Which country showed the most spending restraint during the financial meltdown?

[phk]

Here's an awesome graphic from Harvard Business Review. Essentially it shows a pie chart for each major nation in the world, and then shows the size of their A) government bail outs and B) government stimulus programs relative to the size of their economy. It's definitely an interesting read for many reasons, it really puts things into perspective.

Yet what struck out to us was the tiny, tiny use of bailouts and stimulus by France relative to every other major economy. Despite all the anti-socialist rhetoric from certain pundits and the notion that somehow nations like the U.S. and U.K. are free market bastions while France is some sort of government-infested economic monster, the reality is that France showed the most spending restraint of all nations during the financial meltdown. And it's during crisis when our true philosophical colors shine... They may not talk the talk, but they showed the least manipulation of the economy.

[Verily]

If anything, the charts show which countries had the more regulated banking systems prior to the recession. Iceland, Ireland and the UAE, which were all free market havens that thrived on the risk-taking of their banks and institutions, suffered the most from the recession and consequently had to spend exorbitant amounts of money to keept their financial institutions afloat. Similarly, the US and UK, while not in nearly as dire straits as the aforementioned three countries, also had highly deregulated banking institutions that engaged in dangerous lending practices, necessitating a bailout to prevent a complete collapse of credit.

France, on the other hand, and a handful of other countries as well, had maintained their strong financial regulations that prevented risky and problematic lending by financial institutions and prevented the French from seeing the same dangers of a credit collapse. This isn't a chart of which countries were fiscally responsible after the crisis; it's a chart of which countries were fiscally responsible--that is, had strong bank regulations--before it. The financial bailouts were all based on necessity to maintain credit.

Stimulus funding is a bit murkier; generally, stimulus funds were also necessary to help countries struggling with lean credit that also implemented substantial bank bailouts, but stimulus plans tended to be driven also by political considerations. In some cases, such, as China, the stimulus money was designed to prevent a meltdown rather than to combat one which had already taken place, and indeed it was a very effective policy strategy in China.

[Tetro Kornbluth]

If anything, the charts show which countries had the more regulated banking systems prior to the recession. Iceland, Ireland and the UAE, which were all free market havens that thrived on the risk-taking of their banks and institutions, suffered the most from the recession and consequently had to spend exorbitant amounts of money to keept their financial institutions afloat. Similarly, the US and UK, while not in nearly as dire straits as the aforementioned three countries, also had highly deregulated banking institutions that engaged in dangerous lending practices, necessitating a bailout to prevent a complete collapse of credit.

France, on the other hand, and a handful of other countries as well, had maintained their strong financial regulations that prevented risky and problematic lending by financial institutions and prevented the French from seeing the same dangers of a credit collapse. This isn't a chart of which countries were fiscally responsible after the crisis; it's a chart of which countries were fiscally responsible--that is, had strong bank regulations--before it. The financial bailouts were all based on necessity to maintain credit.

Stimulus funding is a bit murkier; generally, stimulus funds were also necessary to help countries struggling with lean credit that also implemented substantial bank bailouts, but stimulus plans tended to be driven also by political considerations. In some cases, such, as China, the stimulus money was designed to prevent a meltdown rather than to combat one which had already taken place, and indeed it was a very effective policy strategy in China.

No we weren't. Not at all.

[Bo]

Zimbabwe or Palau.

[Beet]

Yeah, China never even had a banking crisis, hence it didn't spend much on "bailouts", on the other hand the economy is heavily dependent on exports, which necessitated a large "stimulus"; India never went into recession; neither did Australia; Brazil's economy barely even dipped into recession. While Ireland had a huge boom. Iceland's banks were leveraged up to several times total GDP.

In response to the question "which country showed the most fiscal restraint during the financial meltdown?", you have to look at total drop in GDP vs. total size of deficit as percentage of GDP. In other words, how much pain was taken? I suspect the prize would to go to the countries that were under pressure to devalue their currency and  instead opted [so far] for internal devaluation: Ukraine, Latvia, Lithuania, and Estonia.

[opebo]

This story is testimony not to anything about the economy or government policy, but just how crazy are right-wing bloggers.

[Verily]

If anything, the charts show which countries had the more regulated banking systems prior to the recession. Iceland, Ireland and the UAE, which were all free market havens that thrived on the risk-taking of their banks and institutions, suffered the most from the recession and consequently had to spend exorbitant amounts of money to keept their financial institutions afloat. Similarly, the US and UK, while not in nearly as dire straits as the aforementioned three countries, also had highly deregulated banking institutions that engaged in dangerous lending practices, necessitating a bailout to prevent a complete collapse of credit.

France, on the other hand, and a handful of other countries as well, had maintained their strong financial regulations that prevented risky and problematic lending by financial institutions and prevented the French from seeing the same dangers of a credit collapse. This isn't a chart of which countries were fiscally responsible after the crisis; it's a chart of which countries were fiscally responsible--that is, had strong bank regulations--before it. The financial bailouts were all based on necessity to maintain credit.

Stimulus funding is a bit murkier; generally, stimulus funds were also necessary to help countries struggling with lean credit that also implemented substantial bank bailouts, but stimulus plans tended to be driven also by political considerations. In some cases, such, as China, the stimulus money was designed to prevent a meltdown rather than to combat one which had already taken place, and indeed it was a very effective policy strategy in China.

