The macroeconomic policy problem is to maintain internal and external balance by means of policy instruments which are consistent with microeconomic objectives. This is common to both socialist and market economies. However, socialist economies are distinctive in their microeconomic objectives and this in turn gives rise to distinctive choices of macroeconomic instruments. The socialist perspective implies suspicion of the market as an allocative mechanism, and suspicion of private property due both to the power and the unearned income which it confers. If the market is rejected as an allocative mechanism, the government has a choice between regulating the private agents who constitute it or replacing them with public agencies. Three microeconomic interventions have had particularly powerful macroeconomic repercussions: the allocation of credit, price controls, and the allocation of foreign exchange.
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- The Macroeconomics of the Transition from African Socialism
David L. Bevan
- Palgrave Macmillan UK