As the note by Holland and Portes linked to earlier by Stephen is likely to be influential in the fiscal policy debate, it is worth taking a closer look at the findings with the Irish case in mind. The note is based on a more detailed (and very useful) analysis by Dawn Holland (available here).
Although the main message on the impact of (coordinated) fiscal adjustment is quite negative, the fact that Ireland is the only country for which the adjustment leads to a (small) fall in the debt to GDP ratio might appear to give some comfort. But I don’t think we can take comfort on the score. Not surprisingly, the reason Ireland stands out as an outlier in this analysis is because of relatively small (normal-case) multipliers. (The multipliers are assumed to be higher in the context of the current crisis, but the precise “crisis multipliers” used for Ireland are not given in the paper.) The assumed normal-case multiplier is -0.36 for a decrease in government consumption and -0.08 for an increase in income taxes. I would guess that the relatively low assumed normal-case multipliers for Ireland reflect Ireland’s high imports as a fraction of GDP. But as discussed here, a large fraction of imports in Ireland are used as inputs into the production of exports. As a result, the high import share can give a misleading view of the marginal propensity to import out of domestic demand. Controlling for exports, a simple regression shows that a one euro increase in domestic demand is estimated to raise imports by 0.23 euro, indicating substantially less leakage from expansions in domestic demand than the crude import share would suggest.
While I don’t think we can get any comfort from Ireland being an outlier in the analysis, I do have concerns about the broad conclusion of the paper. This conclusion is that fiscal adjustment has actually raised debt to GDP ratios. To the extent that the debt to GDP ratio is critical for creditworthiness, this suggests that efforts have been self-defeating on this central measure.
The problem comes from focusing on the impact on the debt to GDP ratio at some near-term date—2013 in the case of the paper. It is of course true that fiscal adjustment measures can raise the debt to GDP in the near term. The negative effect on the denominator can swamp the improvement in the numerator. But the standard equation for the change in the debt to GDP ratio shows how the effect of a given year’s fiscal adjustment on the debt to GDP ratio evolves over time.
∆d = (r – g)d-1 + pd.
Note: d is the debt to GDP ratio, r is the real interest rate, g is the real growth rate, and pd is the primary deficit as a share of GDP.
As assumed in the analysis, a fiscal adjustment will lower the growth rate and lower the primary deficit. But even if the adjustment has a permanent effect on the level of GDP, the effect the growth rate should disappear. However, the effect on the primary deficit will be permanent. (The Holland paper shows that even the coordinated adjustments have reduced individual-country deficits – see Figure 6.) Of course, any initial increase in the debt ratio will be carried forward, but even for very modest improvements in the primary deficit, the debt to GDP ratio will fall over time. Simulations done by IFAC for the Irish case using a simple model that allows for two-way feedbacks between GDP and the deficit show that, all else equal, the deficit multiplier would have to be higher than 3.8 for the debt to GDP ratio to be higher in 2015 as a result of a fiscal adjustment done in 2012.
One potentially important factor left out is the possibility of the “hysteresis effects” highlighted by DeLong and Summers (see here). They argue that today’s fiscal adjustments can leave a shadow on future output. For example, workers made unemployed today due to fiscal adjustment suffer permanent loss of skills and employability. These effects can lead to a permanent increase in the primary deficit. Brad DeLong provides a useful example based on a temporary fiscal stimulus in a comment (at 9:59) here. I think the jury is still out on how important such hysteresis effects are in practice. One concern with the DeLong and Summers analysis is that they assume the hysteresis effects are permanent. I think it is more plausible to assume that they decay over time (see here). Even relatively modest decay rates could overturn their self-defeating result.
So where does this leave me: I think there is little doubt that fiscal adjustments slow the economy – and the contractionary effects are likely to be abnormally large under current conditions. For countries that currently do not appear to have a creditworthiness problem – such as the UK or Germany – the argument for slower fiscal adjustment looks compelling. Less contractionary policies in countries with “fiscal space” would also help their trading partners. But I don’t think the evidence supports a conclusion that fiscal adjustment – even coordinated adjustment – worsens the medium-run path of the debt to GDP ratio and thus creditworthiness.
37 replies on “A comment on Holland and Portes”
Angela is with you John…
We are a shining example of how to do austerity.
Pity about Greece though. Panic selling on their stock exchange today..
