Adopting employment-friendly fiscal policy

Abstract

In this article, Dr. M. Azizur Rahman examines the economic dilemma of choosing between expansionary and contractionary fiscal policies within the context of Bangladesh’s economy in 2010. The author argues that while expansionary fiscal policy characterized by increased public investment is essential for boosting national income, production, and employment, it often carries the side effects of rising inflation and an increased trade deficit. Conversely, the article warns that adopting a contractionary policy to curb inflation or reduce budget deficits would likely lead to severe unemployment, reduced per capita income, and stagnation in indigenous production. Ultimately, the author advocates for a balanced "employment-friendly" approach. He suggests that the government should prioritize expansionary fiscal policy to combat unemployment and foster growth, while simultaneously implementing controlled wage and price policies to manage inflation and production costs.