Fiscal Alcoholism

“Compulsive” institutional borrowing and spending.

Dr Eamonn Butler of The Adam Smith Institute has seized upon the term “fiscal alcoholism” to characterize the economic policies of countries across the world:

They know that they should be giving up their reckless spending and borrowing. But they like the high it gives them. And they reckon that one little bit more spending or borrowing can’t do them much harm, can it…?

As Butler sees it, economic measures such as interest rate reductions, quantitative easing and stimulus packages are to blame for financial boom-bust cycles – because the booms are “built on sand”:

It was the cheap credit that created it, not some revolution in productivity and efficiency, or an influx of new customers. Bigger and bigger doses of the credit drug are needed to keep the high going. Eventually, it falters and the result is an awful hangover.

So I think fiscal alcoholism is a good way of describing this phenomenon. Unfortunately the G20 meetings simply provide an opportunity for all the fiscal alcoholics to get together and buy each other more drinks. It’s a shame we don’t have regular fiscal AA meetings where they all come and fess up: “My name is Gordon Brown and I’m afiscal alcoholic…”

Bulter thanked a colleague for introducing him to “fiscal alcoholism,” and attributed the term to György Kopits, a member of the National Bank of Hungary’s monetary council, who outlined “Budapest’s four-step plan for fiscal alcoholics” in an article for The Wall Street Journal.