Expansionary adjustment required cuts plus wage moderation plus prior devaluation
Evidence
“Tales of Fiscal Adjustment” brings together the claims made in this body of research and distills them into a few simple policy lessons. As Alesina and Ardanga put it, “Three ingredients seem to be important for a successful, long-lasting expansionary fiscal adjustment. It must combine spending cuts in transfers, welfare programs and the government wage bill, some form of … wage moderation, and a devaluation immediately before the fiscal tightening.” Raising taxes in a recession, as noted already, is said to simply make things worse. As such, a new form of TINA returns—there is no alternative to cuts. — Mark Blyth, Austerity, 464
Categorization
- DEFINE: Defines the three-ingredient recipe that constitutes a ‘successful expansionary fiscal adjustment’ in the Alesina–Ardanga canon.
- XREF: The ‘new TINA’ move echoes the thatcherite ‘There Is No Alternative’ and connects to Mattei’s account of austerity as non-negotiable. — connects to: Ireland’s 1987 austerity case combined cuts with devaluation and wage moderation — Mark Blyth, Austerity: The History of a Dangerous…, 565; Expectations-based expansionary austerity theory rests on Denmark and Ireland cases — Mark Blyth, Austerity: The History of a Dangerous…, 457; Expansionary austerity cases depend on conditions absent in the Eurozone — Mark Blyth, Austerity: The History of a Dangerous…, 483 (+3 more)
Broader Connections
- Austerity is voluntary deflation achieved by cutting state budgets to restore competitiveness
#expands(0.90) — Mark Blyth, Austerity, 25 - Expectations-based expansionary austerity theory rests on Denmark and Ireland cases
#expands(0.85) — Mark Blyth, Austerity, 457 - Expansionary austerity cases depend on conditions absent in the Eurozone
#qualifies(0.80) — Mark Blyth, Austerity, 483 - Export-led growth structurally demands wage suppression and anti-inflationary monetary dominance
#corroborates(0.80) — Mark Blyth, Austerity, 368