LIBERAL AND SOCIAL TRENDS IN ECONOMY

The dialogue between liberal and social ideas in search of constructive ways for the development of a society - and not only the economy - has had a long history of evolution in the West. The possibility of such a dialogue, wrought through struggle and strife, has become one of the basic democratic values.

The economic development of the Western countries in the 20^th century was determined by the interaction of two economic theories – Keynesianism and Monetarism. From this original opposition not only a synthesis was brought about, but also a line of succession of the past century capitalism emerged.

The stumbling block for the proponents and followers of both theories has always been the role of the government in the economy and, indirectly, the role of the government in the social development.

In the 1930s the prominent English economist John Maynard Keynes formulated a whole range of revolutionary ideas for the economic development – from the thesis about a necessity of an effective government regulation of the macroeconomics, up to the set of regular and dynamic steps of the government regulation of the market, including investments as an impetus for the crisis management. Keynes’ ideas were a reaction to the Great Depression. By that time it had become apparent that the classical liberal concept of the market, that was able to find a way out of the crisis itself, was skidding. The fall of demand as a consequence of the lack of money resulting from mass unemployment, and the absence of private capitals in industry because of the unprofitability of long-term investments, on which work places and salaries depended, had dramatically short-circuited the capitalist market system. Keynes’ new views, coinciding in time with the new political and economic course of Franklin Delano Roosevelt, known as the New Deal, have become the main component of fiscal and social regulation, bringing forth what is known today as the “welfare state”.

In December 1999 The Financial Times released a special edition, dedicated to the turn of the centuries, entitled “Millennium”, where John Maynard Keynes was acknowledged as the author of the book that had had the greatest influence on the economic thought of the 20th century. His The General Theory of Employment, Interest, and Money (1936)asserted that the government can and must bear responsibility for the employment and well-being of the people. The age of Keynesianism, from 1948 up to 1973, is considered to be one of the most successful in the world economy development. Keynes’ ideas didn’t fit into the classic liberal conception. They were subjected to criticism by the Austrian school representative Friedrich August von Hayek (1899-1992), who is thought to be the forerunner of neoliberalism. But the main opponent of Keynesian school was the professor of Chicago University, Milton Friedman, who followed von Hayek in becoming the Nobel Prize Winner. Friedman was the guru of monetarism of the so-called Chicago school; he was also the future counsellor of Pinochet, the inspirer of the economic policy of Margaret Thatcher and Ronald Regan. Monetarism of Friedman and postulates of the Chicago school, which he headed, were later practiced in the notorious shock therapy. Monetarism proposed to reduce budget deficits through privatization of state property, to cut government spending on social goals, to set targets to regulate growth of money supply and credit, to work out the coordinated policy of Western countries to maintain stability of national currencies and equilibration of payments balances.

Friedman brought the economic thought back to the classic liberal capitalist trust in the ability of the market to regulate itself, this time together with the tightest control of the money supply. A gifted mathematician, he was strongly attached to formulae, whose universal character he valued. And yet his theory was largely determined by his polemics with Keynesianism. Keynes considered the increase of government spending a prerequisite for the reduction of unemployment. According to Freedman in doing so the governments provoked inflation and ran into debts, yet a definite number of unemployed – so-called “natural unemployment quota” - was unavoidable.

Dealing with inflation is more valuable than dealing with unemployment. The answer to the question whether the visible correlation between a tough monetary policy and high unemployment should be regarded as either an unfortunate obstacle or a serious problem will forever remain for the politicians a kind of litmus paper showing their true attitude to the society.

In spite of all the reassurances that the tenets of Chicago School are an ideology-free independent economic concept, they have an ideological mark – a poorly concealed dislike for the government, inherited from liberals on the level of abstract mistrust and made into a dogma. The idea of complete privatization of the state-owned organizations was initially a response to Keynes and attack on Roosevelt’s policy that led to the concentration of power in the government and trade unions – a harmful process according to Chicago school.