ABSTRACT
Post-Keynesians argue that the level of output and employment depends upon the interaction between total spending and the economy’s capacity to produce. Thus a crucial problem with market capitalism is that it possesses no mechanism that guarantees that output and spending decisions always coincide. Therefore enormous scope exists for government macroeconomic policy to initiate, pursue and implement stabilisation through the budgetary monetary measures. The potential to generate a post-Keynesian strategy will, however, be thwarted if the United Kingdom participates in European Economic and Monetary Union (EMU) within the European Union (EU). Membership requires the separate formulation of money policy from nationally determined fiscal policy, leading to a resultant lack of policy coordination prejudicial to the construction of a postKeynesian economic framework. The resultant slow-growth, high-unemployment outcome will be further exacerbated by the transfer of monetary policy to a European Central Bank (ECB), whose sole legal objective is the pursuit of price stability. This chapter therefore seeks to develop an alternative post-Keynesian strategy for the United Kingdom based upon a long-term opt-out from the euro. Its fundamentals are achieving a competitive exchange rate, higher investment, a social contract to restrain inflationary pressures via planned redistribution, the reintroduction of exchange control through a transactions tax on dealings unrelated to trade and the pursuit of an active industrial policy to increase the longrun competitiveness of British industry where it already possesses a comparative advantage.
