Preliminary communication
POLITICAL ASPECTS OF DEFLATIONARY POLICY IN CROATIA
Dubravko Radošević
orcid.org/0000-0001-9829-5473
; Institute of Economics, Zagreb, Croatia
Abstract
Many politicians and macroeconomists claim that fiscal deflation would be
good for financial stability and growth. We think that deflationary policy tends
to lower output and employment, but political aspects of deflationary policies
are even more important. Deflationary policies sharpened a long-standing crisis
of statehood and political legitimacy. Full employment policy may be desirable
for the political stability and social cohesion. It is increasingly clear
that many European countries (Croatia included) – and the EU as a whole –
need to renegotiate their basic social contracts. But political elites are preoccupied
with short-term fixes, they continue with deflationary policies, which
have very strong negative redistributional consequences (rising inequality),
and have not considered the long-term need for such revisions – to their own
detriment and substantial loss of democratic legitimacy. Building the nationwide
support for a new social contract – not just support by major parties and
tehnocracy, but a grand coalition actually empowered by elections, i.e. constitutional
arrangements with citizens-representatives that would monitor political
elites to preclude corruption – will require an appeal to fairness. Fairness,
not just fiscal rectitude – is essential.
Keywords
Deflationary Policy; Full Employment Policy; Reflation; Democratic Legitimacy; Social and Political Stress Tests
Hrčak ID:
107680
URI
Publication date:
23.9.2013.
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