The Firm in the National Economy

Previous chapters have been primarily concerned with those economic influences acting within, or directly on, individual firms. This chapter, and the remainder, deal with the wider aspects of the economic environment; with macroeconomics as opposed to microeconomics. An ideal starting point for considering this wider economic world is the national income and the national accounts. First, however, a brief digression is useful on the economic objectives pursued by governments and to which individual firms must adapt. All post-war governments have chased certain objectives with varying emphasis and success. Often there is some confusion between objectives and means, and there are usually conflicts of varying severity between some of the objectives. Inevitably a compromise is reached, but the elements of this compromise vary according to circumstances and the political complexion of the government. Some objectives, such as the maintenance of a fixed and stable exchange rate, were ditched in the 1970s. The main aims on which all parties were agreed until the late 1970s are the maintenance of a high and stable level of employment, with the concomitant obligation to low unemployment, the avoidance of serious domestic inflation, and the fostering of conditions ‘in which the nation can, if it so wills, realise its full potentialities for growth in terms of production and living standards’ (Cmnd 9725, 1956).