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Growth as an objective of economic policy in the early 1960s: the role of aggregate demand

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  • Johannes A. Schwarzer

Abstract

This paper sheds light on economic policy discussions in the early 1960s about whether there is an optimal level of demand to maximise the rate of growth. This discussion was influenced by the Cold War, which urged policy makers particularly in the USA to achieve higher rates of growth than the Soviet Union. As it was assumed that good demand management can damp the business cycle, regulating and deciding upon the level of demand pressure in the economy was regarded as an important tool for economic policy. The main debate therefore evolved around the question whether or not the economy should be run at high demand pressure and inflation to foster growth or if some slack in the economy and deflationary tendencies are a prerequisite for a prosperous growth path.

Suggested Citation

  • Johannes A. Schwarzer, 2014. "Growth as an objective of economic policy in the early 1960s: the role of aggregate demand," Cahiers d’économie politique / Papers in Political Economy, L'Harmattan, issue 67, pages 175-206.
    • Handle: RePEc:cpo:journl:y:2014:i:67:p:175-206
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    Citations

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    Cited by:

    1. Xhulia Likaj & Michael Jacobs & Thomas Fricke, 2022. "Growth, Degrowth or Post-growth? Towards a synthetic understanding of the growth debate," Basic Papers 2, Forum New Economy.
    2. N. Cordemans, 2019. "Inclusive growth: a new societal paradigm?," Economic Review, National Bank of Belgium, issue i, pages 29-50, June.
    3. Johannes A. Schwarzer, 2018. "Retrospectives: Cost-Push and Demand-Pull Inflation: Milton Friedman and the "Cruel Dilemma"," Journal of Economic Perspectives, American Economic Association, vol. 32(1), pages 195-210, Winter.

    More about this item

    Keywords

    Economic policy; growth; aggregate demand; trade-off; Phillips curve;
    All these keywords.

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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