Policy in crisis

By the end of the 1980s, inflation, high interest rates, and currency and debt crisis were all (theoretically) tied to ‘excessive’ budget deficits (see Fischer 1989). The mainstream political and economic discourse was now firmly geared to budget restraint or sound finance, which did not necessarily imply balanced budgets over the cycle.

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Wither fiscal policy

The anti-Keynesian revolution gained serious momentum following the stagflation episode. Monetarists had established monetary policy as the dominant instrument for economic stabilisation. According to Friedman and other Monetarists’, for example, Allan Meltzer and Karl Brunner, the conduct of monetary policy should be guided by simple, fixed rules.

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Full employment redefined

For many advanced economies, the early post-war period was characterised by full employment, modest inflation and economic prosperity. Under the guidance of the Keynesian model, fiscal and monetary policy was used for economic stabilisation and to achieve low levels of unemployment on a sustained basis.

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A Word from the Wise

The Conservative belief that there is some law of nature which prevents men from being employed, that it is ‘rash’ to employ men, and that it is financially ‘sound’ to maintain a tenth of the population in idleness for an indefinite period, is crazily improbable – the sort of thing which no man could believe who had not had his head fuddled

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Job creation and the Triple Crisis

The aftermath of the Global Financial Crisis strengthened international policy debate regarding high rates of joblessness. However prior to the crisis, a major policy commitment had emerged from the United Nations World Summit. The General Assembly;

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The Triple Crisis: Policy context

The 1987 United Nations World Commission on Environment and Development prompted a global agenda to safeguard the interests of future generations. The subsequent Brundtland Report (1987) called for a new era of economic growth, one which would be ‘forceful and at the same time socially and environmentally sustainable’.

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The philosophy of (economic) language

In Language as Symbolic Action (1966), Kenneth Burke suggests a belief system establishes its own vocabulary to present its adherents with a specific reality. Proponents of neo-liberalism, the dominant economic, social and political ideology since the 1970s, have been effective in establishing a vocabulary, particularly in relation to the conduct of fiscal policy.

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Chancellor for a day…

Mr Osborne’s fiscal austerity agenda has been pursued under the misleading guise of ‘sound’ public finance ostensibly to strengthen the economy’s credibility in international markets and restore economic growth. Yet the required rebalancing of demand from the public to the private sector, particularly private investment and net exports, has not materialised.

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Compare the pair

International Monetary Fund (IMF) policies do not recognise the importance of full fiscal-monetary sovereignty to the conduct of fiscal (government) policy. Specifically, mainstream notions of fiscal sustainability are not applicable to sovereign economies.

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Failed policy: The IMF in crisis

Notwithstanding the nature and causes of the Global Financial Crisis (GFC), the IMF continues to espouse fundamentally flawed policy advice, as the institution seeks to maintain its relevance and legitimacy despite becoming largely redundant following the collapse of the Bretton Woods (fixed exchange rate) system in 1971.

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