It all may unravel yet.
I have sent an email to Dawn and Jonathan with an invitation to comment on this thread.
Much room for discussion here. Appreciate your input.
Pls Correct the Title here: It is HOLLAND & Portes
Jonathan Portes has replied to my email and will comment after he chats with Dawn HOLLAND.
“The assumed normal-case multiplier is -0.36 for a decrease in government consumption and -0.08 for an increase in income taxes. ”
Does this mean than tax increases are almost 4.5 times less damaging to the economy (GDP) that expenditure reductions? If so, why do we keep hearing the opposite?
Many thanks. Now fixed. Apologies to Dawn for being so careless.
There seems to be little consensus on relative multipliers, which is why in IFAC work we have used a “deficit multiplier”, implicitly assuming the tax and spending multipliers are equal (with oppositive signs). The work of Alesina and co-authors led many to believe that tax multipliers were larger. But the influential IMF work in this area concluded this reflected different central bank responses to tax- and expenditure-based adjustments. Once this is controlled for the differences largely disappear. See pages 24-27 here: http://www.imf.org/external/pubs/ft/wp/2011/wp11158.pdf
Why is it so hard to understand that GDP based measures such as these do not matter a damn. Just because it is convenient doesn’t make it right!
I noted on earlier SK thread that I would love to see the Holland/Portes analysis run with Irish GNP data. Debt to GNP ~=150%
John McHale makes a valid point about the time period chosen.
Europe’s growth crisis is not a temporary issue that can be cured by a stimulus even though more spending by some countries could help in the short term.
Property and credit booms masked problems that have been developing for years.
Sadly, the only trigger for remedial action for structural problems is likely slumping economic fortunes.
Even in bailed-out countries, there is a limit to what outsiders can do if the local elites retain power.
The arrest in Greece of a magazine editor over the publication of the list of tax dodgers, is an illustration of the problem.
In a country like France with a continuous annual budget deficit since 1975 and trade deficit since 2002, how much can a temporary stimulus elsewhere help if there is a lack of political courage at home?
Countries like Greece, Spain and Ireland are not held back by poor infrastructure.
So borrowings could help growth in the short-term but as in Japan, it maybe a problem in the longer term, unless painless default is planned.
In the first 8 months of 2012, Germany’s trade with the EA16 was almost in balance. It had a surplus of €5bn; €29bn with the non-EA 10 and €92bn with exEU27 countries.
More consumer spending would help but there would still be a continuing backdrop of crisis in the struggling economies.
Ireland has 188,000 people in longterm unemployment and reports this week claim the Government is considering giving employers cash to hire some of them.
Any better ideas, tell Richard Bruton.
Anything radical will have to wait…..
The FT says today on France:
So keep the fingers crossed until 2017.
You beat me to it, that thought immediately occurred. However, in the case of tax there is more to it than multipliers. There are the so called wedges – Investopedia gives a good explanation. Basically supply/demand will find equilibrium at a lower level of output if there is a tax wedge. In the case of VAT it is a direct effect on the supply of goods whilst in the case of income tax it is the supply of labour exacerbated by the interaction with the social protection regime. Of course all these considerations are hugely dependent on where the taxes are targetted.
And the grateful German electorate responded by throwing him out of office. Some thanks. Can you blame Hollande if he doesn’t want to suffer the same fate?
More news overnight that Greece’s problems just can’t stop getting worse. As I mentioned yesterday the economy continues to veer off track in terms of meeting Troika targets and what the IMF considers to be a sustainable path.
You may be aware that the plan for Greece has been based the premise of “expansionary fiscal contraction” and the idea that internal devaluation would lead to an export-led recovery due to increased productivity. I have been explaining the folly of this plan for over two years, here it what I had to say back in March 2011.
Chart 3 a must view on the illlusion of ‘expansionary fiscal contraction’
[read on ..]
… and this is the ‘plan’ for Spain!
It looks like this mess is going to run and run
“New government ways of boosting the economy must be found if the current Bank of England stimulus proves incapable of combating the headwinds facing Britain, the head of the City’s financial watchdog says.
Rekindling the debate about whether record low interest rates, quantitative easing and lending incentives will work, Lord Turner said further steps may be needed to avoid the risk of deflation.”
