Theorizing about Post-Keynesian economics in Australasia: Aggregate demand, economic growth, and income distribution policy

Abstract

There was much in common in the development of Post-Keynesian economics in Australia and New Zealand, but there were also many differences. Both countries shared a common heritage in higher education. Until after the Second World War most students going abroad for tertiary education went to the United Kingdom with Cambridge a popular choice. Similarly, until after the Second World War most academic staff recruited from abroad for short or long periods were from the United Kingdom. In the first 25 years after that war both countries adopted broadly Keynesian policies and experienced very low levels of unemployment. Increasingly over these years more theorizing about macro economic policy had what now would be called a Post-Keynesian content, but this label was not used till after the event. In both countries, apart from one important factor, the experience of actual monetary policy and theorizing about it were similar. The important difference was the disappearance in New Zealand of an incomes policy, which was always present in Australia, either explicitly or in a de facto form through the operation of arbitration and conciliation tribunals.

The institutions and economic history of the two countries differed in other important respects, affecting which topics figured prominently and also when common topics were prominent, e.g. inflation and incomes policies. Moreover, Post-Keynesian economists were much more numerous in Australia. Mainly this was due to relative size, but also there was a quicker and wider acceptance of the ideas in the General Theory in Australia, with people with a connection to Cambridge prominent, though others were also very important.

Finally, before launching into the discussion of theorizing in the two countries, a more precise description of the content of the chapter is necessary. The first part of the title is too broad and is qualified by the second part. The key words here are ‘aggregate’ and ‘policy’. The focus is on theorizing about macroeconomic policy. Theory directly underpinning fiscal and monetary policy, including inflation theory, is the core. Income distribution is also important, both for its own sake and also because of the emphasis in Post-Keynesian theory on the need for incomes policies. Although this choice of subject matter reflects the nature of the majority of Post-Keynesian theorizing in both countries, the supply side is not ignored and some significant contributions to policy oriented growth theory are discussed. However, some major contributions to Post-Keynesian theory are excluded, particularly in the case of Australia, for example the work on public finance by Peter Groenewegen, and that on industrial organization by Neville Norman. Also, there has not been space to pay much attention to the substantial empirical work on labor markets which enables the discussion of incomes policies to be so impressive. This research is both by Post-Keynesian economists such as Robert Dixon and Peter Riach and by others who would reject that label. Finally, the discussion in this chapter ends with work written before the onset of the global financial crisis in 2007.