Page 85 - Global Political Economy_Understanding The International Economic Order

CHA PTER T HREE
publishedthe commission’s report, entitled Towards Full Employ-
ment and Price Stability (1977).
The thesis of the report was that the economic troubles of the
1970s hadbeen causedprimarily by certain policy errors of OECD
member governments, errors that included overexpansionary eco-
nomic policies andfailure to respondproperly to the inflationary con-
sequences of the breakdown of the system of fixed exchange rates.
Although presentedas economic truth, the report’s analysis was actu-
ally basedon a politically conservative, market-oriented ideology. As
Keohane writes, “Pervading the report is the view that contemporary
democratic governments are unwilling to exercise sufficient domestic
discipline, particularly monetary discipline.” 44 Governments, the re-
port suggests, hadbeen too lax andhad given in to the temptation of
easy monetary policies in order to win favor with their electorates.
The solution offeredby the report was reimposition of economic dis-
cipline andlimitation of the public’s economic aspirations. The re-
port’s idea that a “disciplinary” (rather than a welfare) state was
needed to make capitalism work was adopted by economic conserva-
tives andput into practice by President RonaldReagan andPrime
Minister Margaret Thatcher in the 1980s.
Although the McCracken Report concluded that the causes of the
economic disarray of the 1970s were located in the realms of social
andpolitical affairs, none of the economists on the committee were
experts in those areas. As Keohane pointedout, the fundamental issue
confronting the McCracken committee was the conflict, or at least
the apparent conflict, between the necessary conditions for modern
economic growth and the nature of both modern democracy and the
welfare state. Yet the economist-authors of the report, Keohane sug-
gests, appear to have been totally unaware that they were dealing
with a classic conflict between capitalism and democracy. Nor did
they make any attempt to judge the political feasibility of their recom-
mendations for resolving this fundamental clash. In Keohane’s words,
“A more profound understanding of macroeconomic events will only
be achievedby combining the economic argument with the analysis
of conflicts of interests, andthe exercise of power, as they take place
within different national societies and the international political
economy.” 45
Economists’ neglect of the social andpolitical dimensions of public
affairs andpublic policy originates in their tendency to treat economic

44
Ibid., 111–12.
45
Ibid., 116.
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