Financial Policy and the Balance of Payments

I DELIVER this Inaugural Lecture' with a great sense of the honour conferred upon me by my appointment to this Chair and with a profound realisation of my inadequacies for this position. I cannot vie with my predecessor, Professor Betiham, in his great and robust gifts as a teacher or in his extensive knowledge of trading conditions throughout the world. These qualities of his are well knownl here in the London School of Economics where he both learned and taught his subject for so many years. I have come to this great School as an outsider and with interests which differ somewhat from those of some of my predecessors. lVIy main concern in economics has always been, not with descriptive or institutional studies, but with theoretical analysis and, in particular, with the contribution which economnic analysis has to make to the solution of problems of practical economic policy. Accordingly I have selected as subject 'Matter for this lecture an outstanding, perhaps the outstanding, problem of practical economic policy in the field of international trade---niamely the present balance of payments disequilibrium of the United Kingdom. And it is my intention to discuss it this evening from the point of view of economic analysis. Throughout the many economic problems which confront us one common question arises :--should we rely upon direct quantitative controls to achieve our ends or upon using the money and price mechanism so as to induce persons to do what is socially desirable Should we, for exanmple, direct workers from inessential to essential uses or should we attract them by higher wage rates in the latter and lower wage-rates in the former ? Should we achieve an equitable distribution of wealth by the direct guarantee of a fair share of each essential commodity to each citizen or by measures which ensure a tolerably equitable distribution of general monetary purchasing power exercised in a relatively free market ? Should we restrain the inflationary pressure of the too much money chasing the too few goods by a system of direct licensing and rationing of each commodity or by general measures which reduce money purchasing power to the desired degree ? The same question arises in the case of our balance of payments. Should we exercise a system of direct quantitative

Balance (ability) · Balance of payments · Business · Economics · Financial system · Monetary economics · Payment · Economic Theory and Policy · Finance

• The Intelligent Radical on Economic Policy

  Open Access•David Greenaway•Scottish Journal of Political…•1990

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