Introduction

We will now discuss the policy implications of our theory of growth of a corporate economy. That is, we ask what a government can do to achieve faster economic growth in an economy with barriers to enter the corporate sector and the separation of ownership from control. More specifically, should the government increase government expenditure over time? How should it be financed – through taxation or new issue of money? If taxation, what is the combination of corporate and personal taxes that is least harmful to a growing economy? What are the implications of these alternative policies to inflation? Does inflation contribute to economic growth by stimulating investment or is it harmful?

No one will doubt the importance of these questions. Economic growth is one of the most important and perhaps most conspicuous achievements of a country, and there is hardly a day when the government, journalists, businessmen or economists do not talk about the growth rate of national income. Economic growth, as a consequence, has been of high priority among policy goals for most countries, not only for Japan and West Germany, where their completely destroyed production equipment needed urgent restoration after World War II but also for other capitalist economies as well as socialist economies. Several policies have been undertaken in many countries toward this goal: tax credit to investment; government investment to increase production such as building plants and, more indirectly, building infrastructures to help production activity of the private sector; governmental support of research activity; and so on.