IDEAS home Printed from
   My bibliography  Save this paper

The dangerous rise of economic interventionism


  • Zimmermann, Thomas A.


This paper reviews the economic interventions by governments and central banks in response to the 2007-2009 financial and economic crisis. In the area of trade policy, we find that protectionism has increased substantially, with governments targeting in particular the products of declining industries and financial services. Nevertheless, spiralling protectionism as in the 1930s has so far been avoided. In investment policy, the crisis has not led to a general increase of protectionist pressures for the time being, although the long-term general trend towards liberalisation has recently been complemented by a parallel trend towards re-regulation. The main areas of economic interventionism, however, have been fiscal policy (mainly through stimulus programs and emergency actions to stabilise the financial system) and monetary policy (mainly through interest rate cuts, quantitative easing and various other actions). Given their cumulative size, these interventions hold a substantial potential for distortions and undesirable side-effects on both the microeconomic and the macroeconomic levels. These include protectionism, political mismanagement and state failure, the degradation of government finances and the threat of future inflation. These concerns can be addressed, but this requires constant monitoring of the policy areas affected and decisive actions towards achieving a timely exit.

Suggested Citation

  • Zimmermann, Thomas A., 2010. "The dangerous rise of economic interventionism," MPRA Paper 37262, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:37262

    Download full text from publisher

    File URL:
    File Function: original version
    Download Restriction: no

    References listed on IDEAS

    1. repec:hrv:faseco:33077889 is not listed on IDEAS
    2. Sapienza, Paola, 2004. "The effects of government ownership on bank lending," Journal of Financial Economics, Elsevier, vol. 72(2), pages 357-384, May.
    3. Schaltegger, Christoph A. & Feld, Lars P., 2009. "Are fiscal adjustments less successful in decentralized governments?," European Journal of Political Economy, Elsevier, vol. 25(1), pages 115-123, March.
    4. Carmen M. Reinhart & Kenneth S. Rogoff, 2014. "This Time is Different: A Panoramic View of Eight Centuries of Financial Crises," Annals of Economics and Finance, Society for AEF, vol. 15(2), pages 1065-1188, November.
    5. Thomas Cottier & Satoko Takenoshita, 2003. "The Balance of Power in WTO Decision-Making: Towards Weighted Voting in Legislative Response," Aussenwirtschaft, University of St. Gallen, School of Economics and Political Science, Swiss Institute for International Economics and Applied Economics Research, vol. 58(02), pages 169-214, June.
    6. Rafael La Porta & Florencio Lopez-De-Silanes & Andrei Shleifer, 2002. "Government Ownership of Banks," Journal of Finance, American Finance Association, vol. 57(1), pages 265-301, February.
    7. Steve Charnovitz, 2001. "The WTO and the rights of the individual," Intereconomics: Review of European Economic Policy, Springer;German National Library of Economics;Centre for European Policy Studies (CEPS), vol. 36(2), pages 98-108, March.
    8. Andrei Shleifer, 1998. "State versus Private Ownership," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 133-150, Fall.
    9. Zimmermann, Thomas A., 2006. "Negotiating the review of the WTO Dispute Settlement Understanding," MPRA Paper 4498, University Library of Munich, Germany.
    10. Alberto Alesina & Silvia Ardagna, 2010. "Large Changes in Fiscal Policy: Taxes versus Spending," NBER Chapters,in: Tax Policy and the Economy, Volume 24, pages 35-68 National Bureau of Economic Research, Inc.
    11. Alesina, Alberto Francesco & Perotti, Roberto & Tavares, Jose, 1998. "The Political Economy of Fiscal Adjustments," Scholarly Articles 12553724, Harvard University Department of Economics.
    12. Ardagna, Silvia & Alesina, Alberto, 1998. "Tales of Fiscal Adjustment," Scholarly Articles 2579822, Harvard University Department of Economics.
    13. Alberto Alesina & Silvia Ardagna, 1998. "Tales of fiscal adjustment," Economic Policy, CEPR;CES;MSH, vol. 13(27), pages 487-545, October.
    14. Alberto Alesina & Roberto Perotti & José Tavares, 1998. "The Political Economy of Fiscal Adjustments," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(1), pages 197-266.
    15. Alesina, Alberto & Drazen, Allan, 1991. "Why Are Stabilizations Delayed?," American Economic Review, American Economic Association, vol. 81(5), pages 1170-1188, December.
    16. James M. Poterba, 1996. "Do Budget Rules Work?," NBER Working Papers 5550, National Bureau of Economic Research, Inc.
    17. Stéphanie Guichard & Mike Kennedy & Eckhard Wurzel & Christophe André, 2007. "What Promotes Fiscal Consolidation: OECD Country Experiences," OECD Economics Department Working Papers 553, OECD Publishing.
    Full references (including those not matched with items on IDEAS)

    More about this item


    Journal of Economic Literature (JEL) Classification Codes: E52 (Monetary policy); E58 (Central banks and their policies); E62 (Fiscal policy); E63 (Comparative or joint analysis of fiscal and monetary policy; stabilization); F13 (Trade policy; international trade organizations); F21 (International investment; long-term capital movements);

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:37262. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.