Economic Growth and the Balance-of-Payments Constraint.

• Author: Tiwari, Kashi Nath

The debate over the relative significance of Supply-Side and Demand-Side approaches to solving national economic problems has long dominated the field of economics. For a discipline that is not an exact science, economists should be extra careful in making superlative statements such as "this is the only right approach," or "that is the absolutely wrong approach." The evidence from major industrialized countries (Reagan-era in the U. S., Thatcher-era in the UK, Mulroney-era in Canada, and Kohl-era in Germany) suggests that it is the Supply-Side approach that is more effective in helping attain full employment with price stability. How can demand (not desire) be generated unless there is a source of income? How can a source of income be generated unless there is a workplace (supply), particularly in a non-primitive and non-barter contemporary society? In order for a country to achieve an economic success, therefore, it must place heavy emphasis on the efficiency of its production sector. The demand will be generated through income and can be expanded through informative and educational advertisements. The authors of this book, J. S. L. McCombie and A. P. Thirlwall, however, recommend a demand-oriented approach to economic growth.

Both authors are widely acclaimed economists. With expertise in post-Keynesian and regional economics, J. S. L. McCombie is a Fellow and Director of Studies in Economics at Downing College, Cambridge, and is a member of the Department of Land Economy at the University of Cambridge. Distinguished in the areas of economic growth and balance of payments and author of several books, A. P. Thirlwall is Professor of Applied Economics at the University of Kent at Canterbury. Both in content and style, it is a well written book. The authors' success in covering such a vast amount of material in a single volume is especially noteworthy. With skill and precision, only the academicians of similarly vast knowledge and experience could accomplish such a feat. With an excellent opening commentary, the book consists of ten more chapters, extensive endnotes, and a comprehensive list of references. It also contains name and subject indexes, both of which are very helpful to readers and researchers alike.

The book attempts to show the effects of the balance of payments on a country's growth performance. The authors offer a demand-oriented analysis of growth theory as an alternative to the supply-oriented analysis of the...