I think this article from February merits a reread
“Working to a large extent together, the major central banks are applying palliative care on an unprecedented scale to the world economy. De-leveraging is still in its early stages, and the evil day, or decade, is being put off. This warm bath of liquidity not only helps the financial markets strengthen; it disguises from many of the victims of the crash the extent of the loss of wealth that the crash has engendered. And yet – as we have seen in Japan since 1990 – it is hard for economies to recover strongly until such hits are acknowledged.
Facing up to losses on sovereign exposures may be necessary, but it is deeply subversive; every bank, and every central bank, reposes on the myth of sovereign credit. Since in many societies there will be no alternative but to socialise much of the fallout, we can expect to see state indebtedness in many still solvent countries rising to proportions of gross domestic product much higher even than they are today, and many banks coming under state ownership. Pressure will rise for them to behave unashamedly like state banks.
Right now, for the European political class, the objective of saving the euro overwhelms all else. It should not be the only priority. The most important thing is to ensure that more tested aspects of the EU survive an all-too-possible euro break-up. It was a mistake for powerful people in Brussels and Frankfurt to say in 2010 that a bank defaulting on its bonds would necessarily bring about a sovereign default; that a sovereign default would mean the end of the euro; that the end of the euro would mean the end of the EU.”
Nothing against tax increases provided they raise a lot of money, do not distort the labour Market and do not hurt competitiveness. That would imply those that pay little tax pay more which probably means income deciles 4-7 and the top 1% through closing loopholes.
How about a property tax with no exemptions. The problem with this menu is that traditional Labour decency like yourself would have a fit. The populist in the emerging SF/FF popular front would also cry crocodile tears.
Your comment about France suggests that the present government is too lax or not “austere ” enough .What you say about past budget deficits and trade imbalance is unfortunately exact, but the cumulative effect of the fiscal measures of the last year of Sarkozy’s government and the first year of Hollande’s amount to a brutal cure of austerity ,whose effects are certainly severely recessive .What is regrettable is the fact that this effort is made by 2/3 of tax increases and only 1/3 of expense reductions ,but this is a different story. The truth is that France is engaged in severe austerity measures ,at the worst possible time for the peripheral countries .Even Germany’ s exports toward France are falling !
Gosh. There may be some evidence that a widely accepted economic truth outside the EU applies within it – and this is despite detailed Eurozone agreement and legislation saying it does not.
Shocking. Simply shocking.
This is tiresome and unfortunately a read of John Quiggan’s excellent Zombie economics is not going to quickly convert the mixed bag of supply siders, market fundamentalists and gold bugs who currently dominate European policy making to sanity.
Instead we will be faced with more goggle eyed, fact laden, local structural explanations for a recession that seems to be affecting everyone in the Eurozone not bordering Germany. It is tax evasion in Greece, too much infrastructural spend in Portugal, too much worker protection in France. We have a global cancer misdiagnosed as a set of local scleroses.
Is it fair to say that the political process in Europe has been about evading dealing with the roots of the European component of the global financial crisis (the intersection of the failure of the financial sector with the structure of EMU) so that Germany can focus on making us all good neoliberals?
For those in the reality based community the very same John Quiggan has a recent post which highlights some of these points nicely:
The killer points about a particular attempt to blame the results of the global financial crisis on “too much government” are:
Meanwhile in Europe the usual suspects are trying to blame the crisis on too many public servants, “excessive” worker rights or not enough fiscal rules.
Neoliberalism is now clearly a failed analytical framework as well as a verging on the sociopathic political outlook but they will not surrender power easily. Reason will not win this for us.
It’s not just a magazine editor in Greece who’s at the receiving end of a silencing mission; there were reports on the BBC earlier in the week about two Greek TV presenters, sacked because they gave a government minister a tough time in an interview.
Of course that would never happen in our own national broadcasting organisation.Or our national media in general. Judging by the past week’s reporting of the Kenny/Merkel two-step PR dance in glowingly positive terms, the undue prominence accorded to every paltry ‘new jobs’ announcement, and to any and every other bit of positive spiel emanating from government sources, the one area of government that appears to be working very well is its ‘Department of Spin’.
Seems to me there is a veil of normality being drawn over media representation of the real social and political impact of our crisis. Perhaps understandably. After all, it is part of any government’s job to seek to maintain public hope and confidence. Anyone following what’s happening in Greece, though, can see how the economic crisis morphed into a political crisis and is now manifesting itself as a near full-blown crisis of democracy, which is all you can call it when journalists start getting arrested or fired for ‘speaking truth to power’.
