Evolution of the Policies of Developed Countries

  • Amnuay Viravan
  • José Concepcion
  • Victor Fung Kwok-King
  • Jean-Pierre Lehmann
  • Brian W. Scott
  • Augustine Tan
  • Bunroku Yoshino
  • Hugh Corbet
  • Keith Hay
  • Mohammed Ramli Kushairi
  • Hadi Soesastro
  • Martin Wolf
  • Soogil Young

Abstract

IN CONSIDERING the difficulties that have come increasingly to affect the world economy, in general, and the international trading system, in particular, one must recognize the impact since the mid-1960s of the interaction between, on the one hand, the expansion of government intervention in the market process and the growth of rigidities in the economies of the developed countries and, on the other hand, the persistent pressures for adjustment created by a rapidly integrating, and therefore dynamic, world economy.1

Keywords

Europe Income Assure OECD 

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Notes and References

  1. 1.
    This chapter incorporates material from Sir Kenneth Durham et al., Words Are Not Enough: a Report on the Perils of Protectionism, Special Report No. 2, in mimeograph (London: Trade Policy Research Centre, 1982) ch. 3.Google Scholar
  2. 2.
    See President Kennedy’s address to Yale University, New Haven, on receiving an honorary degree, 11 June 1962.Google Scholar
  3. In the Federal Republic of Germany, Carl Schiller, as Minister of Economics, was asked by the Cabinet to prepare legislation to provide new instruments to cope with recession. On the basis of that commitment, a new law, known as the Stability Law, was passed on 8 June 1967, although its provisions were already being applied at the end of 1966. The law is talked of as the ‘Keynesian toolbox’. See Hans Jürgen Schmahl, Globalsteuerung der Wirtschaft: die neue Konjunkturpolitik der Bundesrepublik Deutschland (Hamburg: Verlag Weltarchiv, 1970) p. 12.Google Scholar
  4. 3.
    Corbet, Agriculture’s Place in Commercial Diplomacy, Ditchley Paper No. 48 (Enstone: Ditchley Foundation, 1974) p. 25.Google Scholar
  5. 4.
    See Brian Hindley (ed.), State Investment Companies in Western Europe: Picking Winners or Backing Losers? (London: Macmillan, for the Trade Policy Research Centre, 1983).Google Scholar
  6. 5.
    On real wages, productivity and profits in developed countries, see Paul McCracken, Guido Carli, Giersch, Attila Karaosmanoglu, Ryutaro Komiya, Lindbeck, Robert Marjolin and Robin Matthews, Towards Full Employment and Price Stability (Paris: OECD Secretariat, 1977) pp. 161–64; and OECD Economic Outlook, July 1977. Declining long-term trends in the industrial profitability of several major OECD countries (Canada, the United States, theGoogle Scholar
  7. Federal Republic of Germany, Italy and the United Kingdom) are shown for 1955 to 1973 in T.P. Hill, Profits and Rates of Return (Paris: OECD Secretariat, 1979) Table 6.6.Google Scholar
  8. 6.
    The average rates of inflation between 1961 and 1970 of France, the Federal Republic of Germany, Italy, Japan, the United Kingdom and the United States were 4.0, 2.7, 3.9, 5.8, 4.5 and 2.8 per cent respectively. The year in which the rate of inflation went above the country’s average for 1961 to 1970 never to return below it in any subsequent year of the 1970s was 1968 in France, the United Kingdom and the United States and 1970 for Italy. Japan managed to attain a rate of inflation below her 1961–70 average in three years of the 1970s (1972, 1978 and 1979) while the Federal Republic managed this in 1978 only. See Main Economic Indicators: Historical Statistics 1960–75 (Paris: OECD Secretariat, 1976) and OECD Economic Outlook, December 1981, Table R10.Google Scholar
  9. 7.
    On the rising rates of unemployment in successive cyclical peaks in the 1960s and 1970s and the deteriorating relationship between vacancies and unemployment over the same period, see A Medium-term Strategy for Employment and Manpower Policies (Paris: OECD Secretariat, 1978) Table 1 and Diagram 4.Google Scholar
  10. 8.
    Durham et al., op. cit.Google Scholar
  11. 9.
    See Tumlir, ‘International Economic Order: Can the Trend be Reversed?’, The World Economy, March 1982, p. 29.Google Scholar
  12. 10.
    For information on subsidies and other aspects of industrial policy, see Wolf, Adjustment Policies and Problems in Developed Countries, World Bank Staff Working Paper No. 349 (Washington: World Bank, 1979) pp. 28–37; Curzon Price, op. cit.;Google Scholar
  13. and Joan Pearce, John Sutton and Roy Batchelor, Protection and Industrial Policy in Europe (London and Boston: Routledge & Kegan Paul, for the Royal Institute of International Affairs, 1986).Google Scholar
  14. 11.
    Tumlir, loc. cit., p. 30.Google Scholar
  15. 12.
    At the seventh Economic Summit meeting held in Ottawa in July 1981, the heads of government representing Canada, France, the Federal Republic of Germany, Italy, Japan, the United Kingdom and the United States and the President of the Commission of the European Community made a point, in their conclusions, of reasserting the reliance of policy on the market process. ‘We must accept the role of the market in our economies,’ their communiqué said. ‘We must not let transitional measures that may be needed to ease change become permanent forms of protection or subsidy.’Google Scholar
