December 6th, 2012 by Hafiz Noor Shams
This is an excerpt from an old article by Raghuram Rajan. The excerpt is a point on the necessity of having a fiscal austerity program during crisis times even when it is ideal to have it spread over time. It is not a new point, but it is worth to be highlighted as a reminder on why some things are as they are right now.
…Fiscal austerity is not painless and will probably subtract from growth in the short run. It would be far better to phase reforms in over time, yet it is precisely because governments did not act in good times that they are forced to do so, and quickly, in bad times. Indeed, there is a case to be made for doing what is necessary quickly and across the board so that everyone feels that the pain is shared, rather than spreading it over time and risking dissipating the political will. Governments should, however, underestimate the pain that these measure will cause to the elderly, the youth, and the poor, and where possible, they should enact targeted legislation to alleviate the measures’ impact. [The True Lessons of the Recession. Raghuram Rajan. Foreign Policy. May 2012]