In a classic paper1, recent Nobel Prize winner Thomas Sargent and his co-author Neil Wallace showed that when the fiscal authority chooses an unsustainable fiscal policy path, in which debt to GDP ratios are rising and proposed budgets don’t generate enough future surplus to offset current deficits, seigniorage is the only way for the government to achieve intertemporal budget balance.
The rhetoric against liberalization of trade has been replaced in the Report by the consensus view that open markets support economic growth. The Commission has rightly distilled the lessons of last five decades’ experience of development. It argues that favorable global and domestic macro 1environment, physical and social infrastructure and rule of law are the foundations for the private sector.