Money, Markets, and the State: Social Democratic Economic Policies since 1918. By Ton Notermans. Cambridge: Cambridge University Press, 2000. Pp. xix, 302. $59.95

The importance of monetary policy in regime changes lies at the heart of Ton Notermans's study of “socia1 democratic economic policies.” Notermans distinguishes two general regime types, one “social democratic,” emphasizing economic growth and employment as its long-term objectives, the other “liberal,” targeting price stability. Based on the experience of five European countries (Britain, Germany, Sweden, Norway, and the Netherlands), he analyzes three major changes of macroeconomic policy regime in Europe since the First World War. The first is the restoration of the international gold standard in the 1920s, after the years of inflation and exchange-rate instability following the First World War. This regime change reestablished fixed exchange rates as the overriding policy objective, and employed restrictive monetary policy to accomplish this end. The gold-standard regime slowed growth, increased unemployment, and sent world prices into a deflationary spiral. The next regime change was abandonment of the gold standard in the 1930s, in the wake of which individual countries reoriented policy towards economic growth and low unemployment, favoring especially low interest rates and exchange-rate adjustment. The third regime change, beginning in the 1970s and stretching into the 1980s, shifted emphasis from economic growth and employment to disinflation, and returned to restrictive monetary policies as the preferred instrument to achieve this goal.