 does not entail being anti-reform. Macro-economic stabilisation can be achieved through growth and
increased efficiency in tax collection rather than through public expenditure cuts, which have reduced
the revenue base and led to an increase in the debt ratio.
We think that the whole of Europe will benefit from Greece being given the chance of a fresh start.
After all, as Ms Tett has reminded us, it was after substantial debt relief that the German economy was
30 able to grow - and reform itself - in the 1950s.
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SPRACHENZENTRUM
Fachbereich Englisch
UNIcert® IV - WS 14/15
WP 1
Prof Joseph Stiglitz
Columbia University, Nobel Prize winner
of Economics
Prof Chris Pissarides
London School of Economics, Nobel Prize winner of Economics
Prof Charles Goodhart
London School of Economics
Prof Marcus Miller
Warwick University
Michael Burke
Economists Against Austerity
Prof Panicos Demetriadis
University of Leicester
Prof Stephany Griffith-Jones
IPD Columbia University
Prof Gustav A Horn
Macroeconomic Policy Institute (IMK)
Prof Mary Kaldor
London School of Economics
Neil MacKinnon
VTB Capital
Prof Jose Antonio Ocampo
Columbia University
Avinash Persaud
Peterson Institute for International Economics
Helmut Reisen
Shifting Wealth Consult
Robert Skidelsky
Emeritus Professor, University of Warwick
Prof Frances Stewart
University of Oxford
Prof Robert Wade
London School of Economics
Hilary Wainwright
Transnational Institute, Amsterdam
Prof Simon Wren-Lewis
Merton College Oxford
Copyright The Financial Times Limited 2015. You may share using our article tools. Please don't cut articles from FT.com and
redistribute by email or post to the web.
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SPRACHENZENTRUM
Fachbereich Englisch
UNIcert® IV - WS 14/15
WP 1
Additional Text 2
Stimulus, not austerity, is the key to global economic recovery
Robert Skidelsky
guardian.co.uk, Monday 1 July 2013 16.01 BST
We all know how the global economic crisis began. The banks over-lent to the housing market. The
subsequent burst of the housing bubble in the United States caused banks to fail, because banking had gone
global and the big banks held one another's bad loans. Banking failure caused a credit crunch. Lending dried
up and economies started shrinking.
5 So governments bailed out banks and economies, producing a sovereign debt crisis. With everyone busy
deleveraging, economies failed to recover. Much of the world, especially Europe, but also the slightly less
sickly US, remains stuck in a semi-slump.
So how do we escape from this hole? The familiar debate is between austerity and stimulus. "Austerians"
believe that only balancing government budgets and shrinking national debts will restore investor
10 confidence. The Keynesians believe that without a large fiscal stimulus – a deliberate temporary increase of
the deficit – the European and US economies will remain stuck in recession for years to come.
I am one of those who believe that recovery from the crisis requires fiscal stimulus. I don't think monetary
policy, even unorthodox monetary policy, can do the job. Confidence is too low for commercial banks to
create credit on the scale needed to return to full employment and the pre-crisis growth trend, however many
15 hundreds of billions of whatever cash central banks pour into them. We are learning all over again that the
central bank cannot create whatever level of credit it wants.
Like Paul Krugman, Martin Wolf and others, I would expand fiscal deficits, not try to shrink them. I
advocate this for the old-fashioned Keynesian reason that we are suffering from a deficiency of aggregate
demand, that the multiplier is positive and that the most effective way to reduce the private and public debts
20 a year or two down the line is by taking steps to boost growth in national income now.
But the argument between austerians and Keynesians over how to encourage sustained recovery intersects
with another debate. Simply put, what kind of post-recovery economy do we want? This is where economics
becomes political economy.
Those who believe that all was fine with the pre-crisis economy except for banks making crazy loans are
25 convinced that preventing such crises in the future requires only banking reform. The new reform orthodoxy
is "macro-prudential regulation" of commercial banks by the central bank. Some would go further and either
nationalise the banks or break them up. But their horizon of reform is similarly confined to the banking
sector, and they rarely ask what caused the banks to behave so badly.
In fact, it is possible to regard excessive bank lending as a symptom of deeper economic flaws. The
30 economist Thomas Palley sees it as a means of offsetting growth in income inequality, with access to cheap
credit replacing the broken welfare guarantee of social democracy. So reform requires redistribution of
wealth and incomes.
Redistributive measures go quite well with stimulus policies, because they may be expected to increase
aggregate demand in the short term (owing to lower-income households' higher propensity to consume) and
35 minimise the economy's dependence on debt financing in the long term. Initial damage to the confidence of
the business class caused by higher taxes on the wealthy would be balanced by the prospect of higher overall
consumption.
Others argue that we should try to rebalance the economy not just from rich to poor, but also from energywasting to energy-saving. The premise of the green economic agenda is that we have reached the ecological
40 limits of our current growth model, and that we will need to find ways of living that reduce demands on nonrenewable sources of energy.
So stimulus policies should aim to stimulate not just demand per se. They must focus instead on stimulating
ecologically-friendly demand. For example, greens advocate free municipal transport in major cities. In
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SPRACHENZENTRUM
Fachbereich Englisch
UNIcert® IV - WS 14/15
WP 1
general, they argue, we need more care, not more cars, so stimulus money should go to health, education and
45 environmental protection.
The truth is that any fiscally-driven recovery policy is bound to have reformist implications. That is why the
austerians are so against it, and why even those who accept the theoretical case for a stimulus insist on
implementing it through monetary policy alone.
Rebalancing the economy from gas-guzzling to energy-saving – and from private to public consumption – is
50 bound to alter the goal of economic policy. Maximising GDP growth will no longer be the top priority;
rather, it should be something we might want to call "happiness," or "wellbeing," or the "good life."
The radical case is that the pre-crisis economy crashed not because of preventable mistakes in banking, but
because money had become the sole arbiter of value. So we should be energetic in seeking recovery, but not
in a way that simply reproduces the structural flaws of the past.
55 As Dani Rodrik has well put it: "If economics were only about profit maximisation, it would be just another
name for business administration. It is a social discipline, and society has other means of cost accounting
beside market prices."
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