The Economic Policies of European Governments, Part II: Fiscal Policy

While political controversies over the legitimacy of monetary interventions in Western economies were settled decades ago, the widespread acceptance of fiscal interventions as appropriate tools for achieving economic stability and economic growth is much more recent and much less pervasive. Even the pre-Depression classical economic model specified a role for government monetary policy: ensuring an appropriate stock of money. While institutions of monetary policy making now enjoy both a long history of utilizing monetary policy instruments and a low level of ideological conflict over the legitimacy of those interventions, the institutions of fiscal policy making enjoy neither. Though some governments had begun to practise fiscal interventions before the Second World War, the widespread use of such instruments is, by and large, a post-war phenomenon. Thus, governments have generally had less experience in learning ‘how to do it’.