Emancipation
England, Northern Ireland, Scotland & Wales
Constitutional questions arising from macroeconomic managementNot-so-free markets
under the arbitrary
interventionism of
KM policies | 
John Maynard Keynes |
Milton Friedman |
Macroeconomic management under Keynesianism and Monetarism has relied upon the operation of a monopoly intervention in markets by the state or by "independent" agencies following state directives. Such interventions affect people and economic units in different ways. In cases of losses in real incomes arising directly from government policy decisions there has never been any consideration for compensation. In representative terms the operation of macroeconomic policies contains a considerable element of arbitrariness responding to policy-induced failures to achieve economic objectives without safeguarding the state of livelihood of some segments of the population. This raises serious constitutional questions which have yet to be addressed by governments and the economists who serve them.
In 1976 it was clear that Keynesianism was no match for the economic realities thrown up by the international petroleum price crises. Unable to address the combination of a slump in output and employment with rising inflation, Keynesianism offered no coherent policy option to control slumpflation. The policy alternative to be adopted was that of monetarism which found favour in both the USA and United Kingdom. The failure of economic policies and that of Monetarism now has been the failure of both Keynesianism and Monetarism to avoid an imposition of a double standard. Whilst opposing private monopolies, market interventions and quotas both of these policies operate on the basis of a monopoly intervention in markets through demand control and price fixing of the rental for money (interest rates). Keynesianism it should be admitted supported a broader state intervention whereas Monetarism pretends to be a free market option. However, both policies, KM policies, operate on the basis of a largely arbitrary interference in markets to secure a movement of the economy so as to satisfy indicators established by the state. Whether we quibble that the Federal Reserve or the Bank of England do this in an independent fashion is largely irrelevant since their role is to support state policies related to inflation, employment and other indicators.
Freedom, It is
so important |
The constitutional implications of this method of macroeconomic management is that policy decisions are bound to have differential impacts on different companies and the state of affairs of people. For example, in order to control inflation the raising of interest rates under Monetarism or increased taxation under Keynesianism, can result in direct and harmful effects on some. Even although the overall rate of inflation might eventually fall the damage to specific segments of the population and economic units will have been done. This calls into question the appropriatness of policies which are, in their impacts, arbitrary and indeed inappropriate to some people and economic units. The fact that in a free market some economic units have selected a specific basis of operation is not a reason for policy-makers to remain content that those with higher debt can fail as a result of a rise in interest rates or falling demand imposed by policy. Policy makers and governments cannot explain away such failures as being a direct result of competiton or risks assumed by such economic units simply because failure is forced onto such units as a direct outcome of policy decisions. Without such policy decisions many economic units might survive.
Just as governments under our electoral system end up ignoring the preferences of the majority, so in economic policy decision-making, governments follow courses of action based upon arbitrary indicators of economic performance. As a result, policy decisions tilt the playng field against some players in an arbitrary fashion. In constitutional terms such macroeconomic policies suppress the ability of sections of the economy to pursure their own preferences and thereby constrain freedom of operation. Just as in terms of representation political parties constrain the individual freedom of the population by failing to respond to their preferences so macroeconomic management policy decisions prevent some economic units from achieving their objectives.
There is therefore a trade-off between the welfare of some economic units and individuals employed by them and the general state of the economy judged from the standpoint of measures established by government and economic advisers.
A more detailed analysis of the econmic and constitutional implications of macroeconomic policies is provided at Real Incomes.
1 "The Briton's Quest for Freedom - Our unfinished journey", McNeill, H.W., Hambrook Publishing Company, 2007, ISBN: 9780907833017 |
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