To stimulate or not to stimulate - that is the question

Hawkeye123

Can economies be stimulated by state subvention? Instinctively I believe they cannot but of course my instincts are not admissible as evidence to support that belief. Instead, I would like to recommend a book called Dead Aid by the African author Dambisa Moya.

This book outlines the devastating effects that aid and cheap loans has had on African countries. Who can deny that cheap credit killed the cat - otherwise known as the Celtic Tiger. If cheap credit kills economies, expensive credit is not going to do much good either. Furthermore, African countries which have rejected aid and cheap credit have invariably thrived.

Here are some points to ponder:

1. Marketeers think differently to Politicians.
2. Cheap credit can foster corruption.
3. Cheap credit can distort the markets and undermine competitiveness.

... but don`t take my word for it. (For the benefit of the Dept. of Finance,) here is the name of that book again - Dead Aid by Damisa Moya.

Belfast

I agree stimulating will not be useful.

sarkozy

That Dead Aid book is rubbish. Wouldn't base a view on it.

matthew8

Asking whether stimulus can make an economy grow is like asking whether pumping air into a balloon makes it bigger. But I don't think that's what's being asked. The big example used for stimulus spending is how we got out of the great depression. But I believe that example is wrong. FDR pumped tons of money into the economy and things were looking rosy. Then he decided it was time to try and balance the books and the economy deflated. The stimulus didn't get the economy going. Then the mother of all stimuli was created by WW2 and apparently this really did get the economy going for some time. But did the economy really get going, or was there just another huge ongoing stimulus made by the Korean War, the troops coming home (millions of productive citizens returning is a huge stimulus) and the rebuilding of Europe. Sadly though I feel the US economy has to be constantly stimulated because they no longer control their own currency and thus they can't deflate the economy. For us, our hands are tied by the euro. We obviously can't deflate the euro and no one will lend us the money to stimulate the economy.

gaffer91

Economic stimuli (not really sure of the plural) can and often do work. Rudd's stimulus of the Australian economy is often credited with staving off recession and Obama's (I'm probably going to get crucified for this) saved or created millions of jobs, despite criticisms of it not being big enough.

Most opponents of economic stimulus packages are just general opponents of keynesian economics. This ignores however that one of the greatest periods of economic expansion, commonly known as the Golden Age of Capitalism in the 30 years after WWII was heavily characterised by increased government spending and expansion of welfare states. My general argument would be that governments can play a role, a large one, in ensuring an economy runs smoothly and prosperously.

Permabear

This post has been deleted.

Lockstep

It depends where it goes really. I'd really like to see better infrastructure in Ireland: roads and water are particularly bad.

sarkozy

gaffer91 wrote: »

Economic stimuli (not really sure of the plural) can and often do work. Rudd's stimulus of the Australian economy is often credited with staving off recession and Obama's (I'm probably going to get crucified for this) saved or created millions of jobs, despite criticisms of it not being big enough.

Most opponents of economic stimulus packages are just general opponents of keynesian economics. This ignores however that one of the greatest periods of economic expansion, commonly known as the Golden Age of Capitalism in the 30 years after WWII was heavily characterised by increased government spending and expansion of welfare states. My general argument would be that governments can play a role, a large one, in ensuring an economy runs smoothly and prosperously.

It's not helpful to see the post-WWII recovery as solely down to 'stimulus', or less anachronistically, Keynesian 'demand management' - the act of injecting capital to ignite socio-economic activity in a country.

Two facts also contributed to the recovery.

One was that the destruction caused by the war became an opportunity for growth. Rebuilding Europe's infrastructure created jobs, and incomes fuelled the regeneration of local and national economies.

Two was that, inasmuch as the Depression was exacerbated by widespread trade protectionism, the post-War era brought about an end to dirigisme. Admittedly, this 'Pax Americana' meant that recovery came about on American capitals' terms, it also meant that the new order (in the West) would involve more open, free trade in a growing international commodity market. At the same time, European countries afflicted by the war knew very well that trade protectionism could not be the answer, and neither could monopolisation of key natural resources be allowed. Gradually, the analysis that led to the vision that became the European Union meant that trade openness could play its part in regrowth.

I say this, but I also would say that trade openness is not the only way out and, indeed, the experience of developing and emerging economies prove, can work against economic growth and wider development. Clearly, the European recovery also relied on selective industrial and trade protectionism, but the emphasis was on 'selective' and the state still took a key role in the reconstruction effort just as it had done during the war effort.

