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Comparative Monetary Economics: Capitalist and Socialist Monetary Systems and their Interrelations in the Changing International Scene PDF

280 Pages·1978·27.58 MB·English
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Comparative Monetary Economics By the same author The Economics and Politics of East-West Trade The Economics of Socialism Das sozialistische Wirtschaftssystem (German translation) Economia de socialismo (Portuguese translation) Economia del socialismo (Spanish trans1ation) Elm al-eqtssad al-eshtraki (Arabic translation) L'economia dei paesi socialisti (Italian translation) Socialistische economic (Dutch translation) Towards Multilateral Payments in Comecon Foreign Trade Socialist Economic Development and Reforms Desarrollo y reformas en los paises socialistas (Spanish translation) Prospects for the Export of Australian Farm Products Profit, Risk and Incentives under Socialist Economic Planning Technology in Comecon The Multinationals and East-West Relations COMPARATIVE MONETARY ECONOMICS Capitalist and Socialist Monetary Systems and their Interrelations in the Changing International Scene J .WILCZYNSKI © J. Wilczynski 1978 So ftc over reprint of the hardcover 1st edition 1978 978-0-333-32666-4 All rights reserved. No part of this publication may be reproduced or transmitted, in any form or by any means, without permission First edition 1978 Reprinted 1978 Published by THE MACMILLAN PRESS LTD London and Basingstoke Associated companies in Delhi Dublin Hong Kong Johannesburg Lagos ,\-lelboume New York Singapore Tokyo British Library Cataloguing 1n Publication Data Wilczynski, Jozef Comparative monetary economics 1. Money 1. Title 332-4 HG230.7 ISBN 978-1-349-06256-0 ISBN 978-1-349-06254-6 (eBook) DOI 10.1007/978-1-349-06254-6 This book is sold subject to the standard conditions of the Net Book Agreement TO ANIA AND SYLVIA Eclectic syntheses of a transcultural heritage Reficiat animos ac reparet varietas ipsa M. F. Quintilianus Institutionis oratoriae libri, AD So Contents Preface lX MONEY A. The Nature and Role of Money I B. Monetary Theory 6 C. The Functions of Money II D. The Supply of Money 20 2 BANKING A. The Development and Structure of Banking 20 B. Banking Control 29 C. International Banking Institutions 32 D. Capitalist Banks and the Socialist Countries 35 E. Socialist Banking in the Capitalist World 42 3 MONETARY POLICY AND CONTROL A. The Role of Monetary Policy 51 B. Monetary Flows and Control 55 C. Limitations 59 4 PRICE FORMATION AND VALUE A. The Market Mechanism and Planning 64 B. Prices and Value 66 C. The Quantity Theory of Money, and Prices 6g D. The Functions of Prices 72 5 FOREIGN TRADE PRICES AND THE TERMS OF TRADE A. Capitalist Foreign Trade Prices 78 B. Prices in Socialist Foreign Trade So C. Prices in Capitalist-Socialist Trade 85 D. The Terms of Trade go 6 CAPITAL AND INVESTMENT A. The Role of Capital 97 B. Domestic Investment 101 C. Foreign Investment 105 7 CREDIT A. Intra-Capitalist and Intra-Socialist Credit 113 B. Capitalist-Socialist Credit Relations 118 C. Credit Risk and Insurance 124 8 INTEREST A. Ideological Attitudes to Interest 124 Vlll B. Functions Performed by Interest I33 C. Interest on Capitalist-Socialist Credits I38 9 THE BALANCE OF PAYMENTS A. Distinctive Structural Features I43 B. Pressures on the Balance of Payments I48 C. Corrective Measures and Remedies I5I IO BILATERAL AND MULTILATERAL SETTLEMENTS A. Bilateralism I 57 B. The Multilateral System of Payments I64 C. Multilateralism in Capitalist-Socialist Settlements I67 I I EXCHANGE RATES AND CONVERTIBILITY A. The Determination and Role of Exchange Rates 175 B. The Convertibility of Capitalist Currencies I82 C. Convertibility and Socialist Economic Planning I85 I2 GOLD A. The Gold Market I92 B. Gold and Money I98 C. Gold and International Reserves 202 I3 STABILITY, EQUILIBRIUM AND FLUCTUATIONS A. Stability and the Economic Mechanism 208 B. Monetary and Market Equilibrium 2 I I C. Fluctuations 2I5 I4 INFLATION A. Sources of Inflation 223 B. The Extent of Inflation 227 C. Inflation in Capitalist-Socialist Relations 236 I5 WORLD MONETARY CO-OPERATION A. Ideological Prejudice and Conflict 242 B. Reforming the International Monetary System 245 C. Towards Transideological Monetary Co-operation 252 Index of .Names 259 Subject Index 264 Preface HENRY Fielding, a noted English writer in the early years of modern capitalism, described money as 'the most charming of all things-money, which