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The concept of bureaucracies not reducing in size is explored by economist William Niskanen in his budget-maximizing theory of 1968. The growth of governments seems to be inevitable, as evidenced by the rise in federal debt relative to output in the US and other countries.
This trend of increasing government spending transcends party politics, with both left and right failing to control expenditures. The rise of populism has led to promises of more spending without the willingness to make sacrifices.
Global bond markets have emerged as a crucial player in holding governments accountable for their fiscal policies. Bond vigilantes monitor government actions closely, influencing decisions and policies.
While bond vigilantes play a significant role, the equity investor complex has been less vocal in challenging government spending. Equity vigilantes could exert pressure on governments by leveraging their influence and power as shareholders in companies.
By targeting specific issues such as infrastructure development or youth unemployment, equity vigilantes could push for policy changes and fiscal responsibility. The potential impact of equity vigilantes extends beyond financial markets to influencing political decisions and government actions.
Through coordinated efforts and strategic actions, equity vigilantes could play a crucial role in shaping economic policies and holding governments accountable for their fiscal decisions.
stuart.kirk@ft.com