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Fiscal austerity, the Great Recession and the rise of new dictatorships

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  • Hassan Bougrine

    (Laurentian University)

Abstract

Austerity measures have been tested in developing countries for several decades under the pseudo name of ‘structural adjustment programmes’ following the recommendations and under the supervision of the World Bank (WB) and the International Monetary Fund (IMF). Evidence indicates that the economic and social consequences of these policies have been so disastrous that there is now more poverty and more inequality than a generation ago. The same scenario is being proposed as the alternative to what has hitherto been labeled a social-democratic economic system in industrialized nations. The economically dominant minority has largely succeeded in imposing its neoliberal agenda by convincing the general public, through various means, of the need for austerity. The paper challenges the erroneous theories on which austerity is based and proposes an alternative explanation to what is the ‘best practice’ in public finance. It argues that deficit spending by the government is an important policy tool that can be successfully used to guarantee full employment and create wealth and prosperity for the whole society.

Suggested Citation

  • Hassan Bougrine, 2012. "Fiscal austerity, the Great Recession and the rise of new dictatorships," Review of Keynesian Economics, Edward Elgar Publishing, vol. 1(0), pages 109-125.
  • Handle: RePEc:elg:rokejn:v:0:y:2012:i:1:p109-125
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    References listed on IDEAS

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    1. Wynne Goldey & Marc Lavoie, 2007. "Fiscal policy in a stock-flow consistent (SFC) model," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 30(1), pages 79-100.
    2. Toye, John, 2000. "Fiscal Crisis and Fiscal Reform in Developing Countries," Cambridge Journal of Economics, Oxford University Press, vol. 24(1), pages 21-44, January.
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    4. Palley, Thomas I., 2009. "America's exhausted paradigm: Macroeconomic causes of the financial crisis and great recession," IPE Working Papers 02/2009, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    5. James Crotty, 2012. "The great austerity war: what caused the US deficit crisis and who should pay to fix it?," Cambridge Journal of Economics, Oxford University Press, vol. 36(1), pages 79-104.
    6. Paul Davidson, 2010. "Making dollars and sense of the U.S. government debt," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 32(4), pages 661-666, July.
    7. Raghuram G. Rajan, 2012. "Presidential Address: The Corporation in Finance," Journal of Finance, American Finance Association, vol. 67(4), pages 1173-1217, August.
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    Cited by:

    1. Markus P.A. Schneider & Stephen Kinsella & Antoine Godin, 2015. "Redistribution in the Age of Austerity: Evidence from Europe, 2006-13," Economics Working Paper Archive wp_856, Levy Economics Institute.

    More about this item

    Keywords

    austerity; fiscal policy; deficit; debt; creative state;

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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