The Reform of Europe by Michel Aglietta

Author:Michel Aglietta
Language: eng
Format: epub
Publisher: Verso Books

The Lessons of History: How are

Consolidation Policies to be Implemented?

These lessons are drawn mainly from two in-depth studies carried out collectively with two teams of researchers for the Institut CDC pour la Recherche in 2011 and 2013.3 They concern historical episodes of large-scale consolidation of government debt, and cover a wide range of developed countries and different historical eras. The lessons are complemented by cases examined by the OECD’s economics department.4

The approach is very different from that of Reinhart and Rogoff. It does not involve assembling the maximum number of countries and examining only the quantitative relationship between two variables: the gross government debt-to-GDP ratio and GDP growth rate. Instead, it involves studying policies in a large group of countries, and in different eras, aimed at reducing the burden of government debt, starting from the situations that gave rise to it. Comparison on the basis of these experiences seeks to define the conditions for success, or the reasons for failure, of attempts at consolidation.

It is important to distinguish between two types of situation: on the one hand, consolidation motivated by fiscal deterioration caused by previous policies on expenditures or receipts resulting in cumulative deficits, in macroeconomic contexts that might be mediocre, because they follow recessions, but which are not marked by major crisis; and on the other hand, surges in government debt attributable to wars or financial crises, as in the current situation.

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