MONETARISM

noun (Business World) (Politics) An economic theory based on the belief that only control of the money supply can successfully bring about changes in the rate of inflation or the level of unemployment. Etymology: Formed by adding the suffix -ism in the sense of 'a system, belief, or ideological basis' to monetary as used in monetary control etc. History and Usage: This is not a particularly new word--the theory was first proposed by David Hume in the eighteenth century and the word has been used in relation to the economic theories of Professor Milton Friedman and his followers since the late 1960s--but it is one which has been used so frequently in the eighties to refer to the economic basis of the political administration both in the UK and in the US that it deserves an entry here for its high profile in recent years. Monetarism has been the underlying principle for controlling inflation used by the Conservative government in the UK under Mrs Thatcher and Mr Major, and the US Presidential administrations of Ronald Reagan and George Bush, and as such it has affected the lives of millions of British and American citizens. It has been the main opponent of Keynesianism (based on the theories of J. M. Keynes), which puts an obligation on governments to create employment and put money into people's pockets through public spending. A believer in the economic principle of monetarism is a monetarist; the adjective to describe policies founded on the principle is also monetarist. Not even the fierce monetarism of the last decade has prevented us from paying ourselves far more in relation to what we produce than any of our major competitors. Guardian 3 July 1989, p. 11 In the early 1980s the insights of monetarism were dissipated because the claims of the monetarists for control of the money supply as a cure-all were exaggerated. Financial Times 3 Apr. 1990, p. 21