ABSTRACT
Spending in order to create political stability might have worked better in completely closed-off economies; with greater economic openness, the money slopped out of the national buckets. The new spending created big imbalances in the external accounts and major capital flows to compensate for the trade and services imbalances. John Maynard Keynes himself in the 1920s and again in the Second World War had worried about the socially calamitous effects of inflation, but his disciples in the late 1960s and early 1970s regarded a moderate level of inflation as desirable. Labor movements could meanwhile be lulled into acquiescence by higher wages, even though the gains might quickly be lost because of further price increases. The election to a Constituent Assembly on the anniversary of the revolution, on April 25, 1975, appeared to be a setback to the communist advance. Monetarism in the 1970s came to be viewed as an alternative to the philosophy of Keynesian demand management.
