Coordinating International Payments and Incomes

A fundamental argument developed in this volume is that any balance of payments problem due to current (or income) account transactions between open economies moving through calendar time towards an uncertain and unknowable future should be resolved primarily via an intergovernmentally coordinated incomes policy designed to achieve the maximum degree of stickiness in flow-supply prices (and incomes claims) while reducing the trade deficit. To enunciate this as a guiding principle is relatively easy. To transfer this principle into the arena of practical policies which are politically acceptable is more difficult, but not impossible. The goal of ‘stickiness’ does mean that one accepts the current distribution of domestic and global income — however arbitrary and unequal it might be — as a healthy position. Validation of the status quo does not mean that the distribution of income and wealth is sacrosanct and therefore cannot be changed over time as the economic process moves on. It does imply, however, that in a developed interdependent entrepreneurial system, significant changes in the distribution of income can be achieved without potentially severe damage to all participants only by a cooperative, negotiated agreement which is compatible with the potential flow and growth of full employment real income Change in the relative distribution of income is a much more socially acceptable phenomenon in a non-zero positive sum economic system; in an era of economic growth, changes in the relative distribution can occur where most citizens suffer little or no reduction in absolute real income levels.