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

280 Pages·1978·27.58 MB·English

by  J. Wilczynski (auth.)

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