By Andrés Velasco, Project Syndicate
Visit London nowadays and you will notice something strange going on: the worse the British economy tanks, the more fervently Prime Minister David Cameron’s ministers and Tory economists insist that draconian spending cuts are good for economic growth.
Some observers see this as an act of faith (presumably in the virtues of the unfettered market). Others, such as the economist Paul Krugman, see it as an act of bad faith: the Tories just want smaller government, regardless of the consequences for growth.
The question remains whether there is a non-faith-based argument for cutting back spending to stimulate an economy. The answer is yes. In fact, there are two. Academic research has shown them at work in the past – for example, in Ireland and Denmark during the 1980’s. Unfortunately for the Tories, neither case for stimulative spending cuts fits Britain’s predicament today. FULL POST
By Andrés Velasco, Former Finance Minister of Chile
SANTIAGO – The Inter-American Development Bank declared last July that this would be “Latin America’s Decade.” A couple of months later, The Economist endorsed that idea, which has since been repeated by countless apologists and experts.
There is nothing like a little economic growth to get pundits’ juices flowing. And Latin America is growing, by 6% last year and an estimated 4.75% in 2011, according to the International Monetary Fund.
Compared with the region’s mostly sluggish performance over the last three decades, this looks like takeoff velocity. And, compared to the dismal recent record in North America and Europe, it looks positively supersonic.