A question of political economy
Bibliographic Data
| ID | 11186102 |
|---|---|
| Authors | John Pinder (0000-0003-2863-2133, Centre for Policy Studies, corresponding author) |
| Year | 1984 |
| Volume | 6 |
| Issue | 1 |
| Pages | 117-130 |
| Publication date | 1984-01-01 |
| Open Access | No |
| Type | ARTICLE |
| Venue | Third World Quarterly (JOURNAL) |
| Journal identifiers | ISSN: 0143-6597 • E-ISSN: 1360-2241 |
| Publisher | Informa UK Limited (PUBLISHER • GB) |
| DOI | 10.1080/01436598408419757 |
| OpenAlex | W2122177019 |
| Language | EN |
| References cited | 6 |
The external trade of the European Community (EC) comprises about a quarter of world trade. The EC is a giant in the world economy, a greater trading power than the United States, with a powerful influence on most other countries' economies and on the international economy as a whole. As such, we can expect it will be criticised. But we may also hope that the criticism will be useful. Unfortunately, it seldom is. Most of the criticism is flawed because it is based on the assumption that free trade, and implicitly laissez-faire, is a tenable policy for the contemporary economy. It is ironic that many of these critics are Marxist or other central planners who demand that the EC remove its trade barriers but would never dream of shutting a factory or laying off workers in their own countries in order to make room for imports. Yet to dwell on this irony would be to miss the main point, which is that laissez-faire, even in the modern dress of Thatcherism or Reaganomics, just does not work in the modern economy. Monetary control without an active industrial or incomes policy can bring down inflation, as in Thatcher's Britain, but only at the cost of decimating investment, industrial production, employment and growth. Reagan's combination of monetarist and supply-side doctrines, with tax cuts causing a budget deficit which, in the context of tight money, pushes interest rates through the roof, may induce a demand-led reflation for a year or two; but with investment constrained by the interest rates and pay push restrained by nothing, the reflation will lead to bottlenecks, over-heating and inflation which will, probably by 1985, run the economy on to the buffers of yet tighter monetary restriction, higher interest rates, and hence renewed recession. All this may be seen as hard luck on the Americans and the British, or as just retribution for their choice of political leaders. But those who are tempted to indulge in schadenfreude should remember that these failures of economic management do not concern their perpetrators alone. In the interdependent international economy, the ripples generated by even small successes or failures of management in a major industrial country can affect the economies of other countries throughout the world; and when the economy is as big as that of the United States and the failure as great as that of Reaganomics is likely to be in a year or two, there can be not just a ripple but a tidal wave that could
Criticism · Economic policy · Economics · Economy · Laissez-faire · Market economy · Political economy · Political science · Economic Theory and Policy · Law
| Highly cited | No |
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