During the last presidential elections in the United States, the American people resoundingly rejected the proposal of an economic policy aimed at taking the breath out of a recovering economy through fiscal contraction. Of course the politicians never take the people’s views seriously. The same strategy has been brought to the table, but this time it’s no longer a proposition, it’s rather an imposition. That’s what sequestration accomplishes. As recent data indicate, the U.S. economy was beginning to register signs of positive effects of the stimulus packages implemented during the recession — rising housing prices, improving investor and consumer confidence and private spending, and, of course, strong gains by financial conglomerates. Those positive developments are, to a large extent, a result of the use of expansionary fiscal policy and monetary policy to support domestic demand.
Following the intense debate on the fiscal deficit during the U.S. presidential campaign, fiscal consolidation continues to dominate discussions in policy circles and academia. The large fiscal deficit in the U.S. and sovereign debt woes in the eurozone are used by proponents of the ‘small government’ mantra as a means to advance the belief that fiscal consolidation is the only way to bring the economy back to sustained growth and full employment. While the arguments are not new, the current circumstances of a global recession and a slow recovery in the U.S. make it somehow easier for proponents of this school of thought to fool the public into believing that tying the hands of the government is the only road to salvation.
The problem of unemployment has risen as the top emerging challenge in Africa today, especially in light of the critical role of the educated but unemployed youth in the revolution in North Africa year last. Unemployment is, however, a general problem, afflicting the working age population, educated or uneducated. The rising unemployment illustrates a failure the current policy frameworks to fully utilize the potential of African economies, including their financial resources. This note proposes policies that ought to be central to a national strategy to achieve full employment.
Léonce Ndikumana: Léonce is the Andrew Glyn Professor in the Department of Economics and Director of the Africa Policy Program at the Political Economy Research Institute, University of Massachusetts, Amherst. From 2008 – 2011, he was consecutively Director of Research and Director of Operational Policy at the African Development Bank, and from 2006-08 served as Chief of Macroeconomic Policy Analysis with the United Nations Economic Commission for Africa. His recent research includes the highly influential book Africa’s Odious Debt: How Foreign Loans and Capital Flight Bled a Continent, co-authored with Jim Boyce.