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Democracy, Debt and Disorder. Towards the End of Political “Generosity”

PFM, Vol. 8 No. 2, (2008)

Unquestionably, the existing welfare state, as has evolved in a four-decade span, is destined to collapse unless redistribution enters a new constitutional contract to smooth the intergenerational conflicts that grew out of the presuppositions of Harvey Road. A key insight is that under the spell of intergenerational solidarity, fiscal illusion has perpetrated a violation of the intergenerational equal treatment. The paper, in its initial part, highlights how concentration of expenditures and intertemporal dilution of costs by means of debt creation have provided the ambiance to turn democratic order into intergenerational disorder. It goes on to analyze the evolution of the Italian public debt and the background of the elements that have generated intergenerational disorder. While the data on the Italian public finances during a one-hundred-fifty-year span show that governments have widely resorted to public debt, there are marked differences between public debt policies before and after the 1970s. The paper suggests that intergenerational order has collapsed ever since the Italian governments embraced the presuppositions of Harvey Road.

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