For a historical comparison, check out Ha Joon Chang's book 'Kicking Away the Ladder' to see how the South-East Asian countries did it, in spite of the West's entreaties.

And I'll say it again ... that Dambisa Moyo book is apalling.

Hawkeye123

sarkozy wrote: »

That Dead Aid book is rubbish. Wouldn't base a view on it.

Of course not - you didn`t even read it.

On a personal note, I am in Rwanda right now - the perfect example of a country that is doing everything right.

Valmont

Hawkeye123 wrote: »

On a personal note, I am in Rwanda right now - the perfect example of a country that is doing everything right.

Start a thread? Wouldn't mind hearing your opinion on it.

sarkozy

Hawkeye123 wrote: »

Of course not - you didn`t even read it.

On a personal note, I am in Rwanda right now - the perfect example of a country that is doing everything right.

I read it. I studied it. I gave a presentation on it. When I was working in southern Africa. On a government aid programme. Are you doing a masters in Trinity/UCD or something? And I'd say Rwanda, which has done much right, has not done 'everything right'. Particularly its president who has justifiably been accused of perpetrating a resource war in the Democratic Republic of Congo.

sarkozy

Lockstep wrote: »

It depends where it goes really. I'd really like to see better infrastructure in Ireland: roads and water are particularly bad.

Until you visit a poor country, you don't truly know how wrong you are ...

Sand

sarkozy wrote: »

One was that the destruction caused by the war became an opportunity for growth. Rebuilding Europe's infrastructure created jobs, and incomes fuelled the regeneration of local and national economies.

Google the broken windows fallacy.

Valmont

sarkozy wrote: »

One was that the destruction caused by the war became an opportunity for growth. Rebuilding Europe's infrastructure created jobs, and incomes fuelled the regeneration of local and national economies.

We have the solution. Right, everyone grab a bat and some molotov cocktails, go on a rampage around your local town destroying as much as you possibly can. People will then have to spend lots of money fixing the damage, stimulating the economy into health!

In this instance we can measure the money being spent on repairs and replacements and the new jobs created to fix the damage etc. But what we can't measure is what people would have spent their money on had the disaster not happened. Someone may have been ready to open a new store-front, hire a new staff member, buy some new materials etc. This is Bastiat's unseen.

Hawkeye123

sarkozy wrote: »

I read it. I studied it. I gave a presentation on it. When I was working in southern Africa. On a government aid programme. Are you doing a masters in Trinity/UCD or something? And I'd say Rwanda, which has done much right, has not done 'everything right'. Particularly its president who has justifiably been accused of perpetrating a resource war in the Democratic Republic of Congo.

President Kagame is not responsible for what happens in the Congo. In fact, the war criminals who do vie for control of the coltan mines are welcome back in Rwanda - albeit for the purpose of standing trial for their role in the genocide.

You mentioned you were in South Africa. Interesting. As you may know, certain agreements were signed into law between the Nationalists and the ANC in the early nineties. These agreements (which made fiscal responsibility mandatory) are now expired or about to expire. Consequently, Jacob Zuma and his ANC party are free to wreak the South African if they choose to. Many are choosing to. Leftists, trade union types etc within that party are now calling for the nationalization of everything in South Africa.

sarkozy

Hawkeye123 wrote: »

President Kagame is not responsible for what happens in the Congo. In fact, the war criminals who do vie for control of the coltan mines are welcome back in Rwanda - albeit for the purpose of standing trial for their role in the genocide.

You mentioned you were in South Africa. Interesting. As you may know, certain agreements were signed into law between the Nationalists and the ANC in the early nineties. These agreements (which made fiscal responsibility mandatory) are now expired or about to expire. Consequently, Jacob Zuma and his ANC party are free to wreak the South African if they choose to. Many are choosing to. Leftists, trade union types etc within that party are now calling for the nationalization of everything in South Africa.

You're changing the topic.

A relatively comprehensive critique of Dead Aid by Owen Barder is available here. Owen is an influential aid effectiveness expert and I would agree with this analysis.

I only mentioned where I was working to respond to your assertion that I don't know what I'm talking about. I have experience working in the international development co-operation system. From that perspective, as well as my longer, critical perspective working in the NGO sector, I find Moyo's arguments factually incorrect and overly simplistic.

