28/01/2008 1:29:08 pm
In Eurointelligence: Look Beyond the Quick Fix! In today?s edition of Eurointelligence, I argue that policymakers should stop acting like desperate Keynesians and continue focusing on long-term structural reforms - the only way to achieve long-term economic success:

"Most policymakers in Europe and the United States are now intensely focused on the shakiness of financial markets and the short-term economic prospects. Monetary and fiscal policy measures are, almost desperately, especially in the US, directed towards expansionism and short-term stimulus. It seems that Keynes was wrong in claiming that ′in the long run we′re all dead′, since he himself is revived frequently, seemingly without an end.

In a turbulent situation, it is easy and understandable to focus on the short term, though it did not have to lead to harmful policies. But long-term economic success can only be achieved through a competitive institutional setting, which makes structural reforms to improve the institutions and systems important. And since short-term crises are often caused by harmful institutions, reforms can indeed make those less likely in the future too.

Indeed, the macroeconomic reforms undertaken in most OECD countries during the past decades have led to fewer crises. Independent central banks with a target of price stability and fiscal frameworks have created a much more sound macroeconomic setting. The stagflation of the 1970s is behind us. But this does not mean that the need to reform has disappeared. Every country can always improve, thanks to new knowledge and other countries paving the way."

Read the entire article here - >