Economic policymaking in the west has developed in radical ways since the global financial crisis. When Lehman Brothers collapsed in 2008, the US after some hesitation allowed the Federal Reserve to intervene in the markets. Afterwards, the European Central Bank did the same in response to the sovereign debt crisis in Greece and other EU states.
Since then, quantitative easing has had a real impact on western markets. So-called helicopter drops are now in vogue, and negative interest rates have gained acceptance in spite of widespread anxiety about their unknown effects. The fashion for unconventional monetary policy was highlighted yesterday with the ECB’s decision to cut interest rates in the eurozone to a record low and to expand its quantitative easing package.
But there are other ways of stimulating demand. Why, for instance, do western governments refuse to set up state-owned enterprises that will create jobs? Are they really so much worse than QE and low or negative interest rates?