The Online Library of Liberty

A project of Liberty Fund, Inc.

• Literature of Liberty a Review of Contemporary Liberal Thought
• Editorial Staff
• Associate Editors
• Editorial
• Bibliographical Essay: Henry B. Veatch, Natural Law: Dead Or Alive?
• I: Natural Law
• “nature” and “law” In Natural Law
• The Anatomy of Natural Rights
• Egoism and Rights
• The Is/ought Chimera
• Deriving “ought” From “is”
• Facts Vs. Value-laden Whims
• Is/ought and Probable Reasons
• Does Righteous Anger Imply Rights?
• Why Be Moral?
• Truth As an Objective Value
• Was the Revolution Objectively Necessary?
• Natural Law and State of Nature
• Natural Law and the State
• Natural Rights and Anarchism
• Dworkin On Rights
• Liberalism, Rights, and Abortion
• Rights and “mercy Killing”
• Rights and the “brain Drain”
• The Natural Law Right to Work
• Grotius: Contract and Natural Law
• Rights and Communication
• II: Autonomy, Privacy, and Authority
• Bureaucracy and “the Organization Man”
• Autonomy and Anarchism
• Autonomy and Taking Responsibility
• Autonomy, Motivation, and “buck-passing”
• Schooling For Conformity
• The Schoolroom Vs. Autonomy
• Obedience to Authority
• The Meaning of Privacy
• Privacy and Autonomy
• Privacy and Consent
• The Court and Privacy
• III: The Ambiguities of Liberty
• Clarifying Freedom
• Rehabilitating Mill's “harm Principle”
• Experiencing Freedom
• Do Offers Coerce Freedom?
• The Danger of “dangerousness”
• Freedom, Motivation, and Government Programs
• Freedom Vs. Determinism
• Negative Vs. Positive Freedom
• Smith and Utilitarian Economic Freedom
• Locke, Freedom, and Tacit Consent
• Religious Freedom
• Freedom, Existentialism, and Innocent Victims
• Does Censorship Harm Freedom?
• IV: Slavery
• Slavery, Ideology, and Subordination
• Slavery and Imperialist Ideology
• Enlightenment Liberalism Vs. Slavery
• The Anatomy of a Slave Revolt
• Colonial American Slave Law
• Jefferson On Slavery
• Slavery and the Poor
• V: Planning
• Regulation and the Warfare State
• Mail, Privacy, and Social Control
• Corporate State Capitalism: Coal
• French War “planification”: Chlorates
• Bureaucracy and British Regulation
• British Foreign Policy and Stagnation
• Political Decisions and the Economy
• Government, Labor, and Multinationals
• Black Markets Vs. Regulation
• Regulation Vs. Academic Autonomy
• Government Schools and Social Control
• The Economics of Charity
• International State Planning and Inflation
• Competition and Individual Knowledge

International State Planning and Inflation

Geoffrey E. Wood Nancy A. Jianakoplos

“Coordinated International Economic Expansion: Are Convoys or Locomotives the Answer?” Federal Reserve Bank of St. Louis Review 60 (July 1978): 11–19.

The international Organization for Economic Cooperation and Development (OECD) espoused the “locomotive” approach in December 1976. This approach to international economic policy puts the responsibility for stimulating world output on the three major industrial countries (Germany, Japan, and the United States). They were to expand aggregate demand in each of their countries so as to cause demand in other countries eventually to increase. But one year later, the OECD Secretariat changed its policy approach, recommending instead that all governments expand aggregate demand in tandem (the “convoy” approach).

Both proposals assume the existence of significant unused capacity in most OECD countries. If true, economic growth could occur without aggravating price inflation. Alternatively, OECD countries are viewed as having unemployment concentrated in export industries. Scant evidence exists for either hypothesis. Regardless, the necessary monetary expansion will increase price inflation, even if there are some temporary effects on real output. Moreover, since evidence suggests that space capacity is not present, there would not even be any short-run benefits.

OECD countries with low price inflation and balance of payment surpluses have not retarded expansion in deficit countries. Rather, by lending savings to deficit countries, surplus countries have benefited the former. Thus, acceleration in the growth of aggregate demand in Germany and Japan would provide little additional help to their OECD trading partners. Instead, by not undertaking such expansion, Germany and Japan support countries with weaker economies. Policies for coordinated international economic expansion would aggravate the problems that such expansion is intended to correct.