Missing Basic Issues on Credit Money: On the Role of Money in Removing World-wide Growth Barriers (The M. L. Qureshi Memorial Lecture)

Kalecki identifies demand restraint in industrialised and capital restraint in developing countries as the decisive barriers of world-wide growth. Thus, beyond others, it is a matter of financing to foster employment in both types of countries: a rational use of credit money on the international scale could finance additional imports of capital goods by developing countries, whereas industrialised countries could increase their output by trade balance surpluses. This question has been largely debated under various aspects, from the Stamp plan (1958) to the programme of the Commission on International Development Issues (1980). Even if this debate has been superseded by questions of the process and the institutions by which capital is allocated, of the appropriate business management and screening and monitoring, declining growth rates in the last twenty years show that the basic issue of production and distribution of additional real capital remains at stake. Besides institutional obstacles, capital restraint still remains the main bottleneck for development. Basic questions as how to create and use world-wide credit money has to be reconsidered instead of taking backfiring actions to manage actual financial crises. Additional international money supply by planned trade balance deficits of developing countries contributes to world-wide growth, whereas trade balance deficits of the United States are likely to prepare the next financial crises by an excessively increasing dollar supply. A revival of the debate of how to link SDR’s and development financing surely requires to tackle a great number of additional questions, such as how to allocate trade balance deficits and surpluses and how to ensure the acceptance of this world credit money. All in all, it would be a serious attempt to break the money away from the handing down tradition and to transform it into a rationale by abstract reasons and well-founded instrument for economic development.