The Creation of Wealth and Poverty: Means and Ways

The failure of governments in developing countries to provide their citizens with the necessary ingredients of growth and development can only be explained, by their inability to secure the sources of financing which ultimately allow them to ‘command’ these ingredients. Standard theories on money and public finance tend to consecrate this inability by endorsing and promoting ideas such as the scarcity of money and the need for imposing budgetary constraints on governments’ spending. Indeed, it is now widely accepted by policymakers that government expenditures should not exceed tax revenues. Since tax revenues in developing countries are often low, government spending is also arbitrarily kept low. Consequently, this presumed ‘lack of financing’ is used to justify the horrifying images of hunger, malnutrition, illiteracy, unemployment, lack of infrastructure and so on.

This book argues that the constraints on government spending are completely arbitrary and, in fact, constitute a major obstacle to any growth strategy. Government deficits (fiscal policy) and low interest rates (monetary policy) are key control variables that can be used to achieve the objective of prosperity and higher economic growth for the whole society. It is shown that these policies are useful both in fighting recessions in developed countries and in helping developing countries master their destiny and break out of poverty by implementing a New-Deal type of industrialization programme.