Remarks on Growth, Inflation and Employment

The unsatisfactory economic performance of the industrial world since 1974 is mostly due to OPEC’s oil price increases, but also to the lack of consensus among policy-makers and economists. Now that inflationary expectations among the industrial countries seem to have almost disappeared, except for some primary commodity markets due to unusual’ weather, it is high time for economists to analyse the causes of the past stagflation and the present slow recovery of the world economy in a much more analytical way, instead of through ideological arguments over monetarism versus non-monetarism, etc. Many policy proposals based on ideological models with weaker empirical ground seem to have failed to revitalise the industrial world. There have been, for instance, proposals for a policy mix with high real interest rates and low corporate tax rates to promote private savings and to expand business investment, and lower personal rates to stimulate output and employment, etc. Now we need a more pragmatic policy approach based on scientific efforts with rich empirical content. Recent volatile movements in exchange rates and heavy fiscal debts, however, might lay the basis for more active policy responses to the present economic diseases, whether macroeconomic or structural. In my opinion, economic theories and empirical findings have steadily accumulated in recent years, such as in the field of exchange rates, asset preference, price-wage behaviour, tax incentives, industrial technical progress, multi-country relationships, etc.