It also seems to me that Ireland is not so far removed from Greece as many of us like to think. As a commentator – I think it was Noel Whelan – put it on the VB show last night, just because people are not rioting in the streets does not mean there is anything ‘normal’ about our social and political situation.
180,000+ long term unemployed is nothing short of a disaster. Even if, as John McHale points out in his post, the effects of LTU and all the social malaise that attend upon it, will ‘decay’ with time, the question becomes: how much time? How long can our society sustain that level of damage, without beginning to come apart at the seams politically and socially, as in the case of Greece, before the natural process of ‘decay’ sets in?
Everybody seems to be missing the point here. If you reduce Government expenditure by X you reduce GDP by a number close to X or a multiple thereof. In Irelands case that multiple may well be different than other more closed economies by default if your debt is Y, Y/(GDP-X) is a larger number.
By all means if you are running a large deficit then by austerity you can reduce the growth of the debt to GDP ratio but your debt/GDP ratio will ALWAYS increase as a result of austerity.
The problem the current argument is that the trokia set out to reduce this ratio to a manageable number – That although a stated objective never was the objective – The objective was to reduce the deficit and always was
If reduction in debt was the objective they could have told the central bank to print half a trillion and buy bonds without sterilisation in effected countries. They could have told Ireland not to honour the commitments of Lenihan and stop the doubling of this ratio in Ireland overnight in reference to bank losses
The real objective was to reduce the deficit down as this was driven by the German electoral cycle. What they wanted and still want is a reduction in our public expenditure and/or an increase in taxes. That’s what they want in Greece, Ireland, Spain and Italy – They want a significant decrease in the Government side expenditure that they know will lead to a worse health service, decreased social transfers etc..
If by some miracle they can achieve that without completely collapsing the economy because of gains, entirely unrelated to austerity, caused by a weak euro, triple Irish tax sandwiches or whatever then of course they will give our guys a little pat on the back as long they are not looking for German taxes for bloated health service pay.
The world is not nice place and never was and the fact that we got years of EU money for cows and building roads doesn’t make Brussels a nice forgiving power and never did. Our guys better wake up and smell the roses but as far as I can see the main objective of FF,FG, labour and other parties is to trouser outrageous pensions and expenses.
Of course Morgan Kelly was right again. We should have slashed government expenditure, upped taxes and handed the banks over to the their biggest Creditor the ECB.
Btw, I see the greek journalist that published the list is being blamed for the suicide of a former government minister who was named. As for Greece not being so far removed from us…Greece is a special case…http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_02/11/2012_468325
Very little discussion of actual fiscal expansion.
One form of which would be taxation…
“On Saturday, the Financial Times Deutschland reported that Greek shipowners are threatening German owners’ dominant position in the container ship market.”
Looks like German ship owners are no more ‘at the races’ than German FDI hub facillitators or publlic sector unions.
It would appear that the chutzpah par excellence award for 2012 for blaming Government for the mess will be won by Aidan Harte of D4 who wrote a stunner to the IT back in January
Mr O’Toole shows no understanding that a robust financial sector might help Ireland to weather the storm, and emerge from it sooner. Indeed, it becomes clear that he lives in a bleak world where an industry’s merit is measured only by how much it contributes to the State; he grudgingly admits the IFSC is an important national asset, but only because it pays over €2 billion in taxes.
Despite this, the IFSC is diagnosed incurably feral. And the evidence? He mutters darkly about securitisation and shadow banking systems, and stops just short of blaming it for the Lehman collapse. The innuendo is balanced with just enough caveats to disguise a high-minded animus towards the sordid business of business generally (“Most of what it does is perfectly legitimate . . .”, “I’m not suggesting that any of this is unlawful”). In the end the objection boils down to two points: “it’s very hard to understand . . .” and “it is virtually unregulated. If those two things don’t ring a bell, you haven’t been paying attention to the origins of the financial crisis”.