  16. In June 1981, the Bank for International Settlements stated in its Annual Report for 1981: ‘It is no accident that the growth of government should have gone hand in hand with a long-term worsening in inflation. The commitment to full employment and the emergence of the modern welfare state have changed attitudes and imparted an inflationary bias to economies’ (p. 25).Google Scholar
  17. In its World Economic Outlook for 1981, the IMF stated: ‘At a time when the growth rate of real per capita income was already declining, many governments decided to maintain or even accelerate the expansion of government services and transfers. It is difficult to assess how much the increased tax burden required to finance government activity may have reduced private-sector incentives to work, save and invest in productive capital, but the effect may have been sizeable… Government intervention in the labor markets, however desirable from a social or political standpoint, has in many cases contributed to inflation and unemployment… [New] policies should aim at the difficult task of removing barriers that have been erected — sometimes by the authorities themselves — against the free play of market forces in the goods and labor markets’ (pp. 8–9).Google Scholar
  18. The July 1981 number of the OECD Observer stated: ‘Public sector deficits have widened and the size and intrusiveness of the public sector have increased. Many countries consider it imperative to reduce both the weight of government in the economy and the size of its deficit’ (p. 13).Google Scholar
  19. In its annual report, International Trade 1980–81, the GATT Secretariat stated: ‘If the process of adjustment has gradually become inadequate, it is logical to ask what new obstructions have come about in the last fifteen years. There are many and, in the aggregate, they imply that economic decisions have been increasingly subject not or not only to the criteria of efficiency but also to those of political ‘acceptability’. This tendency has not been just a reflection of the growth of public expenditure relative to GNP — although the two phenomena are related…Google Scholar
  20. ‘In a broadly illustrative way, we may distinguish three categories of obstructions which have been, increasingly in recent years, impeding the adjustment process.Google Scholar
  21. ‘A general feature of the decline in adjustment capacity is the impairment of the pricing mechanism, the function of which is to signal incipient scarcities and redundancies in the system. This is tantamount to saying that the effectiveness of competition has declined. The first category thus includes the most directGoogle Scholar
  22. obstructions, such as the acceptance — and in some cases enforcement — by public authorities of competition-restricting arrangements among firms, the political determination of particular prices and quantitative import restrictions. Of all the markets in the economy, it is in the labour market and in agriculture that the pricing mechanism has been most impaired. The difficulty of increasing employment by injecting a monetary stimulus into the economy, as well as the necessity for various job-creation schemes based on employment subsidies, indicate that the existing unemployment is mainly due to inappropriate patterns of wages.Google Scholar
  23. ‘The second category includes a large variety of measures whose common feature is that they narrow the scope of entrepreneurial initiative and/or create costly delays in the execution of business decisions. This has been perhaps the most rapidly expanding category. Measures in it aim at a variety of objectives, ranging from labour-market to environmental considerations, and differ greatly in form as well as effects between countries.Google Scholar
  24. ‘Finally, certain aspects of policy practices have significantly attenuated the incentive for firms to adapt and adjust, as various interest groups have become able to influence policy conduct towards the preservation of existing industrial structures. Here we may mention the enforcement of competition laws in such a way that small, less efficient producers are protected against larger and more efficient ones, and the availability of subsidies as well as protection against foreign competition for otherwise unavailable enterprises’ (pp. 14–15).Google Scholar
  25. 13.
    See James E. Meade, ‘The Meaning of “Internal Balance”’, Economic Journal, Cambridge, September 1978, p. 434.Google Scholar

Copyright information

© United Nations 1987

Authors and Affiliations

  • Amnuay Viravan
  • José Concepcion
  • Victor Fung Kwok-King
  • Jean-Pierre Lehmann
  • Brian W. Scott
  • Augustine Tan
  • Bunroku Yoshino
  • Hugh Corbet
  • Keith Hay
  • Mohammed Ramli Kushairi
  • Hadi Soesastro
  • Martin Wolf
  • Soogil Young

There are no affiliations available

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