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eilftPTER II

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Th# eęonoay appeared to perfora accordlng to the theorles of Keyaes. the expansioa ot publlc cxpendlturę or the aoney-supply lnvarlably produced a growth of output and eaployient, wltb Iow effectt upon the dynaaice ot prices and aoney wages. The naw affluenęe produced a aharp lncreaae ln International trade_t The coaaon aarket fraaework ln Europę was Consolidated. European econoales becaae Increaslngly lnterdependent.

Each of the European countrlea pursued a pollcy of stablllzatlon whlch aoatly concerned its own business cycle. The swings of the business cycles ’ were generated aalnly by lnternal events, such as lnvestaent cycles, wage.drifts, etc. However, sińce the dependency upon International trade was growlng, the equllibrlua of the trade balances becaae Increaslngly laportant, actlng aalnly as an addltlonal constralnt upon the lntenslty of expanslve pollcles. On the whole, howeyer, the business cycles of each country were not fully synchronlzed. Furtheraore, each country appeared to be posltloned along a substantlally expanslve trend.

It la laportant to notlce here that thls posltlve attltude towards sustalned growth, whlch was llkely to heavlly Influence the aood of coapanles’ expectations. by no aeans was rooted only to the prevalllng aacroeconoalc phllosophy. Qulte on the contrary, thls aacroeconoalc phllosophy constltuted an approprlate envlronaent, wlthln whlch speclflc progressive lndustrlal and, above all, soclal pollcles were pursued, as the result of cultural and polltical- attltudes and pressures. The need to flght agalnst duallsa and poverty, to get rld of varlous foras of underdevelopaent enclaves, the need to strengthen the posltlon of the weaker parts of the populatlon, the need for laprovlng labour standards and labour conditlons, for proYldlng better houslng and transportatlon, for having aore and better educatlon, etc., were all felt and shared by a vast aajorlty of people; and thls was soaethlng whlch went beyond the contlngency of the polltical aajorltles whlch exlsted ln single aoaents ln single countries.

Thus, lt was thls cllaate, such well rooted and diffused attltudes, that foraed the basls both for expanslve expectatlon8 and expanslve pollcles. On the other hand, lt ls llkely that expanslve expectatlons created a tendency for the flras to wlden thelr productlve capacity quite ln adyance, creating thus a favourable enylronaent to respond, rapldly and wlthout strong tenslons, to expanslve pollcles by an Increase of thelr outputs. Macro-po11c1 es conflraed the expectatlons of flras, and thelr success relnforced favourable attltudes towards thelr contlnuatlon.

These tendencles, that prevalled ln each of the countries whlch were beconlng Increaslngly lnterdependent, aade for a posltlve Circuit of Interdependency aaong pollcles at the International level. In other words, although the need for equlllbrlue ln the International trade acted as a new constralnt, thls dld not produce excessive pressures towards sharp coapetltlon. If a country happened to be ln a sluap, whlle the other lnterdependent ones found theaselyes ln a