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01/18/2013

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Philipp

"It makes sense then to say that good governance must be reflected in the degree to which governments exercise this resource mobilization and management authority."

I'm not sure if I agree with the argument following this. The shift in debt levels in rich vs poor is certainly impressive, but what does that mean for governance?

Arguably, you could say that the higher the debt per GDP at a given interest rate, the better the governance. In other words, the fact that Japan, Italy et al are able to sustain debt levels far higher than what would have led to rapid default in poorer countries is a sign of strength.

matt andrews

Great comment. Yes. As with all measures of governance I struggle to always see how we come away with clean and clear ideas about what 'good governance' and 'bad governance' is... The interesting thing, of course, is that countries like Japan and Italy have been burdened by interest payments that take up 15+% of their revenues each year because of the debt. Even with low rates, this suggests higher debt comes at the opportunity cost of having lower taxes or more spending on other things.

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