Sunday , April 11 2021
Home / Project Syndicate / The Pandemic Public-Debt Dilemma

The Pandemic Public-Debt Dilemma

Summary:
Much of the conventional wisdom about how governments should manage the COVID-19 economic fallout is perfectly appropriate for advanced economies, but dangerous elsewhere. Even if developing and emerging economies could simply borrow and spend more to weather the storm, doing so could jeopardize their long-term economic prospects. MILAN – Increased government spending during the pandemic is essential for managing public health, supporting households that have lost income, and preserving businesses that otherwise may fail and thus cause longer-term damage to output and employment. Kristalina Georgieva, the managing director of the International Monetary Fund, has urged policymakers to “spend but keep the receipts.” Likewise,

Topics:
Michael Spence considers the following as important:

This could be interesting, too:

Bradford DeLong writes DeLongTODAY: Inflation as the Principal Risk? I Do Not See It…

Miles Kimball writes James Wells on the Evolution of the Standard Model of Physics

Tyler Cowen writes New York City estimate of the day

Tyler Cowen writes From Charles Kenny

Much of the conventional wisdom about how governments should manage the COVID-19 economic fallout is perfectly appropriate for advanced economies, but dangerous elsewhere. Even if developing and emerging economies could simply borrow and spend more to weather the storm, doing so could jeopardize their long-term economic prospects.

MILAN – Increased government spending during the pandemic is essential for managing public health, supporting households that have lost income, and preserving businesses that otherwise may fail and thus cause longer-term damage to output and employment. Kristalina Georgieva, the managing director of the International Monetary Fund, has urged policymakers to “spend but keep the receipts.” Likewise, World Bank Chief Economist Carmen M. Reinhart reminds us that, “first you worry about fighting the war, then you figure out how to pay for it.”

Although these are sound recommendations for countries with solid fiscal foundations, the long-term risks of increased spending may be dangerously high for others. In 2008, the Commission on Growth and Development (on which we both served) showed that successful developing countries owe their economic growth in part to the quality of their social and capital spending. And the most successful of these countries, we found, had run their economies with savings levels at or close to investment levels, such that their current account...

Michael Spence
Nobel Prize in economics, Economics professor at Stern School of Business NYU, author of The Next Convergence

Leave a Reply

Your email address will not be published. Required fields are marked *