NCPA - National Center for Policy Analysis

Chicago Capital, Inc.,: A Comeback For Classical Economics

March 3, 1998

Most of the world's economies are continuing to move in the direction of pro-growth, classical economic principles, says economist Robert Genetski . And there is growing pressure throughout the world for lower taxes, freer markets, more limited government, protection of property rights and price stability.

Specifically, there is widespread acceptance that price stability should be the primary goal of monetary policy.

  • During 1997, the only one of the world's top 12 economies with a rate of price inflation above 2 percent was the United Kingdom, at 3.3 percent.
  • To reduce inflationary pressures, the U.K. has raised interest rates four times to over 7 percent.
  • And of the top 25 developing nations, almost half had inflation rates below 5 percent.
  • The most notable exceptions -- Thailand, Korea, Indonesia, Malaysia and the Philippines -- which inflated their money supply while trying to maintain fixed exchange rates with other currencies, are introducing free market reforms.

Another positive development, says Genetski, is the spread of Chilean-style privatization of social security. It has been adopted by Argentina, Peru and Columbia in the past few years, and Mexico, Uruguay, Bolivia and Hungary have set up variants of the Chilean model.

In addition, Australia is phasing in privatized social security, and Poland, the Czech Republic, Ecuador, Paraguay, Indonesia, Canada, South Africa, China and the U.K. are either studying the move or have


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