The commonly accepted story line about the French and Greek elections on Sunday is that the outcome is a rejection by voters of the austerity that Merkozy-dominated European decision makers have been imposing on the euro zone. The result, as some critics might put it more bluntly and negatively, is a defeat of disciplined economic policy by short-sighted populist sentiment. In general, displacement of disciplined decision making by raw popular anger is not good. But from the standpoint of Europe's economic health and its effect on the health of the global economy, backing away from austerity is the main thing needed right now. To understand why, read any of Paul Krugman's frequent forays into the subject. The idea that austerity breeds confidence, which in turn breeds private-sector initiative and prosperity, simply hasn't proven valid where it has been tried. Stimulation of demand is needed to keep Europe from dropping into a deep double-dip recession.

The election results do give reason for concern. Parts of François Hollande's platform look ill-conceived. The beneficiaries of Greek voters' rejection of the mainstream parties that had signed on to austerity are the Far-Left and Far-Right fringes; in this respect, the Greek result is a disturbing move toward extremism. On the basic dimension of austerity vs. stimulation, however, voters have moved the European economic debate in the correct direction, even if most of them did so for the wrong reasons.

A general lesson to extract from this is that just because a political leader's position may conform with some of the ignoble desires of the populace does not ipso facto mean it is bad policy. What constitutes good or bad policy is often a matter of debate even among people of goodwill—as it is regarding economic policy today in Europe, although I am more persuaded by those arguing for the need to stimulate demand than by the pro-austerity camp. Moreover, it is rare that one side has a monopoly on positions that could be seen as a pandering to short-sighted popular desires. German positions are rooted in immediate German self-interests that, as Andrew Moravcsik explains in the current Foreign Affairs, are no better for the economic health of the Continent than is the southern European profligacy that German banks and investors have helped finance. Germany has benefited from imbalances that make it, in Moravcsik's term, the “China of Europe,” even though its membership in the euro zone insulates it from the sort of criticism that is regularly directed against China about currency-exchange rates and trade surpluses.

Similar principles apply to debate about economic policy in the United States. Over the weekend, I attended an event at the University of Chicago at which the thinking of the Chicago school of economics pervaded discussions. It was the sort of environment in which people conversed about whether Barack Obama's economic policies mean he doesn't understand how economies work or—probably the dominant view—that he understands but has subordinated his understanding to a populist political agenda. The main problem I had with what I was hearing is that—although I am as much a believer as anyone else in the effectiveness of free markets—some of the economic structures and practices I heard being defended (such as those involving corporate governance) differ substantially from a free market and differ for reasons that have nothing to do with governmental interference. More to the present point, that a position of Obama might appeal to some of the baser emotions of the voting public does not keep if from being good economic policy—as measured by standards, such as macroeconomic growth, that would be as important to adherents of the Chicago school as to anyone else. And also as in Europe, a populist tendency to sway in whatever direction the voters want to go is no more characteristic of Obama than it is of his opponent.

Pandering to the crowd is indeed a common and unworthy political pattern, and it often does encourage lousy policy. But the pandering and the policy making are distinct dimensions. Determining the extent to which the two intersect in any one case requires closer examination of the policy in question.

Image: Francois Hollande