Passenger-vehicle sales in China rose at the slowest pace in five months in April 2015 as weaker economic expansion hurt demand (photo: dpa)

Unrealistic expectations of growth lead to wrong decisions

Governments have been ignoring the hard economic facts of life to deliver political dreams which meet the expectations of voters. They have been living in a world of make-believe by failing to deliver the reforms which current economic positions demand but meddling with more and more government intervention.

<i>Policymaking follows people’s expectations to an increasingly large extent. In turn, public opinion tends to neglect what the economy can really deliver, and focusses on the authorities’ moves to ensure that reality meets expectations. This results in a distorted causal mechanism which creates unrealistic expectations, provokes tensions, and creates a rising demand for m...

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Professor Enrico Colombatto
It will take time before public opinion accepts that under the present circumstances a growth rate close to stagnation is a more realistic target. It is only then that policymakers will dare to make realistic promises, and abstain from engaging in vain efforts to jump-start the economy without introducing structural reforms
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