Monetarism

One of the great intellectual triumphs of the 1930s was Keynesian economics. Looking back fifty years it is hard to appreciate the profound change in thought that occurred during that period of economic depression and political crisis. The orthodoxy of the time was laissez faire, the only respectable strategy of development was that advocated in Adam Smith’s Wealth of Nations, and the only macroeconomic theory that was available was the laws of motion of capitalism as described in Karl Marx’s Capital – a, theory which had few supporters in the West and no policy implications. The “new economics” as it was called emerged in Sweden, in Poland through the work of Kalecki and in England through the work of Keynes and his close colleagues at Cambridge University. The new economics was not just a product of university research and of pure thought, however. Certainly the theorists made an important contribution, perhaps the most lasting contribution, but the application of Keynesian ideas before Keynes, especially in Argentina where Raul Prebisch was responsible for economic policy, demonstrated in concrete terms that there was an effective alternative to orthodox doctrines1.