Fiscal and monetary policies and problems in developing countries. Eprime Eshag. (Modern Cambridge Economics), Cambridge, 1983, 287 pp
| Author | K. W. S. Mackenzie |
| DOI | http://doi.org/10.1002/pad.4230040414 |
| Date | 01 October 1984 |
| Published date | 01 October 1984 |
Book
Reviews
387
Nicaraguan as emerging collective systems and the Iran case (under the Shah) as
a
search for
modernized agriculture. It is
a
pity that there is no China case study
of
the shift from
collective to peasant systems.
Agrarian reform has been unfashionable for
a
decade as the benefits from modern
technology-mainly seeds and fertilizer-raised the ceiling on total production. As the
technology bag
of
tricks looks increasingly expensive and more limited, and as the
consciousness about the unsatisfactory income distribution impact is increased,
so
interest in
detailed case studies will grow. ILO are doing
a
good job in recording varied experience and
the results are valuable, even if their main effect is to highlight how difficult it is to have
sustained reform given multiple objectives.
IAN
CARRUTHERS
Agrarian Development Unit
Wye College, University
of
London
FISCAL AND MONETARY POLICIES AND PROBLEMS
IN
DEVELOPING
COUNTRIES
Eprime
Eshag
(Modern Cambridge Economics), Cambridge,
1983, 287
pp.
The series preface to this book tells us that the series is aimed at ‘the intelligent undergraduate
and interested general reader’. The authors derive ‘their main inspiration from Keynes
himself and his immediate successors, rather than from the neo-classical generation of the
Cambridge school’. The objective of the series is ‘to stimulate students to escape from
conventional theoretical ruts and to think for themselves on live and controversial issues’.
Mr.
Eshag’s contribution is divided into six chapters. The first two define concepts and
explain the Keynesian model
of
income determination and Kalecki’s model of financing
investment within the framework of which the role of fiscal and monetary measures and of
foreign capital is examined later. Chapters
3
and
4
discuss the role of fiscal measures and of
foreign capital, respectively, in promoting domestic investment. Chapter
5
examines the use
of both fiscal and monetary instruments, including industrial and agricultural development
banks, to influence the pattern of investment. The final chapter deals with problems of
internal and external imbalances.
The author adheres firmly to his Keynesian brief, polemically on occasions, particularly in
Chapter
2.
He insists that the Keynesian model is the only rational one and that effective
development requires pervasive governmental intervention. Conversely the neo-monetarist
approach of Friedman and his disciples is stigmatized as unsound, even though the Chicago
School ‘propaganda’ may have recruited
a
number of academic economists. In the same vein
the International Monetary Fund is chided in Chapter
6
for its sound money policies and its
‘bias
..
in favour
of
deflationary policies’. Mr. Eshag prefers direct controls and selective
measures including import control, the promotion and diversification of exports, consumer
subsidies, rationing and investment licensing. However, he admits that in most developing
countries such measures would soon breed corruption rather than effective development. One
of the most attractive features of the book is indeed
Mr.
Eshag’s honesty in
first
stating his
fundamental ‘Keynesian’ beliefs and then casting doubt on their efficacy by his observations
on some of the realities of the developing world. Thus, on page
23
he tells
us
frankly that ‘a
large part of what follows in this book is in one sense hypothetical’. On page
25
he says that
‘in practice
few developing countries are in
a
position to utilise all the policy instruments
discussed in this book which can
in theory
be employed to assist development’. And on page
269
he regrets that ‘there is little
or
no prospect at present of introducing fundamental
changes in the international monetary system along the lines suggested’.
Mr. Eshag defines development as the adoption of measures which would both increase
national wealth and improve the lot
of
the poor. Both conditions must be satisfied.
Accordingly
essential investment
would allocate resources towards the provision of goods and
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