Regarding Rwanda, the situation is very messy. In that region of Africa, borders are particularly porous, and lines of accountability nebulous. There is evidence that Congolese militias take orders from Rwandans, but othere vehemently deny this, citing lack of evidence. This only shows how 'constructive ambiguity' has led to a messy diplomatic dispute. You might also be aware that, in recent months, the impact of the so-called 'Dodd-Frank Act' in the US, has put a moratorium on all mining in the east, with extractive companies shifting investments to the south where it is less conflict-prone. Any country can do right and wrong simultaneously - it's not inconceivable that a developing country like Rwanda would, for example, develop effective tax collection systems (with assistance from the Irish Revenue Commissioners) while at the same time have representatives, officials and military officers who perpetrate a war in a neighbouring country for self-enrichment. In fact, this has been a common historical trend across that part of the continent. On Kagame and his people, I would say the jury is still out on him.

As for South Africa, you're comparing apples with oranges. And there are also different opinions about whether the secret economic agreements made by the white Nationalist government prior to the end of apartheid was good or bad for the country. You seem to be of the view that all nationalisation and redistribition is wrong?

Sand

sarkozy wrote: »

You're changing the topic.

Have you googled the broken window fallacy yet?

sarkozy

Sand, I've dealt with this in lots of other threads with you before under a different name. Either contribute to this discussion or don't.

Hawkeye123

sarkozy wrote: »

You're changing the topic.

A relatively comprehensive critique of Dead Aid by Owen Barder is available here. Owen is an influential aid effectiveness expert and I would agree with this analysis.

I only mentioned where I was working to respond to your assertion that I don't know what I'm talking about. I have experience working in the international development co-operation system. From that perspective, as well as my longer, critical perspective working in the NGO sector, I find Moyo's arguments factually incorrect and overly simplistic.

Regarding Rwanda, the situation is very messy. In that region of Africa, borders are particularly porous, and lines of accountability nebulous. There is evidence that Congolese militias take orders from Rwandans, but othere vehemently deny this, citing lack of evidence. This only shows how 'constructive ambiguity' has led to a messy diplomatic dispute. You might also be aware that, in recent months, the impact of the so-called 'Dodd-Frank Act' in the US, has put a moratorium on all mining in the east, with extractive companies shifting investments to the south where it is less conflict-prone. Any country can do right and wrong simultaneously - it's not inconceivable that a developing country like Rwanda would, for example, develop effective tax collection systems (with assistance from the Irish Revenue Commissioners) while at the same time have representatives, officials and military officers who perpetrate a war in a neighbouring country for self-enrichment. In fact, this has been a common historical trend across that part of the continent. On Kagame and his people, I would say the jury is still out on him.

As for South Africa, you're comparing apples with oranges. And there are also different opinions about whether the secret economic agreements made by the white Nationalist government prior to the end of apartheid was good or bad for the country. You seem to be of the view that all nationalisation and redistribition is wrong?

You make a cogent argument but in the final analysis one must take account of Dambisa Moya`s background (a black African woman), qualifications (a Master`s from Harvard and a doctorate in economics from Oxford) as well as her experience (career in the World Bank).

Dambisa Moya has not only seen the consequences of "aid" and cheap credit to her country, she has also suffered the consequences of that "aid" and cheap credit.

It is easy for NGOs to cast aspersions and accusations against President Kagame but the evidence proffered is here-say at best. Furthermore, it is those very NGOs that have reduced Africa to a childlike state of beggary by literally killing with kindness. In the past, they had the excuse of ignorance but nowadays we know that aid and cheap credit is the bane of Africa (and now Europe) so why do NGOs persist - if not for their own selfish vested interests?

Also, one NGO - the united nations stood back at watched while the genocide was conducted in Rwanda.

Regarding South Africa, I am not opposed to the redistribution of wealth - this is necessary in South Africa because of the apartheid legacy. I am opposed to Nationalization in all circumstances.

sarkozy

Hawkeye123 wrote: »

You make a cogent argument but in the final analysis one must take account of Dambisa Moya`s background (a black African woman), qualifications (a Master`s from Harvard and a doctorate in economics from Oxford) as well as her experience (career in the World Bank).

Dambisa Moya has not only seen the consequences of "aid" and cheap credit to her country, she has also suffered the consequences of that "aid" and cheap credit.

