Full text: Growth and Stagnation

international monetary system. This system,with its freedom 
p o 
of capital movements, involved great instability, 
which ultimately led to the breakdown of the international 
cooperation in the early seventies. 
The growth of international trade had also been stimulated 
by government policy. I mean here the promotion of investment 
by tax idDates ( write offs ). The stimulation of investmetn 
led in most cases to the creation of additional capacities 
and the outlet for these was often sought abroad 
because of a reluctance to destabilise the domestic market. 
Since most countries followed this policy it led to 
the establishment of overcapacities, and this in basic 
industries before all, because it was mainly they which 
were favored by the tax concesssions. The policy of 
tax rebates was very successful as long as it created 
sufficient effective demand to absorb the new capacities/ 
from a certain point it could not keep up with the growth 
of capacity. This reproduced, on an international scale, 
t»e consequences which were foreseen by Kalecki 
in the case of a national policy of stimulating private 
investment by means of tax incentives ( Three ways to 
full employment ). 
Another big change concerned the labour market. 
Under the elassical conditions it was prices which adjusted 
to co st reductions brought about by technical progress / 
and therefore prevented tHe permanent increasing shift 
of income to profits . My arguments in my book were that 
this did not function any more^in the decades before 
world war II. But there is another possibility of adjustment 
which became important in the unparalleled situation of 
full employment or high employment after the war.

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