Fiscalism

Fiscalism is a necessary consequence of the historical development of the system of taxation.

What is more, the advantage of this sort of fiscalism is that government is enabled to divert the wealth of the rich from private luxury consumption to the benefit of the commonwealth and at the same time to re-distribute it more evenly.

Among the institutions established according to fiscalism during the eighteenth century, we need to mention the life-term tax farming system (malikane sistemi), which had an impact on the entire economy, including industry.

Fiscalism was a first attempt at rationalizing a system of tax levying that would display more efficiency than it used to.

Hereby it will become clear how Keynesianism, a doctrine appealing to the monetary theorist JOHN MAYNARD KEYNES, soon converted into fiscalism, a position ascribing stronger effects to fiscal than monetary policy – and, in the extreme, denying the latter all real and nominal effects.

With a relatively inelastic IS curve and a relatively elastic LM curve Keynesianism became synonymous with 'fiscalism' and policies to fine tune the macroeconomy.

Despite this view of the importance (or lack of it) of fiscal policy for full employment it is also important to note that 'fiscalism' did become deeply entrenched in Britain in this period. Budgetary policy became the centre piece of macro-economic policy to an extent to which no other country can compare (Dow 1964, p.178).

Minsky's work factored in the transformation away from fiscalism that characterised the “long 1970s” and contributed to the development of "Post-Keynesian" economics, an intellectual program dedicated to revolutionising macro-economics in a way that was true to the spirit of Keynes eschewing the Neo-clasical synthesis inherent to the IS/LM models that formed the basis of fiscalism.