No we weren't. Not at all.

What's your interpretation of the Celtic Tiger economy, then? Obviously, some sectors remained highly regulated (farming, e.g.), but these were not the growth engines, either.

[Tetro Kornbluth]

If anything, the charts show which countries had the more regulated banking systems prior to the recession. Iceland, Ireland and the UAE, which were all free market havens that thrived on the risk-taking of their banks and institutions, suffered the most from the recession and consequently had to spend exorbitant amounts of money to keept their financial institutions afloat. Similarly, the US and UK, while not in nearly as dire straits as the aforementioned three countries, also had highly deregulated banking institutions that engaged in dangerous lending practices, necessitating a bailout to prevent a complete collapse of credit.

France, on the other hand, and a handful of other countries as well, had maintained their strong financial regulations that prevented risky and problematic lending by financial institutions and prevented the French from seeing the same dangers of a credit collapse. This isn't a chart of which countries were fiscally responsible after the crisis; it's a chart of which countries were fiscally responsible--that is, had strong bank regulations--before it. The financial bailouts were all based on necessity to maintain credit.

Stimulus funding is a bit murkier; generally, stimulus funds were also necessary to help countries struggling with lean credit that also implemented substantial bank bailouts, but stimulus plans tended to be driven also by political considerations. In some cases, such, as China, the stimulus money was designed to prevent a meltdown rather than to combat one which had already taken place, and indeed it was a very effective policy strategy in China.

No we weren't. Not at all.

What's your interpretation of the Celtic Tiger economy, then? Obviously, some sectors remained highly regulated (farming, e.g.), but these were not the growth engines, either.

While I don't really have an analysis of the 'celtic tiger' it is a complete myth that Ireland has a small state, deregulated economy. There was alot of deregulation in regards to trying to seduce foreign capital investment to Ireland. But that isn't the economy as a whole. True it did play a very significant role in the early stage of the Celtic Tiger from about 1994-2002 with our major industrial developments in pharmaceuticals and IT. However that pretty much declined as a vital factor after the end of the dotcom boom, after which it was internal investment which was the main driving force in the economy. Especially in property which was completely and utterly unsustainable in the long run. And there is a very strong property-banking complex in this country. Political decisions (including favourable deregulation to favoured FF-backed industries) were crucial in this. Ireland is a pretty corporatist setup as a whole, unsurprising giving that the economic scaffolding of the state was pretty much designed in the Lemass era (and liberalized somewhat in the late 80s) and claimed to be based on the papal encyclical Rerum Novarum. The Republic of Ireland contains (or rather contained) strong state-union-business co-operation. See here.

(The above article is utterly awful for the record. I'm only using as a major example of what 'corporatist' state the Republic of Ireland is).

[opebo]

Ireland's boom had not the least little bit to do with 'deregulation'.  It was caused by the Euro.

[k-onmmunist]

Hehe, Britain only has 1.2% on stimulus.

[Tetro Kornbluth]

Ireland's boom had not the least little bit to do with 'deregulation'.  It was caused by the Euro.

Joke poster.

For the record deregulation did most certainly contribute to the boom, but it also contribute greatly to the crash...

[k-onmmunist]

Ireland's boom had not the least little bit to do with 'deregulation'.  It was caused by the Euro.

Joke poster.

For the record deregulation did most certainly contribute to the boom, but it also contribute greatly to the crash...

This is true also. The euro will actually hurt most countries in Europe in the long run because now they've lost control of fiscal policy.

[k-onmmunist]

Here's an awesome graphic from Harvard Business Review. Essentially it shows a pie chart for each major nation in the world, and then shows the size of their A) government bail outs and B) government stimulus programs relative to the size of their economy. It's definitely an interesting read for many reasons, it really puts things into perspective.

Yet what struck out to us was the tiny, tiny use of bailouts and stimulus by France relative to every other major economy. Despite all the anti-socialist rhetoric from certain pundits and the notion that somehow nations like the U.S. and U.K. are free market bastions while France is some sort of government-infested economic monster, the reality is that France showed the most spending restraint of all nations during the financial meltdown. And it's during crisis when our true philosophical colors shine... They may not talk the talk, but they showed the least manipulation of the economy.

*snip*

The reason why is because France already had a good deal of input on the management of the economy to begin with and it suffered alot less than other European countries. The banks were more stable because deregulation wasn't as strong and little actual stimulus was needed: the government could simply ramp up spending in publicly owned businesses.

It's a model for good economic growth and one which the US and the UK should learn from.

[Bono]

Why is latvia in the chart, but not Canada?

[opebo]

Ireland's boom had not the least little bit to do with 'deregulation'.  It was caused by the Euro.

Joke poster.

GT, how can  being under the monetary policy of a much larger slower-growing economy not be stimulative of a tiny faster growing one?

[titaniumtux]

Why is latvia in the chart, but not Canada?

I too am disappointed that Canada was left out. I'm not trying to defend Canada's importance, but it would be interesting to see how it would compare. I do know there's been a fair amount of stimulus spending in Canada to please the Obamesiah, such a shame that Soviet Canuckistan didn't make the map.