It's true that Moyo's education isn't different from, say, Owen Barder's, who also studied in Oxford. It's also true to say it doesn't necessarily follow that someone educated in Oxford or the other institutions Moyo attended are automatically wrong in their views. While you're right to say she grew up in Africa - Zambia to be precise - she grew up among the country's elite. A relatively charmed upbringing where her advantages allowed her to study in the US. Advantages most Zambians cannot attain. She hasn't spent much time, by her own admission, in her home country in quite some time. I'm not saying she doesn't have insights into her country or others, but I think it's quite wrong to take this at face value. I believe the interests of elites in countries like Zambia are very different to the majority, but similar to other elites (see L. Sklair's theory). It seems reasonable that her views are at odds with the lived experience of many poor people. But I don't know her personally, so, rather than take her education as proof of her argument, I'd rather examine her arguments.

Any here's one of them: in Dead Aid, she argues that, after the aid is turned off, developing countries should go to 'the markets' to borrow the money they need to develop. The commercial interest rates and loan conditions would cause those governments to behave responsibly because the money would come from nowhere else. Well, she hasn't read her history books. Developing countries endured a massive debt crisis for the same reasons. Not able to pay the debts (many/most ratched up by brutal regimes), the IMF swooped in, consolidated their debts and insisted on highly restrictive 'Structural Adjustment Policies'. Years later, and after much hardship and campaigning, the IMF's own internal scrutiny body found that these neoliberal conditionalities actually made those countries and people worse off. The World Bank also has its part to play in this.

Now, I think it's a major flaw, at the very least, to recommend returning to this. Some countries are in a position to borrow in this way, some aren't - and Ireland certainly isn't. The timing of her book was the last nail in the coffin - Dead Aid was published before the crisis, then the global crisis hit and there's no money. Hardly a route to sustainable development.

And here's a question: isn't it odd that a woman from Zambia who, let's assume, endured the hardship of the IMF era, and who ended up working for one of the biggest creditors in the world, would recommend developing countries to take out massive loans before they're ready?

That's a recipe for disaster.

It is easy for NGOs to cast aspersions and accusations against President Kagame but the evidence proffered is here-say at best. Furthermore, it is those very NGOs that have reduced Africa to a childlike state of beggary by literally killing with kindness. In the past, they had the excuse of ignorance but nowadays we know that aid and cheap credit is the bane of Africa (and now Europe) so why do NGOs persist - if not for their own selfish vested interests?

Also, one NGO - the united nations stood back at watched while the genocide was conducted in Rwanda.

The UN is not an NGO. It's a complex multilateral institution made up of most states in the world and comprising agencies (e.g. the World Health Organisation) and programmes (e.g. the UN Development Programme). You're talking about the time that General Dallaire's troops were not permitted to intervene because the UN Security Council wording of the resolution on Rwanda didn't permit them to do so. That's international politics (and particularly those of the permanent members).

I also wouldn't agree with your assessment of NGOs. The landscape is just too diverse and issues complex to generalise too much. And since you seem confused over what the UN is and what NGOs are, I wouldn't mind a bit more clarity on who you're exactly referring to.

Regarding South Africa, I am not opposed to the redistribution of wealth - this is necessary in South Africa because of the apartheid legacy. I am opposed to Nationalization in all circumstances.

What's wrong with nationalisation?

Lockstep

sarkozy wrote: »

Until you visit a poor country, you don't truly know how wrong you are ...

Well, I was speaking relatively. Irish healthcare is lightyears ahead of say, Zimbabwe but it still needs a hell of a lot of work.

sarkozy

Lockstep wrote: »

Well, I was speaking relatively. Irish healthcare is lightyears ahead of say, Zimbabwe but it still needs a hell of a lot of work.

It's a citizen's perogative to demand their own country/city/town to be better. No argument there.

Hawkeye123

sarkozy wrote: »

isn't it odd that a woman from Zambia who, let's assume, endured the hardship of the IMF era, and who ended up working for one of the biggest creditors in the world, would recommend developing countries to take out massive loans before they're ready?

It is wrong to assume that just because Dambisa Moya says that African countries should go to the markets as the preferred source of credit - that she is actually saying that they should borrow in the first place. The markets represent the real world view and the reason they charge high interest is to reflect poor economic management which seeks external financing in the first place. Economies should grow organically within their means.

sarkozy wrote: »

The UN is not an NGO.

NGOs are generally understood to be such organisations as charities, missionaries, advocacy groups etc but technically the UN is also a non governmental organisation as far as any individual country is concerned.

sarkozy wrote: »

What's wrong with nationalisation?

