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Economic Theories Outside The U.S.*

January 22, 2020

People frequently believe the U.S. economy is different from other countries’…,and to some degree that is true but much of the economic theory applies across countries.

During the Great Recession, Europe and Japan bought into fiscal austerity as did the U.S.—reducing government spending and trying to balance budgets. European governments are learning that deficits may not be so bad since reducing them has not produced the growth they seek. In fact, many politicians are ignoring economic theory and going their own way.

In England, the new government plans to SPEND money, thus investing in infrastructure and health care. They point to President Trump’s’ tax cut, increased military spending, and increased deficits. The U.S. economy continues to chug along.

France and Spain plan to relax their budgets, spending more on social benefits. Japan just approved a fiscal stimulus package. The usually austere government spending habits in the Netherlands, Finland, and Germany have altered their approach to increase spending on welfare programs, defense, and infrastructure.

According to the International Monetary Fund’s chief, Kristalina Georgieva and outgoing European Central Bank president Mario Draghi, increased spending on infrastructure and education would promote more balanced global growth.

 

*For how economic theories might be incorrect inside the U.S. please see our Fourth Quarter 2019 Newsletter

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