Tuesday, September 2, 2008

The state and its fiscal obligation

Confucius says:

The state has an obligation to support a society that provides the proper incentives for economic activity among its people.

During times when people are not investing, the state has the obligation to provide fiscal stimulus that will result in its people re-investing in the economy.

The state does not have the obligation to use fiscal stimulus to bail its people out of reckless investment.

The state should not use fiscal stimulus as a way to gain political favour from a chosen minority.

The state should not bankrupt itself supporting personal consumption that does not result in added economic activity. This includes squandering state coffers into funding personal spending that is only sustainable for as long as the state continues to support it.

The state has the obligation to keep itself solvent and liquid, so that it will have enough in its coffers to use for a truly necessary fiscal stimulus.

When such a situation comes, the state should wisely determine which activities will best re-store business confidence amongst its peoples, and should be bold in providing such stimulus, so that the stimulus is not only effective, it is successful over the long-term.

Ok, ok. Confucius did not say these things. But had he lived during a time when fiscal stimulus from the government was already an accepted concept, he might have said something close to this.

No comments: