IMF-convened economists say cuts are the wrong strategy

Green Politics

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.”

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

  1. Tony Hardwick

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

  2. Richard Bradley

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

  3. Daniel Pitt

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

  4. Allan Siegel

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

  5. Matthew Davis

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

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