monetarism

Economic policy that proposes control of a country's money supply to keep it in step with the country's ability to produce goods, with the aim of controlling inflation. Cutting government spending is advised, and the long-term aim is to return as much of the economy as possible to the private sector, which is said to be in the interests of efficiency. Monetarism was first put forward by the economist Milton Friedman and the Chicago school of economists.

Central banks (in the USA, the Federal Reserve Bank) use the discount rate and other tools to restrict or expand the supply of money to the economy. Unemployment may result from some efforts to withdraw government ‘safety nets’, but monetarists claim it is less than eventually occurs if the methods of Keynesian economics are adopted. Monetarist policies were widely adopted in the 1980s in response to the inflation problems caused by spiralling oil prices in 1979. Policies that promote monetarism may include deregulation (the reduction of government control over business activity) and privatization (the selling of public assets to private industry).