Explaining Variations in Patterns of Fiscal Consolidation

The comparative study of debt and fiscal consolidation has acquired a new focus with the re-emergence of debt as a major problem consequent upon the global financial crisis. This leads us to re-evaluate the literature on fiscal consolidation that flourished during the 1980s and 1990s. We identify two broad schools of analysis, one which segments episodes of fiscal change into discrete observations, the other comparing budget profiles at two points in time. We argue that both strategies miss the dynamic features of government strategy, especially in the choices made between expenditure-based and revenue-based fiscal consolidation strategies. We propose a focus on pathways rather than episodes of adjustment, to recapture what Pierson terms 'politics in time'. We draw on classical explanatory tools of comparative political economy, including structures of interest intermediation, the role of ideas in shaping the set of feasible policy choices, and the situation of national economies in the international political economy. We support our argument with qualitative data based on paired comparisons of Ireland and Britain, and Greece and Spain.