Iulia Igescu

Bonding in Europe: Governments As Promoters of Economic Growth and Stability Iulia Igescu

Stimulus policies or poor relief? That is the main government role dilemma. The goal of this book is to look into economic institutions less visited by economics: labor bonding. They are specific to Europe, both in the East and in the West. Unlike Keynesian government expenditures that stimulate current consumption (acting as a form of poor relief), bonding expenditures increase consumption indirectly through improved agents productivity (acting as an instrument of economic growth in the long run). Agents become healthier, better educated, have better working conditions. I extend the boundaries of economic growth theory and argue that a government can positively influence the wealth of an economy if it moves away from poor relief spending and concentrates instead on spending to increase agents' productivity, on stimulus policies. However, in this new century European bonding has to move towards a new equilibrium. While countries in West Europe should reduce some of their bonding and make it more efficient, it is necessary that East Europeans increase their expenditure to reinstate their bonding levels lost during their 1990s transition.