Enoch was right. He had made the two intellectual leaps in economic policy which Keith Joseph and I would only make some years later. First, he had grasped that it was not the unions which caused inflation by pushing up wages, but rather the Government which did so by increasing the supply of money in the economy. Consequently, incomes policies...were a supreme irrelevance to anti-inflation policy. The only aspect of the matter which Enoch then and later failed sufficiently to grasp was the importance of the indirect link between trade union power and inflation. This lay in the fact that over-powerful trade unions priced their own members out of jobs, and inflicted unemployment on both union and non-union workers alike. Governments...would then react by lowering interest rates and expanding the money supply. This would increase demand and jobs for a time, but it also increased inflation... That said, Enoch's insight into the cause of inflation was of supreme importance.
Enoch PowellRelated topics
aspect cause government grasp increasing increase inflation intellectual interest later lay link matter money power react right trade wages years enoch irrelevanceRelated quotes
Wages, profits, prices are determined, always have been determined, and always will be determined until we go Communist, by the market-by supply and demand working through the market. While we tie ourselves into knots trying to invent non-market criteria for our commissions to use, the market is there, noiselessly, efficiently, irresistibly doing the job for us all the time. Irresistibly-yes, and there's the rub. For there is one thing outside the market in a modern economy, and that is money itself. Governments can and do satisfy the demand for money, raise and lower the supply of money. In short, governments have the power to control money, which is so largely their own creation. If governments allow monetary demand to increase faster than productivity, the market will not stop the process, because it cannot stop it. The market will simply go on determining wages, profits and prices in ever higher monetary terms-until something busts.
Enoch Powell
Though the war ended forever the possibility of disunion, there still remain problems between State and Federal authority. There are divisions of interest, perhaps more apparent than real, among geographical sections or social groups. The seaboard thinks it has interests in maritime transportation and overseas commerce which differ greatly from those of the interior, which is peculiarly dependent upon railroads. Difference in climate and physical conditions throughout so great a territory tend to varied social habits and modes of living which react upon the economic and political attitudes. The industrial development of some sections contrasts with the agricultural character of others. Obviously, these differences give rise to many problems in government, which must always be recognized. But it is hardly conceivable that a really menacing contest between the sovereignty of the States and of the Union could ever again arise.
Calvin Coolidge
Professor Ohlin also made an important contribution to what now might be called the macro-economic aspects of a country's balance of payments. In 1929 in the Economic Journal he engaged in a famous controversy with Keynes on the problem of transferring payments from one country to another across the foreign exchanges. In this he laid stress upon the income-expenditure effects of the reduced spending power in the paying country and of the increased spending power in the recipient country. In doing so he made use of the usual distinction between a country's imports and exports; but in addition he emphasised the importance of the less usual distinction between a country's domestic non-tradeable goods and services and its tradeable, exportable and importable, goods. I made some use of this latter distinction in my Balance of Payments; but looking back I regret that I did not let it play a much more central role in that book.
James Meade
The economic policy issues that we debate today-trade policy, inflation, the proper role of government, the eradication of poverty, and the means of raising the rate of economic growth-have been discussed by economists for more than two centuries. Many of today's economic policies-both the good ones and the bad-are the result of the ideas of those past economists. And many of today's debates about economic policy can be understood only by those who have at least some familiarity with the ideas of earlier economists.
The giants of economic science during the past two hundred years have been men concerned with the critical policy issues of their time. They studied the working of the economy in order to advocate better economic policies. But despite their concern with policy, they were not polemicists or politicians but men who sought to persuade their contemporaries in government and in the broader public by analysis and evidence that would meet the standards of professional debate.
Martin Feldstein
If a Martian were asked to pick the most efficient and humane economic systems on earth, it would certainly not choose the countries which rely most on markets. The United States is a stagnant economy in which real wages have been constant for more than a decade and the real income of the bottom 40 percent of the population declined. It is an inhumane society in which 11.5 percent of the population, some 32 million people, including 20 percent of all children, live in absolute poverty. It is the oldest democracy on earth but also one with the lowest voting rates among democracies and the highest per capita prison population in the world. The fastest developing countries in the world today are among those where the state pursues active industrial and trade policies; the few countries in the world in which almost no one is poor today are those in which the state has been engaged in massive social welfare and labor market policies.
Adam Przeworski