This post was prepared by Geghetsik Afunts, a second year PhD student at CERGE-EI.
Do governments need a “Personal Trainer or Watchdog” to achieve objectives such as long-term sustainability of public finances, economic growth or surplus targets? Fiscal watchdogs have existed for a long time in some countries and one of the first European countries was Sweden. But the Chairman of the Swedish Fiscal Policy Council John Hassler says that in practice such institutions are considered more as personal trainers than watchdogs.
This month, CERGE-EI students had the pleasure of attending Professor John Hassler’s lecture. In addition to his role as Chairman of the Swedish Fiscal Policy Council where he leads evaluation of the government’s economic policy, he is Professor of Economics at the Institute for International Economic Studies. His research has covered areas of dynamic public finance, social mobility, growth and climate change. Since 2009, he has served as a member of the Prize Committee for the Prize in Economic Sciences in Memory of Alfred Nobel.
In Hassler’s view, independent evaluation of fiscal policy should only be done by academics, since they have no political career considerations and can become “fair trainers”. Moreover, the objective of such an agency is not just to analyze the situation, but to convince politicians to “train a little bit longer”.
Professor Hassler also pointed out that economic policy is almost always about finding the right balance between conflicting goals and that even if policy seems perfect it can lead to hidden “Frankenstein monsters”. This is where the Council steps in to assess whether fiscal policy is in line with long-term sustainable growth and long-term sustainable high employment. Furthermore, being the third independent side, the Council’s goal is also to stimulate more public debate on economic policy.
Pondering what lessons politicians should take from the Swedish experience, John Hassler suggested not only to set up political goals, but also to analyze whether proposing these means achieving them and to remember that “hidden conflicts can rise anyway”. Of course, agency objectives vary from country to country, but these are the main principals that work in Sweden and they should work in other countries.
Since the Czech government is currently considering the creation of a similar advisory institution, the director of CERGE-EI also joined the lecture and highlighted several issues. According to Professor Michel Kejak, successful fiscal policies should be internally consistent, implemented by relevant structural reforms and supported by macroeconomic policies.
Watch Professor Hassler’s recent lecture at CERGE-EI here.
