Fiscal Policy Convergence from Reagan to Blair: The Left Veers Right

Fiscal Policy Convergence from Reagan to Blair: The Left Veers Right

Fiscal Policy Convergence from Reagan to Blair: The Left Veers Right

Fiscal Policy Convergence from Reagan to Blair: The Left Veers Right

Synopsis

It has been previously thought that the process of adopting common fiscal policies was caused by economic integration and globalization but 'Fiscal Policy From Reagan to Blair' reveals a much more comprehensive explanation - one that includes domestic factors.

Excerpt

This book can be read at two levels. One is as a fascinating account of a set of high-profile economic policy episodes, the fiscal policy battles of the Reagan, Thatcher, Clinton, and Blair administrations. The second is as an important contribution to the literature on the role of ideas in economic policy making. A number of scholars have viewed the espousal of particular economic theories or ideologies in the public arena as merely rationalizations for the pursuit of particular interests. However, as Roy and Denzau make clear, that is far too simple a characterization. There is certainly reason to be cynical about whether interested parties always believe the public arguments that they make, but we cannot formulate our interests without at least implicit ideas about our objectives and how the world works.

Ideas about how economies work have undergone some important changes in recent decades. There is now a rather broad consensus that although a little inflation may be good for growth in the short run, it is bad in the long run. Likewise, the disappointing results of market liberalization in Russia have helped to focus greater attention on the prerequisites for well-functioning markets, such as clear property rights, a legitimate legal system, and political stability.

Equally important have been changing beliefs about fiscal policy. Although perhaps most famous or "infamous" were the supply-side tax cuts of the Reagan administration, Roy and Denzau convincingly argue that the neoliberal revolution in fiscal policy was much broader than the simple (and often false) idea that tax cuts will pay for themselves. A cynic can interpret the simple supply-side view as an attempt to form a coalition based on the pie-in-the-sky belief that good conservative objectives-both to cut taxes and balance the budget while increasing military spending-need not conflict. The authors, however, convincingly show that there was more to Reaganomics than this. They provide a broader interpretation of the neoliberal paradigm that was embraced by Reagan and Thatcher and, more surprisingly, by Clinton and Blair.

Stressing the interplay of ideas, coalitions, and institutions in fashioning major shifts in economic policy, the authors argue that Reagan and Thatcher

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