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Sustainability of Fiscal Policy in Democracies and Autocracies

"This paper tries to identify the fiscal sustainability record of democratically and autocratically governed countries by applying various performance indicators (payment defaults, national debt, foreign assets) and also to clarify what effect the characteristics of a regime have on consolidation and intertemporal budgeting efforts in a country. Important economic, social and environmental challenges of the future cannot be addressed if long term financial viability is not preserved in a country. The study identifies two key findings: while in the past, democracies have clearly found it easier to preserve their solvency and to avoid government bankruptcy, a similar advantage can no longer be detected for democracies in terms of reducing national debt and foreign debts. Why democracies, in spite of their arrangements with a sensitivity for the public good and for due process, are finding it so difficult to avoid shifting their debts to future generations (to undertake cutback measures and to provide sufficient financial foresight) can in principle be interpreted as the other side of the coin, namely highly presence-oriented interests boosted even further through the short democracy-specific time horizon."
Stefan Wurster
Institute for Political Science, Trier University
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