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‘Deficit Financing’ or ‘Deficit-Reduction Financing?’ Debates in Contemporary Economics: Origins, Confusions and Clarity "تمويل العجز" أو "تخفيض العجز في التمويل؟" مناقشات في الاقتصاد المعاصر: الأصول والالتباس والوضوح

Author

Listed:
  • Ann Pettifor

    (Director, Policy Research in Macroeconomics (PRIME), and Council Member, Progressive Economy Forum, London, UK)

Abstract

The analysis of government deficits and public debt points to a funda-mental error in contemporary economic discussions. It is not possible to assess the stance of fiscal policy from estimates of the public sector deficit. John Maynard Keynes’s macroeconomics and the empirical evidence discussed in this paper indicate that expansionary fiscal policy financed by loan issues will lead to growth in economic activity and employment. In an economy with spare capacity and idle resources, high government expenditure generates income, including tax revenues and thereby reduces the government deficit, and cuts public debt. The main purpose of increased loan-financed government spending at times of private economic weakness is to increase the nation’s income. Keynes argued that any such government spending was not deficit spending, because he understood the spending as the most sensible means to cut the deficit. Deficit-reduction spending might be a more appropriate definition, because as he argued with Josiah Stamp: “You will never balance the budget through measures which reduce national income” (Keynes, 1978, vol. 21, p. 149). يشير تحليل العجز الحكومي والديون العامة إلى خطأ جوهري في المناقشات الاقتصادية المعاصرة. ليس من الممكن تقييم موقف السياسة المالية من تقديرات عجز القطاع العام. نظرية جون ماينارد كينز للاقتصاد الكلي والأدلة التجريبية المطروحة في هذه الورقة تشير إلى أن السياسة المالية التوسعية الممولة بإصدار القروض ستؤدي إلى نمو في النشاط الاقتصادي والعمالة. الإنفاق الحكومي المرتفع في اقتصاد ذي قدرات فائضة وموارد خاملة، يولد الدخل، بما في ذلك الإيرادات الضريبية، وبالتالي يقلل من عجز الحكومة، ويخفض الدين العام. الغرض الرئيسي من زيادة الإنفاق الحكومي الممول بالقروض في أوقات الضعف الاقتصادي للقطاع الخاص هو زيادة دخل الدولة. ينظر كينز بأن أي إنفاق حكومي من هذا القبيل لا يعتبر عجزًا، لأنه فهم أن الإنفاق هو الوسيلة الأكثر منطقية لخفض العجز. قد يكون "إنفاق لتخفيض العجز" تعريفاً أكثر ملاءمة لنظريته، لأنه جادل مع جوزايا ستامب: "لن توازن الميزانية أبداً من خلال إجراءات تقلل الدخل القومي" (كينز، 1978م، المجلد 21، ص 149).

Suggested Citation

  • Ann Pettifor, 2019. "‘Deficit Financing’ or ‘Deficit-Reduction Financing?’ Debates in Contemporary Economics: Origins, Confusions and Clarity "تمويل العجز" أو "تخفيض العجز في التمويل؟" مناقشات في الاقت," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 32(1), pages 67-78, January.
    • Handle: RePEc:abd:kauiea:v:32:y:2019:i:1:no:4:p:67-78
    DOI: 10.4197/Islec.32-1.4
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Fiscal policy; Monetary institutions; Multiplier; Deficit financing; Public Debt. السياسة المالية ، المؤسسات المالية ، المضاعف ، تمويل العجز ، الدين العام.;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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