How many times must this statist canard be repeated? A rash of worldwide mal-investments caused the current crises; loose regulation didn’t help, but the chief villain of this drama is the State and its disastrous intervention at the start and end of the bubble. No market, no matter how tyrannically regulated, can act sensibly when flooded with easy credit by central banks. After the crash, further State intervention, in the form of belated regulation or populist taxes, is not only useless but harmful; free markets regulate themselves mercilessly by the failure of bad companies. When that correction is postponed we get deepening recessions. The moral hazard created by State bailouts makes nonsense of State regulation past and future.
Far from fiscal expansion even being contemplated even in solidly left of centre pollitically controlled France. Germany and the peripherals ganging up on Hollande..
“But Francois Hollande’s government has only gone as far as call for a competitiveness “pact” (to be implemented over a five-year period). It hardly suggests urgency. And this already-too-weak message is much undermined by his 2013 budget, which, proposes to raise €20bn more in tax (half of which would come from the corporate sector), while reducing public spending by just €10bn. Unsurprisingly, businesses see it as a deterrent to job creation and investment.”
These numbers don’t look so hot for the best boy in the class..
At 3b a year in austerity measures it will take at least 5 years to balance the budget. Or maybe growth will magic.
Response rec by email from Jonathan Portes and Dawn Holland
We are grateful to John McHale (and others on this site ) for these very thoughtful comments.
First, we should emphasise that NIESR does not have the detailed specific expertise on the Irish economy of many of those commenting here: given that NiGEM is a global macroeconometric model, the Irish economy component is inevitably quite stylised, and can’t take account of some of the specific features of the Irish economy which John and other commenters have rightly highlighted. The fact that our calculations suggest that fiscal consolidation is less damaging in Ireland than in other countries reflects relatively low estimated multipliers, even in current circumstances. But the NiGEM multipliers may well overstate the extent of import leakages, given the specific structure of Irish trade, so actual multipliers might be higher than our model estimates suggest. We should also note that the fact that, in contrast to other countries, our estimates suggest fiscal consolidation has in fact reduced debt-GDP ratios in Ireland does not any measure imply that we think it was the optimal policy (see below).
There are two important general points John makes.
First, he points out that while our simulations show that debt-GDP ratios will be higher in 2013 (in all countries except Ireland!) than they would have been without fiscal consolidation, primary deficits will be lower, and in the long run the binding solvency constraint is the intertemporal government budget constraint. This is absolutely correct. Postponing fiscal consolidation doesn’t mean that it isn’t ultimately necessary in EU countries – almost all of them – that have significant structural primary deficits. The main point of the paper is that the negative impact on GDP, and hence on the amount of consolidation required, is much larger if you frontload consolidation during a period when multipliers are much larger. Later consolidation could have been both smaller and less damaging. We have not attempted to illustrate such an alternative path (and of course the “optimal” path depends on future economic developments) but certainly delaying would have been better. This is also true for Ireland.
Second, he notes that we omit any analysis or discussion of hysteresis. We agree entirely that this is a very important issue when considering the impact and timing of consolidation. In an earlier paper, Bagaria et al
(see Vox http://www.voxeu.org/article/alternatives-austerity-effect-jobs-and-incomes-uk here)
we perform a similar, but more detailed, analysis for the UK, incorporating labour market hysteresis effects (but ignoring spillovers). In this (in contrast to Delong and Summers), we do exactly what John suggests, which is to assume that hysteresis effects matter but decay over time. Ideally we would indeed do the same for Ireland and other EU economies, but this is a somewhat more complex exercise.
Thank you. Keep up the good work.
That suggests the earlier thread on this blog should have been more like:
“Self Defeating Austerity? Not in the Authors’ view – but it might be an idea to finesse the timing, if funding were available Ireland, Apparently”
So, as you were then.
I wonder what Portes and Holland would make of the potential multiplier effects ion a situation like Ireland where a certain amount of fiscal consolidation has to be implemented because of external funders’ programmes and the choices are roughly:
1 Raise taxes
2 Cut quality and quantity of public sector service provision. but continue to gradually increase public sector pay and keep a near staff veto on redundancies and reform.
3 Cut PS pay along with services and allow management to impose efficiency enhancing reforms.
What are the respective multipliers? (Hint, you are not alowed to pretend public services do not have real value to the economy and therefore can be cut with a multiplier set to zero).
Unsurprisingly, businesses see it as a deterrent to job creation and investment.
’tis funny – I didn’t realise the prime objective of capitalism was “job creation” and “investment”. I thought it was all about profit (personal and/or the company’s) first, second and third.
