Full text: Some Comments on the Politics of Full Employment.

the type of financial system which is able to exert such an 
overwhelming restrictive bias in the capitalist world. 
The result can only be that the government will step in and undo 
at least in part the reformist policy, driven by the adverseries 
of reform whose turn has now come to say that they have always 
predicted the dire consequences of reform policy. In any case some 
controls will have to be installed and the rate of growth will 
have to be reduced. This substantial political volte face will 
have drastic consequences. Private enterprise will be discouraged, 
pessimism will spread and the economy will plunge into a 
recession, possibly with unemployment emerging. 
This requires some comment since it is apparent that there are 
analogies to certain experiences of capitalist countries. In an 
apparent digression I shall now refer to a statement of T.Balogh 
on the working of monetary and fiscal controls in capitalist 
countries (Balogh 1973 p.48). As an example we may refer to 
interest policy or more generally a credit crunch used to dampen 
an excessive boom. When this instrument of credit crunch is used 
in successively increasing doses it is found to be ineffective up 
to a point: Nothing happens. When a certain level is 
overstepped,however, a reaction suddenly takes place which is 
large and incalculable. In short, you achieve either nothing or 
too much. As Balogh says, these policies work only by overkill. 
His explanation is that the reaction is psychological. This may 
well be but I feel that some more explanation is required which 
takes account of the social character of the phenomenon. A 
substantive response requires the massive reaction of a great 
number of people, which depends on imitation and mutual 
stimulation of the individuals. It works like an epidemic which 
quickly diffuses pessimism throughout a group of people whose

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