Political business cycle

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The political business cycle is a thesis of the New Political Economy . The thesis says that governments try to stimulate the economy in the election year through higher government spending and lower taxes, because voters judge the economic situation on the basis of the unemployment rate and the inflation rate. The trade-off to be postulated according to the Phillips curve , that a decrease in the unemployment rate goes hand in hand with an increase in inflation, would only become noticeable after the election because of a time lag in the increase in inflation (short-term rigidity of prices and wages). After the election, the governments would then reduce inflation again through economic cooling measures. The thesis says that it is worthwhile for an incumbent government to produce such a political business cycle: the intervention increases the chances of voting, if re-election still does not work out, the responsibility of the new government for the economic situation deteriorating again to normal can be asserted .

overview

In reality, it can be observed that government parties in parliamentary democracies often try to stimulate the economy before an election by increasing government spending and lowering tax rates and increasing voter income. After the election, they then try to curb the inflationary tendencies caused by this through measures to cool the economy. From this observation the thesis of the political business cycle was derived.

These issues are mostly for popular purposes; they are called "active labor market policies " or " stimulus packages ". Critics often call them "election gifts". The rulers suspect a correlation between economic recovery and the chance of re-election; they are spending these expenses to increase that opportunity. Since hardly any state has a balanced national budget (rather it incurs new debts every or almost every year to cover the budget deficit), this regularly leads to increased national debt .

This approach is often viewed critically. Many democracies have been trying since the early 1970s (i.e. for over 40 years) to boost their economies in an election year through deficit spending . This increased the national debt. High national debts can lead to crises (see also euro crisis ).

Some states, such as Great Britain , allow the respective government to choose the next election date itself within a specified period of time, i.e. to be able to initiate early elections relatively quickly. In this way, the government can take advantage of phases in which it has good results in election polls. In Germany, on the other hand, the Federal Chancellor can only dissolve the government to a limited extent; see question of trust .

The theories of political business cycles are among the macroeconomically determined research areas of the New Political Economy .

According to Hans-Rudolf Peters , the assumption that a government will succeed in managing the economy, which is not only dependent on domestic and controllable factors, is dubious in an election campaign. Economic management is usually also limited by the fact that important economic actors such as the central bank and the collective bargaining parties pursue their own goals. The assumption of a naive electorate, which is fooled every time by a manipulation of the unemployment rate at the expense of the inflation rate, is also doubtful.

Individual evidence

  1. ^ Hans-Rudolf Peters: Economic Policy. Chapter 15: Macro and Mesoeconomic Policy Approaches , ISBN 3486255029 , page 360
  2. ^ Die Zeit, Klaus Schweinsberg, Die Zeit (2000): When chance co-rules , February 10, 2000
  3. ^ Hans-Rudolf Peters: Economic Policy. Chapter 15: Macro and Mesoeconomic Policy Approaches , ISBN 3486255029 , page 359
  4. ^ Hans-Rudolf Peters: Economic Policy. Chapter 15: Macro and Mesoeconomic Policy Approaches , ISBN 3486255029 , page 362

Sub-areas and representatives

  • Model of the political business cycle: William D. Nordhaus , The political business cycle , Review of Economic Studies, 42, 169–190, 1975
  • Partisant theory : Douglas A. Hibbs, 1975/77
  • Rational partisant theory: Henry W. Chappell and William R. Keech, 1986, Alberto Alesina , 1987

literature

  • A. Belke: Political business cycle - comments on the explanatory value of the partisan approach . In: Ifo studies, 3/1997.
  • Sylke Behrends: New Political Economy , WiSo short textbooks - Economics, Vahlen 2001, ISBN 3-8006-2505-9 , pp. 121–129.
  • Hans-Rudolf Peters: Economic Policy. Chapter 15: Macro and Mesoeconomic Policy Approaches. Pp. 359 ff. ISBN 3486255029

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