Tuesday, December 15, 2009

Political Short-Termism

Mojmir Hampl , vice-governor of the Czech National Bank and a member of the EU’s economic and financial committee, chastises politicians in a Wall Street Journal opinion column for “cheap lecturing of the markets in may countries around the world (…) when it is easy to see that the advocates of such lessons lack credibility in the subjects on which they preach”.

While the political elite in most of the advanced democratic countries have been lecturing the financial markets about their irresponsible, myopic and reckless behavior, it has hardly been offering a textbook example of care for long-term goals stretching beyond terms of office and political cycles. There are always elections on the horizon, be they party, local, national or pan-European, and long-term thinking is the exception.

Whereas “there have been few times so good for public budget management as the “great moderation” years of solid growth and low inflation that preceded the present crisis, (…) the vast majority of EU countries ran substantial budget deficits (…)

It is ironic that in the current EU, the new regulatory measures are being written and promoted primarily by the large Western countries whose financial systems proved to be the most vulnerable in the crisis. Just imagine how it would look if new financial regulations in Central and Eastern Europe were written mostly by Latvians.”

My conclusion: one should listen more often to the Czechs, they really understand public choice theory.

Read the paper here .

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