Recently in Economic Reform Category

That'll Work

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Spitzer's idea on how to boost New York's economy:


New York Governor Eliot Spitzer, in his first address to a joint session of the Legislature, asked lawmakers to strengthen the state's economy by such measures as boosting spending for transportation projects and a $2 billion bond proposal for stem-cell research.
Anyone want to bet on how effective this will be in boosting the economy? I'll take the under.

In all seriousness, upstate New York economy is pretty bad by national standards. The city of New York survives because the costs imposed by the state and local officials are small when you're employing investment bankers and lawyers. The story is different in other sectors of the economy and the rest of the state suffers. Good luck Mr. Spitzer with your program, You need it.

The price of delaying democratic reform?

tonga.jpg
Jonathan at The Head Heeb has interesting analysis of recent riots in Tonga;

“It looks like Tonga will finally have its democracy, but at staggering economic and social cost. And the price of withholding democratic reform for so long may in fact be even greater than it first appears; during the past three years of turmoil, Tongans have become used to revolutionary protest, and the effect on national politics and governmental legitimacy may remain with the country for a long time.”

Related;
Trouble in Tonga (Radio National Podcast)
NYT new blog The Lede has more on the Tonga riots
Information hub on the Kingdom of Tonga
Country profile: Tonga

Podcast of Day- Boyer Lectures

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Lecture 2: From Golden Age to Stagflation
For the world's developed economies, the end of the second world war was the trigger for almost 30 years of sustained growth. Ian Macfarlane says the Keynesian system of economic management had served policy-makers well, but asks had Keynesian policies been pushed too far, beyond their natural limits? Inflation began to rise in all countries in the late 1960s and early 1970s. When the first OPEC oil shock occurred it would bring the post-war boom to a sudden close, and give rise to a new condition—stagflation. Some excerpts below;

The Chile Story

The secret behind Chile’s macro-economic stability and robust growth over the past 20 years.

- Strong fiscal discipline. Over the last two decades, only in Chile were years of fiscal deficits roughly offset by years of surpluses; most other Latin American countries displayed a bias toward deficits. Fiscal discipline was reinforced by the introduction of the structural surplus rule in 2000. The reward has been a vastly lower debt-servicing burden, as fiscal discipline resulted not only in lower government debt but also in lower real interest rates.

-A credible inflation targeting framework has helped anchor inflation expectations at a low level. Under this framework, the central bank aims at keeping inflation within a 2–4 percent target range. In recent years, the central bank has also let the peso float freely.

-The financial system was strengthened and capital markets deepened. Financial liberalization was a mainstay of policy reform in Latin American in the 1990s, mainly focusing on deregulation and privatization. Chile took strong actions to strike the right balance of market discipline and sound banking supervision, while its capital market rapidly deepened.

- Trade integration, in conjunction with a broad financial opening, was significant. Chile’s export sector, one of the most open and diversified in Latin America, has proven an important buffer against current account shocks, while also boosting Chile’s growth potential.

- Institutional arrangements were set to create a more certain macroeconomic environment. Sound economic policies and reforms have been carried out within a stable institutional framework to avoid reversals. These institutional arrangements have helped reduced the incentives problems that have led to a lack of fiscal discipline, complex and distorted trade polices, and moral hazards in the financial system see elsewhere in the region.

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