ECONOMIC ROLE OF THE STATE 13 that each country will be able to pursue its own monetary and fiscal-operation unconstrained by problems of external balance. In the domestic sphere, the delinking of money from gold had implied that in its pursuit of Keynesian policies, the State will never face a problem of liquidity, domestically. In relation to external payments, however, each country has a liquidity problem, and with growing operations of the world economy, the demand for international liquidity, major capitalist countries have been in a state of war—the so-called interest rate war, that is now raging for more than four years. The war that consists in competitively raising the interest rate, to attract international money, has created further problems for the domestic economy. A Note on Monetarism The reaction against Keynesian policies that has gripped some advanced countries in the form of a reversal to high interest, tight money and curbs on spending has been termed monetarism. It has been contended that the resurgence of monetarism is due to a new social development, namely, the dominance of finance over industry. As we have argued earlier, the idea that there has been a recent resurgence of finance necessarily presupposes that sometime in the past finance had been subjugated to industry. Since early this century, however, the capitalist States have been ruled by finance capital, a fusion of large industrial and financial interests. Smaller industrial capital has remained subordinate to this consortium of large bank and industrial interests. There is no historical evidence of this smaller industrial capital at any stage being in a dominating position over finance capital, and thus there is also no question of finance coming back to power now. During the period of Keynesian policies, the concentration of capital has proceeded apace. In fact, the Keynesian innovation of easy credit has enticed small capital into growing dependence on bank capital, institutionalised a high debt-equity ratio and thus led to many take-overs by finance capital. The regime of high interest rates has been also cited as a proof of the rise of financial interests over industry. We have pointed out earlier that a high interest rate does not affect very large industrial capital and the multinationals, whose interests are indistinguishable, except in a book-keeping sense, from that of large bank capital. On the contrary, a part of the motivation for high interest derives from the needs of large multinational industrial interests, who in their operations perpetually come up against the shortage of international liquidity. We have pointed out already that high interest has primarily been the fall-out of the war among large capitalist countries to corner international liquidity. High interest therefore does not represent subjugation by finance of industry, but subjugation by large finance and large industry of small industrial interests. But this by