The Stability of the System as a Whole (continued)
It was the outbreak of the First World War in 1914 which constituted a watershed in the history of thought regarding the management of the stability of the economic system as a whole. It must not be thought that the ideas which have been dominant since then have no counterpart in the past: on the contrary there can be discovered in the literature precedents for almost everything. But, so far as practical policy was concerned, and the thought which had some influence on it, the contrast is very evident. Up to then the underlying assumption had been that the main areas of the world were on common metallic standards, gold or silver; and although practical problems still arose where the relations between the gold and silver areas were concerned, this did not give rise to extensive theoretical discussion or to recommendations other than such as were directed to securing a more universal link with gold. Thus, while it may perhaps be argued, historically, that the then existing gold standard was by no means a close approximation to the models of the textbooks, the fact remains that theoretical speculation in the main assumed a monetary system which was essentially international in character and that the practical maxims which governed the conduct of policy were largely concerned to maintain the necessary connections.
KeywordsPolitical Economy Monetary Policy Fiscal Policy Money Supply Full Employment
Unable to display preview. Download preview PDF.