ABSTRACT
The seductive doctrine that a government deficit, as long as unemployment existed, was not only innocuous but even meritorious was of course most welcome to politicians. The advocates of this policy have long maintained that an increase of total expenditure which still led to an increase of employment could not be regarded as inflation at all. This sort of unemployment which we temporarily ‘cure’ by inflation, but in the long run are making worse by it, is due to the misdirection of resources which inflation causes. After a unique 25-year period of great prosperity the economy of the Western world has arrived at a critical juncture. The conquest of opinion by Keynesian economics is mainly due to the fact that its argument conformed with the age-old belief of the shopkeeper that his prosperity depended on consumers’ demand for his wares.
