Cite JOURNAL ARTICLE
Die Geld-, Finanz- und Einkommenspolitik im volkswirtschaftlichen Systemzusammenhang
Credit and Capital Markets – Kredit und Kapital, Vol. 5 (1972), Iss. 4 : pp. 407–437
Werner Ehrlicher, Freiburg i. Brsg.
Monetary, Fiscal and Income Policy in the Context of Macroeconomic Systems
Since the world economics crisis, monetary, fiscal and income policy have been developed into instruments of overall macroeconomic control. In this connection, employment, growth and the value of money followed each other in rapid succession as the objective of general economic policy. The employment of monetary, fiscal and income policy, to which varying weight and varyıng emphasis was given in theindividual economies, did not prevent economic development from proceeding with fluctuation in real economic activity, although they were less marked than earlier trade cycles. And in some countries, even in periods of economic expansion, an undesirably high degree of unemployment was maintained. Internationally the inflation rate manifestly rose from cycle to cycle. In the explanation of this penomenon there is a marked divergence between the theories of the post-Keynesians and the neo-quantity theorists. Generally speaking, the proponents of neo-quantity theory take no definite stand on whether there are mechanisms in our economic system designed to favour a cyclical process. They place more emphasis on the fact that the fluctuations in their given amplitude are the result of anticyclical policy which, on account of its inherent time lag, overcompensates for upward and downward moviments and hence contributes to a decisive degree to cyclical trends. In contrast, the post-Keynesians are of the opinion that the modern economy tends towards unstable development owing to the built-in accelerator mechanisms. Cyclical policy damps the fluctuations. Its instruments, however, are not yet sufficiently differentiated and in addition are handled inadequately, so that the current fluctuations are maintained. The inflation process is explained by the neo-quantity theorists as the consequence of too rapid expansion of the quantity of money, which is permitted by the responsible authorities in order to attain employment in excess of the natural underemployment rate. The post-Keynesians, on the other hand, stress that in the modern economy the entrepreneurs have achieved a certain degree of pricing power, and the unions a certain amount of wage-setting power. Under these conditions the struggle relating to income distribution results in inflationary trends, if it is not contained by income policy, of which, however, the instruments are so far insufficiently developed. The therapy suggested the neo-quantity theorists is directed towards replacing the more or less abrupt alternation of contractive and expansive cyclical policy with a policy of steady expansion of the quantity of money oriented to the real growth potential of the economy and promoting the growth of the economy by way of fiscal structural policy. In contrast, the post-Keynesians recommend that growth fluctuations should continue to be damped by more refined cyclical policy measures and the inflationary trend limited by enlarging the instrumentarium of income policy. In the final analysis, the differing prescriptions are attributable to the fact that the opposing theories proceed from different assumptions regarding people’s attitude to money. According to the conception of the neo-quantity theorists, economic entities realize in the long run the effects of currency depreciation and calculate in real magnitudes. This the natural tendencies towards equilibrium make themselves felt and many excess creation of money can find expression only in a corresponding inflation rate. The post-Keynesians assume that the monetary sector of the economy has a high degree of instability in the sense that exogenous monetary impulses can be offset by redistribution within that sector, and conversely that redistribution within that sector can also trigger monetary impulses. This is the underlying reason for the tendency to instability of the economic process, which must be counteracted by cyclical policy