IMF-convened economists say cuts are the wrong strategy

The international chorus of experts against sharp deficit reductions plans has grown stronger, as world-leading economists said that the US and EU economies remained too fragile to absorb major deficit cuts. The economists met at a private conference convened by the IMF to discuss “Macro and Growth Policies in the Wake of the Crisis”.

World economies are under threat from deflationary policies

The international chorus of experts against sharp deficit reductions plans has grown stronger, as world-leading economists said that the US and EU economies remained too fragile to absorb major deficit cuts.

The economists met at a private conference convened by the IMF to discuss “Macro and Growth Policies in the Wake of the Crisis”.

Nearly all of those gathered at the conference concluded that additional spending and tax breaks would be a much more sensible strategy.

Robert J. Shapiro, US undersecretary of commerce for economic affairs under Bill Clinton, writes:

Particular scorn was heaped on calls for cuts in education and infrastructure investments, which economists have long promoted as the best way to support future expansion and provide a lifetime of healthy social returns.”

Mr Shapiro refers to a “genuine consensus” of views at the conference on the danger of the cuts and the misjudgments that triggered the financial crisis. He writes:

“Starting with the opening remarks by Dominique Strauss-Kahn, the head of the IMF, a long line of economic luminaries laid out how policymakers here (US) and in Europe misunderstand the very nature of modern financial capitalism…

“There was rare unanimity for the view that markets today… lack the means and the information to recognize bubbles and evaluate the economic risk of complex financial instruments.”

These issues appear to have been confined to the West and advanced economies:

“Much of the developing world learned the painful lessons of the 1997-1998 Asian financial crisis. So, their policymakers imposed new limits on leverage, and their financial institutions passed on investing in the toxic assets that brought down the U.S. and European economies.”

He concludes:

“The Great Depression produced a large sheaf of institutional reforms which have helped the world avoid a repeat ever since. Yet, the Nobel Laureates and other experts gathered this week by the IMF also agreed that the United States and Europe have yet to undertake comparable reforms that would make another global financial crisis less likely. If we don’t, they warned, another financial crisis almost certainly will befall America and Europe in the foreseeable future.”

23 Responses to “IMF-convened economists say cuts are the wrong strategy”

  1. Ma

    RT @leftfootfwd: IMF-convened economists say cuts are the wrong strategy: http://bit.ly/gebXwm writes Dominic Browne

  2. Martin Johnston

    Me and the IMF agree RT @leftfootfwd: IMF-convened economists say cuts are the wrong strategy: http://bit.ly/gebXwm writes Dominic Browne

  3. Jack Robson

    RT @leftfootfwd: IMF-convened economists say cuts are the wrong strategy: http://bit.ly/gebXwm writes Dominic Browne

  4. carboncoach

    RT @leftfootfwd: IMF-convened economists say cuts are the wrong strategy: http://bit.ly/gebXwm writes Dominic Browne

  5. Frank R

    RT @leftfootfwd: IMF-convened economists say cuts are the wrong strategy: http://bit.ly/gebXwm writes Dominic Browne

  6. Mike Ranscombe

    RT @leftfootfwd: IMF-convened economists say cuts are the wrong strategy: http://bit.ly/gebXwm writes Dominic Browne

  7. James Doran

    Now even IMF-convened economists say #cuts are the wrong strategy #austerity http://bit.ly/hW2go7

  8. Adam White

    RT @oranjd Now even IMF-convened economists say #cuts are the wrong strategy #austerity http://bit.ly/hW2go7

  9. Altany

    RT @oranjd: Now even IMF-convened economists say #cuts are the wrong strategy #austerity http://bit.ly/hW2go7

  10. Hawke

    RT @oranjd: Now even IMF-convened economists say #cuts are the wrong strategy #austerity http://bit.ly/hW2go7

  11. AdamRamsay

    panel of economists convened by the IMF pour scorn on cuts: http://bit.ly/h4hY9v (on @leftfootfwd)

  12. Eve

    RT @AdamRamsay: panel of economists convened by the IMF pour scorn on cuts: http://bit.ly/h4hY9v (on @leftfootfwd)

  13. Ma

    RT @AdamRamsay: panel of economists convened by the IMF pour scorn on cuts: http://bit.ly/h4hY9v (on @leftfootfwd)

  14. David G. Boo

    RT @AdamRamsay: panel of economists convened by the IMF pour scorn on cuts: http://bit.ly/h4hY9v (on @leftfootfwd)

  15. Tony Hardwick

    RT @AdamRamsay: panel of economists convened by the IMF pour scorn on cuts: http://bit.ly/h4hY9v (on @leftfootfwd)

  16. Richard Bradley

    RT @leftfootfwd: IMF-convened economists say cuts are the wrong strategy http://bit.ly/hcV07V

  17. Daniel Pitt

    IMF-convened economists pour scorn on cuts strategy http://bit.ly/gebXwm #ConDemNation

  18. Allan Siegel

    "US & Europe yet to undertake… reforms that would make another global financial crisis less likely." LFF http://t.co/TtN3YUE

  19. Matthew Davis

    All Left Foot Forward ever says is ‘you can’t cut that, you can’t cut that, you can’t cut that’.

  20. John Ruddy

    @ssamani IMF economists say the scale and speed of your cuts is not the answer to solving deficit http://bit.ly/f7W9sO

  21. US ambassador questions speed and scale of Osborne's cuts | Left Foot Forward

    […] Britain into a double-dip recession. His remarks echo those of leading economists at the IMF last week, who said the US and EU economies remained too fragile to absorb major deficit cuts, concluding […]

  22. Ideology in the Name of Austerity : Lawyers, Guns & Money

    […] isn’t the most prudent approach.  (See additional warnings by an IMF-convened conference here, and a warning by the US Ambassador to the UK that the spending cuts proposed by the coalition […]

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