Back to Full Employment: Old Instruments,New Methods

Abstract

The old Keynesian instruments of monetary and fiscal policies aimed at full employment are currently ineffective. But the monetary instrument can be freed by writing off rather than rescheduling the developing-country debts that cannot be paid and by replacing the private U.S. dollar currency system with a system in which debt limits are specified and controlled by the International Monetary Fund and special drawing rights. Fiscal policy also can make an important contribution to national full employment, despite budgetary constraints. This it can do by promoting human capital rather than real capital and by not treating the black economy as a false path from growth but as its continuation and extension into postindustrial times.

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References

1. J. Tinbergen , On the Theory of Economic Policy (Amsterdam: North-Holland, 1952), esp. chaps. 4 and 5.

2. John M. Keynes and Bertil Ohlin , “The German Transfer Problem, A Discussion,” Economic Journal, 39:1, 172, 388 (1929).

3. The Keynes Plan: A: Proposal for an International Currency (or Clearing) Union, 1942. B: Proposals for an International Clearing-Union, 1943, International Monetary Fund Documents vol. 3, ed. J. K. Horsefield (Washington, DC: International Monetary Fund, 1969).