Sorting the politicians from the economists

Divisive politics has hijacked fiscal and monetary decision making worldwide in the last few years, and some democratic sacrifices may be needed to avoid future bad decisions.

Lowy Interpreter

It was not pre-ordained that the economies of Europe, the US, and the UK would perform as poorly as it they have over the past two years.

There were better policy options available which would have lowered unemployment (currently close to 8 per cent in the US and the UK, and nearly 12 per cent in Europe), fostered stronger growth, and left official debt in better shape. The US and the UK might have struck a better balance between the need for short-horizon fiscal stimulus and, simultaneously, the need for a credible commitment to medium-term fiscal sustainability. Europe might have accepted in 2010 that Greece was bankrupt, written off the debt and shored up the other peripheral countries against contagion.

Why were the superior options not chosen?



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