If you want an extreme example of the consequences of nationalization, I refer you to North Korea. Capitalist countries are invariably better off than regimes under socialism. In this country, we had a nationalized financial regulator that failed to regulate. If it had been privately run the banks would have been properly regulated like they were supposed to be.

sarkozy

Hawkeye123 wrote: »

It is wrong to assume that just because Dambisa Moya says that African countries should go to the markets as the preferred source of credit - that she is actually saying that they should borrow in the first place.

You haven't addressed the historical fact that this is what African governments did throughout the 60s, 70s and 80s. This strategy led to a debt crisis, which underminded African countries' development for decades. How is Moyo's proposal, as you describe, an improvement on this?

Hawkeye123 wrote: »

If you want an extreme example of the consequences of nationalization, I refer you to North Korea. Capitalist countries are invariably better off than regimes under socialism. In this country, we had a nationalized financial regulator that failed to regulate. If it had been privately run the banks would have been properly regulated like they were supposed to be.

This is an enormous claim, and one not helped by extreme examples. I was asking you whether, in your opinion, all nationalisation is bad, or whether some can in certain cases be beneficial?

Sand

sarkozy wrote: »

Sand, I've dealt with this in lots of other threads with you before under a different name. Either contribute to this discussion or don't.

I have contributed. You offered a nonsensical interpretation of an immense war with untold human suffering and destruction as an opportunity for growth.

Following that logic, the solution for low Irish economic growth rates is to burn Dublin to the ground and to transfer the Irish population to roughly made shacks in the Bog of Allen. From that low start point, and development would yield record growth rates - presuming of course that we ignore that we burnt Dublin to the ground...opportunity cost being a key economic principle.

Europe would have been vastly richer in 1950 if Europeans hadn't spent the previous 11 years destroying cities, dismantling factories (Soviet and French post war looting, plus the Morgenthau Plan which was essentially the Anti-Marshall plan) and massacring tens of millions of people. The idea that the *recovery* from war was in anyway an opportunity for growth is a perfect example of two things: how people confuse income (GDP) with wealth, and the broken window fallacy. If mass destruction and economic malaise was an opportunity for economic growth, then Africa would be an economic superpower by now. Its not.

I've asked you to go off and examine the broken window fallacy to broaden your own knowledge, so I've contributed. Your criticism of other economic points of view, such as "Dead Aid" are faulty when you seem to be uninformed on the basics.

Hawkeye123

sarkozy wrote: »

You haven't addressed the historical fact that this is what African governments did throughout the 60s, 70s and 80s. This strategy led to a debt crisis, which underminded African countries' development for decades. How is Moyo's proposal, as you describe, an improvement on this?

The governments you refer to borrowed. Dambisa Moya is suggesting that they do not borrow. It is irrelevant how much interest the markets charge if you take the decision not to borrow from them. One does not create a debt crisis by not borrowing.

sarkozy wrote: »

This is an enormous claim, and one not helped by extreme examples. I was asking you whether, in your opinion, all nationalisation is bad, or whether some can in certain cases be beneficial?

An alcoholic could ask me a similar question on the subject of alcohol. In the case of governments and the public sector in general - systemic corruption, inherent stupidity, breathtaking ingratitude and congenital irresponsibility spring to mind. To avoid the proverbial slippery slope the safest answer to that question is no. One should not nationalize anything under any circumstances.

sarkozy

Hawkeye123 wrote: »

The governments you refer to borrowed. Dambisa Moya is suggesting that they do not borrow. It is irrelevant how much interest the markets charge if you take the decision not to borrow from them. One does not create a debt crisis by not borrowing.

I'm sorry. Moyo's argument is precisely to 'encourage' developing countries to go to 'the markets' to source development financing. If I got this wrong, please point to where in the book I got this wrong.

Sand: I know the broken window fallacy. And it highlights some issues which I agree need to be resolved. But your suggestion that I look at it implies certain assumptions made on your part about where my argument is coming from.

Hawkeye123

sarkozy wrote: »

I'm sorry. Moyo's argument is precisely to 'encourage' developing countries to go to 'the markets' to source development financing. If I got this wrong, please point to where in the book I got this wrong.

To answer this question you must first consider the obvious. Why would Dambisa Moyo argue that developing countries should source credit from the markets when they can source much cheaper credit in the form of bilateral aid, special low interest loans, grants etc.

