As more governments recognize the need for greater public control over economic outcomes, they must be careful to define the concept well. What matters most is not ownership, but the state’s capacity to direct economic activity toward strategic goals in the service of the common good.
LONDON — Governments around the world say they have no room to act. Although inequality and the cost of living are rising, fiscal space, we are told, is tight. But in many cases, the pressure is self-inflicted. It follows from equating fiscal responsibility with reducing the deficit and debt, rather than with building the economic capacity to grow, withstand shocks, and fulfill its obligations over time. In fact, cutting spending in a weak economy can leave the debt-to-GDP ratio higher, not lower; and when fiscal rules bite, public investment is often the first thing cut.
LONDON — Governments around the world say they have no room to act. Although inequality and the cost of living are rising, fiscal space, we are told, is tight. But in many cases, the pressure is self-inflicted. It follows from equating fiscal responsibility with reducing the deficit and debt, rather than with building the economic capacity to grow, withstand shocks, and fulfill its obligations over time. In fact, cutting spending in a weak economy can leave the debt-to-GDP ratio higher, not lower; and when fiscal rules bite, public investment is often the first thing cut.