Monday, August 12, 2013

Austerity v Stimulus - The Great Debate … PART 1

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1 comment:

Anonymous said...

Max, your analysis may be correct in terms of the situation in the North. But for us in the South, we do not understand our economies well enough to know what are the factors that will make them grow.

Some think that government spending or priming the pump, Keynesian-style is what is needed. Off they go in STEP and with PRIDE and do little else, other than creating disguised unemployment.

The cash injected by wealth or economic transfers from borrowed funds, exacerbates the already poor economic performance. How do you expect to stimulate the economy with expenditure that has no visible or no expected multiplier or investment effect?

These payouts (essentially or in effect, leakages) make just one round of spending that tend to leak out straight into eithr encouraging or paying imports. This weakens the external position even further.

There is no educational infrastructure nor a financial infrastructure being created by any of this spending to create a multiplier. This is so, mainly because there is no such thing as idle plant or even existing plant or technologies, needing a stimulus for growth or take-off, as in the case of Saint Lucia, that will create outputs, either for export or domestic markets.

Do you see the chasms that need to be bridged?

Therefore, simply jumping on the economic bandwagon, parroting the 'growth' mantra is totally ludicrous and largely self-defeating. It requires a much deeper understanding and knowledge of our own domestic economies and of the discipline called economics.

Obviously, our policy makers are by and large, merely going through the motions, whilst they are totally out to sea on the real issues.

August 14, 2013 at 1:32 PM

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