will say more in one moment than the most eloquent lover can in years'. Karl Marx at the height of industrial capitalism said that 'money degrades all the gods of man and converts them into commodities', and a century later Nikita Khrushchev labelled the capitalist world as 'the kingdom of the dollar'. These quotations symbolize the traditional capitalist and Marxist views of money. The purpose of this book is to identify the distinctive characteristics of the monetary systems under modern capitalism and socialism, to examine their differences, unexpected striking similarities and paradoxical develop ments, and to bring the relations between them into a clearer focus. The Socialist bloc covered in this study includes all the fourteen countries ruled by the Communist Parties under the mono-party system of government, i.e. nine European, four Asian and one Latin American. Distinctions are made between different economic models on each side where appropriate, especially if they are of comparative capitalist-Socialist consequence. In contrast to many other aspects of the Socialist planned economies, little attention has been specifically given in capitalist studies to the monetary factor under socialism. This is not surprising, considering that for a long time in the past monetary questions were conspicuously neglected even in Socialist economic thought. However, economic reforms in the European Socialist countries and their increasing interest in international monetary developments in the last decade have added a new dimension to Socialist monetary economics. The pattern of the treatment of topics is, first, a brief outline of the relevant distinctive attitudes, policies and practices under capitalism, which is then followed by a more detailed analysis of the situation in the Socialist countries. Although historical background is provided, the emphasis is on recent and prospective developments. Monetary economics can be viewed as one of the spheres of 'con vergence' of capitalism and socialism. Although traditionally the re spective monetary systems differed diametrically, there have been many developments in the last decade or two whereby each system has tended to shed its former extreme features and consciously or subconsciously adopt certain elements peculiar to the other side. Furthermore, there has been a remarkable growth of various forms of monetary co-operation between capitalist and the Socialist countries. X In recent years, monetary questions have assumed new levels of importance both in capitalist as well as the Socialist countries, and particularly in capitalist-Socialist relations. The problems of inflation, international liquidity, the demonetization of gold and Eurocurrency financing have placed the monetary system in the limelight of publicity in the capitalist world. At the same time, the monetary factor has assumed an unprecedented role in economic processes in most Socialist countries and the problems besetting the capitalist world are also affecting the Socialist bloc. The monetary disarry in which capitalist countries have found them selves in recent years, domestically and internationally, has demonstrated that the traditional solutions to monetary problems are no longer appropriate or effective. A study of the Socialist approach to monetary management may provide valuable lessons to capitalist countries - developed and less-developed alike. The international monetary system has so far virtually excluded the Socialist bloc-about one-third of the world. As is well known, since I 971 the system has ceased to exist in the form originally erected under the Bretton Woods agreement. It appears timely at this stage to give thought to the inclusion of the Socialist countries before the system being reformed now solidifies into a set matrix. This book provides some ideas in this direction. The field of monetary economics lends itself to extremist polemics in a myopic support of one system and a narrow-minded condemnation of the other. The author's well-meaning intention throughout this book is to be objective and preserve neutrality. But he does not hesitate to bring out strengths and weaknesses of one system particularly if they contrast with those of the other side. He is aware of the fact that in doing so he still incurs the danger of displeasing the committed extremist protagonists of one system or the other. University of New South Wales jOZEF WILCZYNSKI at Duntroon, Canberra

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