Fiscal policy and capital mobility: the construction of economic policy rectitude in Britain and France

Abstract

IntroductionIt is a commonplace of both political and academic argument that the last quarter of twentieth century saw major diminution of national economic policy autonomy, with increased capital mobility identified as the key explanatory variable. Despite such qualification regarding capital mobility impact, the idea of 1970s as a watershed for national policy autonomy is still pervasive. 9 This article looks at how that credibility is constructed in the contemporary period (1997)(1998)(1999)(2000)(2001)(2002)(2003), and goes on to analyse the degree of enduring fiscal policy autonomy in two cases -Britain and

The New Political Economy ofDirigisme: French Macroeconomic Policy, Unrepentant Sinning and the Stability and Growth Pact

“…The dirigiste instincts to exploit and indeed expand policy space continued under Raffarin's Centre‐Right government from 2002 onwards. France's sharply expansionary fiscal policy in 2002 (Clift and Tomlinson 2004, 525) gave way to a slightly restrictive stance in 2003. That said, French government deficit forecasts had to be repeatedly revised upwards (OFCE 2004, 8), and fiscal policy in 2004 proved less restrictive than both the stability plan, and indeed the Budget had predicted (OFCE 2004, 6–7) 3 .…”

“…This, it was feared, could potentially lead to damaging spillover effects from national policies to the wider Eurozone (see e.g. Eichengreen and Wyplosz 1998; Eijffinger and Hahn 2000, 81–87; Clift and Tomlinson 2004, 520–522). Spillovers could arise because, with a fixed exchange rate, national government borrowing would no longer involve any exchange rate risk, assuming continued adherence to the euro.…”

The political economy of French social democratic economic policy autonomy, 1997–2002

“…Public spending accelerated in 1999 (+2.4 per cent in volume, compared with an average of 1.2 per cent increase 1993-97) (Dupont 2001: 63-5). The role of automatic stabilisers retained its importance within the French fi scal policy framework (Clift and Tomlinson 2004). This, combined with some redistribution to lower income brackets with a higher propensity to spend, was a means of keeping demand buoyant during the growth period.…”

Joined at the hip, but pulling apart? Franco-German relations, the Eurozone crisis and the politics of austerity

“…A crucial aspect of these 'complex linkages' is the degree of credibility economic policy settings enjoy with financial market participants. This is an important determinant of the nature and degree of enduring macroeconomic policy autonomy (or conversely the constraints thereon), and understanding it draws our gaze to the institutional and ideational context in which 'credibility' is constructed (Mosely 2003;Clift & Tomlinson 2004.…”