Tag Archives: Keynesian economics

Lesson from Cyprus: Spending Restraint Is the Pro-Growth Way to Solve a Fiscal Crisis | Cato @ Liberty

May 30, 2016 By in Business Administration, Cyprus, People, Politics Tags: , , , , , , , , , 1 Comment
Map of Cyprus with EU flag

Map of Cyprus with EU flag (Photo credit: Wikipedia)

This is an outstanding must-read article from the Cato Institute. It argues that unlike many other European nations, Cyprus decided to deal with its over-spending problem by tightening belts in the public sector rather than the private sector.

Source: Lesson from Cyprus: Spending Restraint Is the Pro-Growth Way to Solve a Fiscal Crisis | Cato @ Liberty

The article puts Cyprus on a pedestal as best practice and this will be good for Cyprus to attract inbound investment and borrow money in international markets.

However, the article ignores the political and social context.

Firstly, Germany gave Cyprus a very raw deal because she was small. German policy makers deliberately tried to destroy Cyprus business with large Russian companies.

Secondly, unlike bigger countries like France or Italy, Cyprus could not manipulate the rules of the fiscal compact.

Thirdly, the Cyprus example highlights that the EU economic engine is a sham. There is no cohesive energy strategy that capitalized upon Cyprus’ offshore gas reserves. Meanwhile, Angela Merkel, in a box domestically because of her refugee policies, was able to get the EU to stomp up EUR3 billion for Turkey.

The bottom line is that it is not possible to consider economics in isolation, social and political policies must be dovetailed.

In the case of Cyprus, the real prize will come from reunifying the island.

Thoughts?

 

Why is Osborne so keen to balance the budget? To bring about a smaller state | Voices | The Independent

November 23, 2015 By in Austerity, Business Administration, David Cameron, Economics, Fiscal Policy, George Osborne, Growth, Healthcare, Keynesian, NHS, People, Politics, Public Sector, Public Services Reform, Reform, Shared Services, Unemployment Tags: , , , , Leave a comment

The Independent cautions that it is risky to predict what’s going to appear in a Chancellor’s fiscal package, particularly when the Chancellor in question is a surprise-merchant like George Osborne. However, the left-leaning paper is confident that Mr Osborne will unveil a contraction in the scope of the British state of historic proportions on Wednesday.

Source: Why is Osborne so keen to balance the budget? To bring about a smaller state | Voices | The Independent

For those that don’t know me let me restate my political views by way of sharing my bias:

  1. Libertarian, rather than authoritarian
  2. Internationalist and Pro-Europe
  3. Right of centre , favouring strongly individualism compared to state
  4. Strongly anti-bureaucracy, favouring small government
  5. Pro democracy
  6. Anti corruption
  7. Pro Keynesian and anti monetarist (I favour a belt & braces approach with sound monetary policy, good fiscal discipline but leaving room for state intervention where necessary)
  8. Pro Monarchist

For me George Osborne’s policies have always been about his political bias, rather than any sort of cohesive strategy. Despite my conservative politics, I struggle with Osborne’s austerity policies. Whilst I accept radical reform, simply top-slicing public sector budgets reduces the quality of public services. Also given politically ring fenced budgets, the ax falls unfairly on the rest.

We have seen savage cuts to military spending and the Home Office budgets. Now that the nation is at risk, I expect Cameron and Osborne to announce major policy reversals. 

As John Gelmini and I have said many times on this blog, there is still massive opportunity for radical reform and consolidation across the public sector. But the UK needs strategic leadership.

Thoughts?