Earth Economics
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Earth Economics

An Introduction to Demand Management, Long-Run Growth and Global Economic Governance

Peter A.G. van Bergeijk

Taking stock of emerging planet data and analysing policies during the global crisis, Earth Economics provides a comprehensive and accessible introduction to basic macroeconomic concepts, methods and principles, and their application to real world data.
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Chapter 6: What About Government?

An Introduction to Demand Management, Long-Run Growth and Global Economic Governance

Peter A.G. van Bergeijk


The existence of national governments is probably the most important reason why eartheconomics is not yet practised everywhere. Realists state that governments pursue national interests and therefore a model that focuses on the whole will miss that policy coordination amongst the parts is difficult. International coordination of national economic policies is especially difficult since many opinions around the globe exist about the appropriateness of economic policies. The realist view has a valid point of course, but for eartheconomics the aggregate behaviour is all that ultimately matters. Sometimes a fuzzy picture emerges when countries follow completely different and contradictory policies so that on average the impulse from government at the world level is about zero. However, many instances exist where we can observe that the aggregate of governments (and their problems and solutions) moves in the same direction. In the ‘Golden Age’ of the 1950s and 1960s, for example, policies by and large were Keynesian. The oil crises in 1973 and 1980s led to stagflation (a combination of high inflation and high unemployment that could not be cured by Keynesian policies). Ultimately this failure provided the basis for structural reform policies and the Washington Consensus which both put a lot of weight on markets. The initial response to the financial and economic crisis in 2009 is the most recent example of a case of national policies moving in the same direction. The debt problems that started to emerge in large parts of the world economy in 2010 – 2012 similarly result in a quite general movement of policies towards austerity measures (ILO, 2012b)

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