Natural Law Liberalism and the Financial Sector

Chapter 8 applies the philosophy of economics developed in the last chapter to monetary and fiscal policy. The point of departure is that governments tend to pursue sub-optimal policies with respect to the economy for short term electoral reasons. This pressure has only increased with the latest stage of “globalization” which has fuelled both protectionist and populist policy. To preserve the economic benefits of trade while dealing with the real challenges of economic dislocation and insecurity, to say nothing of national solvency, three policy recommendations are advanced. First, there ought to be enshrined in the fundamental law of the land an economic constitution mirroring the political constitution. Second, the banking sector, so intimately connected to the Global Financial Crisis of 2008, needs fundamental reform. The Basel recommendations in this regard do not go far enough. The adoption of the Full Reserve Banking system of Fisher and Eucken is recommended in their stead. Finally, governments ought to adopt the policy of a universal employment guarantee.