Wage rates, credit expansion and employment

The article aims at dispelling a widespread misconception, the notion, propagated by popularisers of the views of Keynes, that all cases of unemployment can be successfully remedied by a monetary and fiscal policy aimed at raising the volume of aggregate demand. Secondly, it attempts to restate the conditions that are necessary if such a policy is to succeed in bringing about full employment. The analysis made by the authors proceeds by reconstructing the genuine position taken by Keynes and by the examination of the more significant post-Keynesian developments on the importance of the relative movements of prices and wage-rates for the success of a policy for reabsorbing unemployment, based on the expansion of credit and therefore of total demand. Following in the wake of the classical tradition and of Keynes himself, the authors confirm the importance of the price-wage relationship, making the necessary qualifications and reservations suggested by the growing refinement of economic research and by the evolution of real facts.