Fiscal and Monetary Policy

The successful use of financial policy by democ racies depends largely upon timing of money and credit deci sions. Legislators tend to respond promptly to suggestions from the Executive that taxes be lightened and spending in creased; the opposite decisions tend to be made tardily, if at all. Fiscal policy is often inflexible if it is needed to restrain excessive speculation and price rises. At such times, the burden falls upon monetary policy. Changes in the direction at which monetary policy is aimed can be made quickly. In a democracy, the freedoms held to be most precious are associ ated with free markets. These freedoms are looked upon as being fostered by democratic institutions, which remain most healthy and untrammeled if credit control is general, rather than selective. General control has the virtue of promoting the fragmentation of decision-making. Millions of transactions are characteristic of an economy that is democratic. Such fragmentation is an element of strength because errors in busi ness judgment, though numerous, tend to be offset by correct decisions. It is this strength that creates for democracy the problem of how to bring a large citizenry to an understanding and acceptance of the hard decisions needed. Only economic literacy and the tradition of prudence will provide the atmos phere in which a country can achieve economic growth without inflation.