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Global Collective Action

Leaders of developed and developing countries all recognize the need for collective action to tame the worldwide recession.

But collective action is easier said than done. Protectionism is tempting as jobs and incomes at home are vanishing.

Topnotch economists, including Federal Reserve chair Ben Bernanke and Barry Eichengreen (University of California, Berkeley), say that mercantilist policies during times of world recession did work. See for example Bernanke’s Essays on the Great Depression (2000) and Eichengreen’s Golden Fetters: The Gold Standard and the Great Depression, 1919-1939 (1992).

Fiscal Stimulus and Global Collective Action

Let’s face it: The Barack Obama stimulus plan by itself will not lift
the US from the recession in the quickest and most decisive manner.

Some quarters—Paul Krugman, for example—have doubts about the
effectiveness of the stimulus plan. Krugman criticizes the stimulus
plan for lacking boldness as well as for being incomplete and
inadequate.

But let us assume that the Obama administration will take heed of
Krugman’s advice and adopt his more aggressive proposals. Will that
lead to the definitive stimulus?

Market failure in family-size choice

The current global economic crisis which exercises policy makers
everywhere is an example of a market failure which justifies costly
state intervention because doing nothing is much more costly. The
safety-net problem facing our own policy makers today is the more
burdensome because of our failure in the past to deal with another
market failure, one associated with family-size choice among poor
households. And this brings us to a momentous crossroad: the
Reproductive Health (RH) Bill.

Being Pro-Business is Good

In the article titled Populism and Being Anti-Business (BusinessWorld, 16 June 2008), I said that Gloria Arroyo’s populism, while pandering to the masses, is ultimately anti-poor as well as anti-business. It is a brand of populism that weakens macroeconomic fundamentals and productivity and therefore harms the whole nation.

Her being anti-business is politically partisan, and the economic consequence of this antagonism is damaging.

Pragmatism in US public finance

In 1985, the Congress of the United States (US) passed the Gramm-Rudman-Hollings Law (GRH) establishing a process of gradually reducing the Federal government’s budget deficits to eventually balance by fiscal year 1991. Among other things, the law contains targeting the budget deficit to US $172 billion for 1986, US$144 billion for 1987, and henceforth reducing the deficit by US$36 billion per year. That is: $108 billion for 1988, $72 billion for 1989, $36 billion for 1990 and $0 or balanced budget in 1991. To make these reductions possible, the law states that Congress and the Executive branches would select and agree on specific spending cuts and tax increases every year that they formulate the national budget. If they did not agree, an automatic across-the-board reduction of expenditure on certain eligible categories would apply.