The things you find out on the Internet, eh?
Or maybe growth will magic.
You jest, but wait till the Confidence Fairy gets to work.
keep a near staff veto on redundancies and reform.
There is no “staff veto” on redundancies (voluntary) and reform in the Croke Park environment.
I note you accidentally on purpose missed out the word “near” there.
Note the redundancies are not chosen by management, but are “voluntary”.
What multiplier would you apply to public services? I presume they are very valuable, no?
There’s no ‘near’ either. Anything within the remit of Croke Park is sailing through because TINA etc. There are huge changes occurring, but I accept that to those unfamiliar with (or innately, irretrievably hostile to) the public sector, they may not be apparent on the surface.
Note the redundancies are not chosen by management, but are “voluntary”.
They are not “voluntary” when the stick is redeployment to nowhere or with your family or in your declining years, or the threat of reductions in your pension (only the mandarin class – the sort who write IT columns about how clerical workers are lazy layabouts – sail into being lucrative poachers instead of gamekeepers after retiring).
What multiplier would you apply to public services? I presume they are very valuable, no?
What are you rabbiting on about?
@seafóid directs me to the wisdom of Aidan Harte on whether the current financial crisis is a financial crisis
Exemplary stuff, Mr Harte could be in the running for a medal from Wolfgang Schaeuble for “Selfless devotion to the ideals of the free market in brave defiance of the facts.”
What this post totally fails to appreciate is the level of fiscal and financial interconnection between states in the Eurozone. The Eurozone is a semi-closed trading economy. Only 10 percent of trade leaves the zone, mainly to other EU countries. Assessing the success of Irelands fiscal consolidation as though it were an economic island would inevitably lead one to the conclusion that in the medium term an aggressive reduction of the nominal deficit will improve the debt-GDP ratio and hence access to markets. The problem with this analysis is that it has no basis in the empirical reality of the Eurozone (and is totally ahistorical). The proposed strategy by John McHale can work if and only if Ireland was not dependent on the fiscal strategy of other Euro regions and there was a radical improvement in Eurozone economic growth. None of these conditions exist and therefore the analysis is flawed.
Holland and Porte (and pretty much the entire economic profession outside of Ireland) are absolutely correct in their analysis that coordinated fiscal austerity is increasing rather than decreasing the debt-GDP ratio.
An important question that will probably emerge in the next ten years (by which stage I am confident rationality will prevail and a change in strategy pursued): who is to be held accountable for the failure of ECB-IMF-EU Commission adjustment programs: national governments or the EU.
Why does it have to be just one? The adjustment programs could never have worked (thanks neo-classical economists) but national governments should never have put EPP solidarity above national interest.
I think there are three lessons that can be learned from the mess, the danger of letting ideologically toxic and intellectually failed schools of thought like neoliberalism take root in international institutions, the dangers of not confronting (and purging them) when they do (step forward Ireland’s cowardly political class) and the dangers of upper class solidarity both domestically and in the various EU institutions[*1].
We must not be like the US after the invasion of Iraq and let the perpetrators escape to continue exercising their malign influence. Rehn, Bini-Smaghi and a host of others need to face personal and professional ruin so that the next set of European bureaucrats/technocrats and economic thinkers who plan to further their political preferences by other means have a strong incentive not to.
Keep up the good work on your own blog Mr Regan. It was the kind of thing I hoped to find when I started following the Irish Economy.
[*1] It is notable that all the talk of performance based pay and “flexible” employment conditions does not apply to EU mandarins.
@Shay, Aidan R
Prob is the neoliberals are still in control at EU and local level. As John Quiggan notes, EU Social Democracy has yet to mobilise credible arguements for a radical change in direction and such change is unlikely to emerge from the SPD in Germany or indeed in France. Some lite reading below:
I first became an economist in the early 1970s, at a time when revolutionary change still seemed like an imminent possibility and when utopian ideas were everywhere, exemplified by the Situationist slogan of 1968: ‘Be realistic. Demand the impossible.’ Preferring to think in terms of the possible I was much influenced by an essay called ‘Economic Possibilities for our Grandchildren,’ written in 1930 by John Maynard Keynes, the great economist whose ideas still dominated economic policymaking at the time.
John Quiggin is professor of economics at the University of Queensland. His latest book, Zombie Economics, is published by Princeton University Press.