ABSTRACT
Until quite recently purchasing power expansion as a system of monetary policy was unknown in practice. Even in theory its implications in the sphere of monetary policy were almost entirely unknown. It is true that Karl Marx, and other Socialist writers, and also economists such as Mr. J. A. Hobson, denounced the deficiency of the capitalist system on the ground that consumers do not obtain sufficient purchasing power to enable them to buy all the goods produced, and that consequently from time to time there is bound to be a breakdown owing to over-production. The conclusion of this group was that this inherent defect of capitalism could not be remedied, and was bound sooner or later to lead to the collapse of the system. In practice, the Socialist movement has done its utmost to remedy this particular shortcoming, even though its leaders were not aware that their efforts to obtain higher wages would tend to produce that result. The efforts of trade unions and of the Labour Party in Great Britain and of their counterparts in other countries, had no particularly profound theoretical background in the monetary sphere. Higher wages were demanded as a matter of practical politics, not as part of a general monetary policy, and certainly not in an effort to overcome the shortcomings of liberal capitalism.
