Macropolicy in the Rise and Fall of the Golden Age

The Golden Age was the era of demand management. Originally with monetary, and then fiscal policy, the governments of the advanced capitalist economies attempted to enhance and guide the accumulation process. They allocated credit, manipulated interest rates, and presided over a dramatic expansion in state expenditure. As the Golden Age eroded, and stagnation replaced prosperity, governments tried to manage the decline. Policy was actively used to reduce inflation and labor costs, enhance international competitiveness, or maintain employment. This paper is a brief analysis of macropolicy in six countries during the Golden Age and its erosion. It begins with a general account of the structural determinants of policy. Next we turn to a discussion of policy during the Golden Age. We argue that our six countries divide into two groups. Germany, Japan, France and Italy all pursued expansionary policies aimed at maximizing the rate of accumulation. The U.S. and the U.K. were less expansionary, on account of the international position of their currencies, the power of internationally-oriented finance capital, and the independence of the central bank. In the last section of the Paper we analyse policy in the wake of economic decline. We are particularly interested in the degree of convergence and divergence among the six countries. The policy differences shed light on our own theory of policy determination, as well as the alternative explanations.