I believe the reason she argues this is because she believes that the deterrent of higher interest will mitigate against developing countries incurring debt in the first place.
Moyo argues throughout her book that borrowed money is not just a problem because it has to be paid back. It is a problem because it fosters a political culture of corruption and cronyism. Borrowed money undermines indigenous industry and competitiveness. It breeds a culture of dependence and a lazy mentality among the political elite. Access to cheap credit is an incitement to political unrest and ultimately civil war.
Therefore, anything which discourages politicians from incurring debt in the first place is a good thing. It is true that some politicians will borrow regardless of the interest rate because they are not the ones who will have to pay back the money. Nevertheless, the spirit of the idea is that high interest rates discourage borrowing and therefore the markets are preferable to cheaper sources of credit.

recedite

You have to remember that stimulating an economy is extending credit, or simply giving everybody a loan. Is it good to give people a loan? Depends on what they use it for.

ScissorPaperRock

Hawkeye123 wrote: »

To answer this question you must first consider the obvious. Why would Dambisa Moyo argue that developing countries should source credit from the markets when they can source much cheaper credit in the form of bilateral aid, special low interest loans, grants etc.

I believe the reason she argues this is because she believes that the deterrent of higher interest will mitigate against developing countries incurring debt in the first place.

I believe she argues for this because it will act as an incentive for developing countries to get their affairs in order. While aid is provided on highly concessional terms and the stream continues regardless of whether a country invests it wisely or achieves the expected results, accessing money at low interest rates from the international bond market will require decent credit ratings and other assurances. The country will have to ensure the appropriate structures exist to manage its credit and invest it wisely, compared to a situation where there are no real incentives to do so. This is her position.

Aidan1

You offered a nonsensical interpretation of an immense war with untold human suffering and destruction as an opportunity for growth.

To be fair, while WWII didn't do much for economic life in Europe (somewhat of an understatement given the massive destruction in capital stock) it did work wonders for the US economy. This was mainly because reconstruction involved US companies taking up key roles in the European economy. This meant that the US had a huge opportunity to invest, and to exploit it's immense advantages post WWII in terms of economies of scale and technological advancement. At it's simplest, a lot of the Marshall Aid (even the aid that was not loan based) came back to the US in terms of orders for plant, machinery, services and commodities.

It did have one benefit for Europe, in that it swept away a lot of smaller firms and replaced them by larger and more efficient industrial concerns, often using techniques and management/institutional arrangements imported from the US. Then again, there is an argument that this was already beginning pre WWII, so it's not simple.

To return to the OP - yes, plainly stimulus can work, and in fact does in certain conditions. Problem is, there are also many cases where it does not (like for us, with our low fiscal multiplier), and even where it does you have to (a) invest in the right things, not the politically convenient things and (b) be able to stop stimulating when the time is correct, not always easy or possible for political reasons, (c) be lucky in terms of exogenous factors.

sarkozy

Aidan1 wrote: »

To be fair, while WWII didn't do much for economic life in Europe (somewhat of an understatement given the massive destruction in capital stock) it did work wonders for the US economy. This was mainly because reconstruction involved US companies taking up key roles in the European economy. This meant that the US had a huge opportunity to invest, and to exploit it's immense advantages post WWII in terms of economies of scale and technological advancement. At it's simplest, a lot of the Marshall Aid (even the aid that was not loan based) came back to the US in terms of orders for plant, machinery, services and commodities.

It did have one benefit for Europe, in that it swept away a lot of smaller firms and replaced them by larger and more efficient industrial concerns, often using techniques and management/institutional arrangements imported from the US. Then again, there is an argument that this was already beginning pre WWII, so it's not simple.

This is an assessment I'd agree with and a perfect response meaning I don't have to!

To return to the OP - yes, plainly stimulus can work, and in fact does in certain conditions. Problem is, there are also many cases where it does not (like for us, with our low fiscal multiplier), and even where it does you have to (a) invest in the right things, not the politically convenient things and (b) be able to stop stimulating when the time is correct, not always easy or possible for political reasons, (c) be lucky in terms of exogenous factors.

I also agree this. While stimulus - injections of capital - can work, often it doesn't for the reasons given above, among others. I recently spoke to someone from the International Finance Corporation (the private sector investment wing of the World Bank) who couldn't give me a straight answer when I asked about the criteria the IFC uses in assessing the economic development impact of investment proposals as they also relate to poverty reduction. It was a trick question because they don't have any. Quite often, institutions such as these do not chose the right investments, which is because (IMO), they are driven by the interests of norther capital and steered by political concerns (while also ignoring political concerns at the level of the developing countries in which they operate).