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The Paradoxes and Pitfalls of Revived Fiscal Activism

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  • Anthony J. Makin

Abstract

This paper critiques the revival of fiscal activism by the G20 in response to the global financial crisis of 2008–9. It first re-examines the international macroeconomic conditions leading up to that crisis, before highlighting the paradoxes and pitfalls of revived fiscal activism for advanced economies. It argues that the harmful legacy of budget deficits and escalated public debt levels spawned further financial crises, most notably in southern Europe, and generally damaged household and business confidence to the detriment of private consumption and investment spending, which has delayed economic recovery. To undertake the repair necessary to the fiscal accounts of most advanced economies, the paper proposes that government spending programmes need to be thoroughly reviewed against the key principles of public finance.

Suggested Citation

  • Anthony J. Makin, 2014. "The Paradoxes and Pitfalls of Revived Fiscal Activism," Economic Affairs, Wiley Blackwell, vol. 34(1), pages 59-67, February.
    • Handle: RePEc:bla:ecaffa:v:34:y:2014:i:1:p:59-67
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    1. Bruno Martorano, 2015. "Lessons from the recent economic crisis: the Australian household stimulus package," International Review of Applied Economics, Taylor & Francis Journals, vol. 29(3), pages 309-327, May.

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