Fiscal policy

Once it is finally realised that this economic crisis is not an ordinary recession, perhaps we will stop deploying Keynesian remedies and begin more fundamental reforms as advocated by Tanzi. But then again, it took several decades until communism’s apologists ran out of excuses – and some are still at it.

Readers do not have to agree with every single prediction or assessment in Tanzi’s book, and may even miss a more clearly spelt out recipe of how to reduce government to the smaller size that the author deems sufficient to fulfil the functions of a modern state. But Tanzi’s well-written, thoughtful and thought-provoking book will leave readers better informed and better able to engage in debates about the future role of the state in the economy.

Australia is on a slippery slope of becoming more like European countries. If the government continues to spend big and finance it through deficits, the future tax burden may have to rise substantially to pay for a growing debt burden.

If Europe and America are bent on committing suicide, there is nothing Australia can do to stop them. But we can decide not to join them.

How a new playground in a fossilised village can amount to ‘nation building’ is a government secret. They could have just as well repainted the disused railway station or installed a new dock in the closed courthouse.

By comparing the different economic conditions of Europe and Australia, it should not be too difficult for Australians to make a choice about economic policy. Mimicking European policies is the surest way to economic disaster.

By comparing the different economic conditions of Europe and Australia, it should not be too difficult for Australians to make a choice about economic policy. Mimicking European policies is the surest way to economic disaster.

The problem with Keynesians like Krugman and Stiglitz is that they are theoretically committed to balanced budgets, but only in the long run. But as no other than Keynes taught us, in the long run we are all dead. In the meantime, his disciples will never tire to explain why the right time to cut spending is never.