2013년 4월 4일 목요일

[발췌: William Keegan's] This is no time to flirt with fiscal S&M (2004)


출처: The Observer, 4 April 2004
지은이: William Keegan

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※ 발췌 (excerpts): 

The word 'sado-monetarism' has been revived by the US commentator of the Financial Times, Gerard Baker, to describe the doctrine of those who were urging rises in US interest rates when the US was widely regarded as suffering from a 'jobless' economic recovery.

The latest US employment figures suggest that the economic recovery there is at last creating jobs.

I take some interest, though, in the revival of interest in sado-monetarism since I believe I coined the term in the early 1980s to describe the policies associated with the sensational rise in unemployment - from 1 million to over 3 million presided over by Mrs Thatcher's first two governments. Whether the present scene in the US bears comparison with the first half of the 1980s in Britain is another question.

In the early 1980s the government believed in tightening fiscal policy (ie increasing taxes and lowering public spending) when the economy was already in recession. The sado-monetarism part was the obsessive pursuit, on top, of a tight monetary policy (ie excessively high interest rates). These high interest rates - and the commitment to raise them further - made London a very attractive place for savings from the rest of the world, thereby driving the exchange rate up and tightening the economic squeeze further.

The Conservatives at the time had the cheek to maintain that they didn't start the monetarist trend, but that James Callaghan, Labour Prime Minister 1976-79, did. This propaganda got into the collective psyche of the political establishment, and is still trotted out from time to time.

It all went back to a famous passage in his Labour Party conference speech of 1976 - with Britain up against the ropes, and throwing in its towel to the International Monetary Fund - when Callaghan appeared to disavow the entire British Keynesian inheritance. Personally I always thought the passage, at least from Callaghan's point of view, was tactical, to help his government out of a tight corner. It did. That very passage impressed key elements in the White House of the Republican President Gerald Ford, and, after a long struggle, Britain got its IMF loan.

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