By Bilal Hafeez 29-10-2019

How To Spend It (The Sound of Economics)

(30 min listen)

(You can listen to the podcast by clicking here)

This podcast discusses public finance. Is quantity more important than quality? Boris Cournede, Deputy Head of Public Finances at OECD; Francesco Papadia, a senior fellow at Bruegel; and Maria Demertzis, Deputy Director at Bruegel, delve into how fiscal policy makers’ attitudes have changed over public spending. There are areas where tax can be increased in order to reduce the burden on lower classes, such as on sources of emission. How can we improve the quality of finance in an environment where countries are continuously being asked to spend more money and where countries are at a very high level of debt, meaning that their budgets are limited?

The speakers question the balance between fiscal policy and government intervention and whether it is possible to have a pragmatic approach to public spending. Ultimately, they agree that quality spending is equally (or more important) than quantity because it addresses inequality in a more effective way. For example, through distribution policies that pay attention to deviations from means and not just averages.

Why does this matter? Public spending is particularly important as there are a number of risks foreshadowing economies. For example, the IMF forecasts growth stagnation, which could be compounded by Brexit and trade wars. We must question how fiscal policy can react to this. Furthermore, it is important to question the way governments spend money and whether they are being as effective as possible in tackling issues such as inequality.