Alesina’s econometrics framed expenditure cuts as growth-promoting and the new policy norm
Evidence
However, politicians need not fear making these cuts because, according to these econometric results, states that cut “grow one percent faster than the G7 countries” while “business investment as a share of GDP rises by a full 1% point” and competitiveness improves. Tax increases, in comparison, cause the failing cases of adjustment. When done correctly, on the expenditure side “the good news is that major fiscal adjustments do not cause major recessions.” Moving beyond the cases of Denmark and Ireland, and dealing with the negative cases in a way that reinforced the message that cuts lead to growth, Alesina and his collaborators were laying the groundwork among neoliberal economists for expansionary austerity to be seen as “the new normal” rather than the policy exception. — Mark Blyth, Austerity, 462
Categorization
- XREF: Directly connects to Mattei’s work on austerity as intellectual construction; the ‘new normal’ framing is a key bridge. — connects to: Supply-side economics descends directly from Smith’s saving-drives-investment theory — Mark Blyth, Austerity: The History of a Dangerous…, 296; Expansionary fiscal contraction theory emerged despite contradictory IMF field evidence — Mark Blyth, Austerity: The History of a Dangerous…, 446; Austerity enforces the wage-labor relation that capitalism requires for growth — Clara E. Mattei, The Capital Order: How Economists…, 29 (+1 more)
- QUESTION: Worth chasing: what exactly were Alesina’s negative cases and how did he ‘deal with’ them to preserve the cuts-cause-growth story?
Broader Connections
- Austerity enforces the wage-labor relation that capitalism requires for growth
#expands(0.80) — Clara E. Mattei, The Capital Order, 29 - Fiscal and monetary austerity jointly transfer capital accumulation costs onto working classes
#complicates(0.78) — Clara E. Mattei, The Capital Order, 774