Since the 2008/2009 global financial and economic crisis, countries all around the world have been looking for strategies to improve national income and increase employment opportunities to ensure that their nationals can continue to enjoy reasonable standards of living. As the evidence would suggest, the achievement of that critical goal has been a much tougher task than we were all led to believe.
Consequently, whether it is in relation to the leading industrialised countries, or the transition economies of Eastern Europe, or even small open economies like those in the Caribbean, generating sustained levels of economic growth has been a rather elusive goal over the past five years.
Part of the problem in this respect has to do, in my opinion, with the ideological positions adopted by many governments as far as finding reasonable solutions to the problems facing various economies.
For example, many countries including the powerful United States returned to the Keynesian revolution as the major source of inspiration to resolve the economic challenges they confronted. Keynesian economics is well-known for its novel prescription that fiscal policy can be used to increase national income and resolve unemployment issues.
Even though that school of thought suggests that the broad goal of raising national income can be achieved by increasing consumption, or investment or government expenditure, in practice most of the emphasis has been placed on greater public spending on things such as economic infrastructure.
Some may argue that in the context of the US, the use of Keynesian remedies have worked well over time because the economy is now growing again and unemployment is on the decline.
What, however, the supporters would not say is that at the same time the national debt has soared and is now approaching US$18 trillion. Even though increased government spending does have the potential to grow the economy and reduce employment, the issue is always one of the huge cost involved – massive debt.
Taking the American experience alone, it seems logical to me that no one course of action should ever be contemplated by any government in seeking to bring about economic recovery. Instead, strategies should be borrowed from as much schools of thought as deemed necessary in the circumstances.
Within that context, I firmly believe that rather than focusing so heavily on Keynesian type economic strategies, governments throughout the world can be better served by incorporating elements of, for example, supply-side economics and allow some economic growth through greater private investment. All this strategy requires governments to do is create the right investment climate for businesses to function and thrive. This means that all of the issues pertaining to marginal tax rates on individuals and corporations, incentives to businesses, and regulatory matters, among others, have to be addressed in a holistic fashion.
Indeed, for any government to put all of its faith in a particular school of economic thought is to miss out on the opportunities that exist in others in relation to alternative strategies for growing an economy and lowering unemployment in a sustained manner. Heeding that simple advice puts all and sundry on the right side of economic history.
