Robert Naiman wrote: > aren't progressive economists generally of the view that a little extra > inflation isn't such a terrible thing? > > suppose that unemployment is 6% and inflation is 3%. Behind Door Number Two > we have: inflation is 6% and unemployment is 3%. > > shouldn't we favor Door Number Two?
Most macroeconomists see relatively low inflation rates (say, below 10%) as pretty harmless. (Rates below about 2% per year can be harmful, encouraging excessively slow real growth -- but that's another story.) But those on fixed incomes -- e.g., those on private pensions -- have to scramble to keep up. Even those of us without fixed incomes have to do some extra work to keep our money wages from being undermined by inflation. (This is why most people don't like inflation.) The rich/creditor classes lose due to inflation, but only if the inflation is unanticipated. They don't require low inflation rates. Rather, they want rates that don't rise steeply so that they can hike nominal interest rates to protect the life styles to which they've become accustomed (or lust for). Inflation creates all sorts of redistributions. Nowadays, it's oil producers, ethanol producers, etc. who are gaining, while a lot of the rest of us are losing. Michael Perelman writes: >The effort to tame inflation is, in reality, a class war. < Yes, but inflation can also be a _result_ of class struggle. Back in the 1960s & 1970s, inflation resulted from the willingness of the employers to tolerate union contracts: they passed the cost of money-wage increases onto consumers. Since the latter were often the wage-earners, it made money-wage increases futile, so further money-wage increases were needed. The "price/wage spiral" is a battle over the distribution of income, with the claims on income exceeding the actual real income available. It's a distorted expression of the class struggle. Part of the story of class struggle causing inflation is that labor restricts its side of the conflict to pushing money wages up (or increasing labor costs in other ways) rather than trying to change the rules of the "game" in a more fundamental way. Of course, Volcker and his comrades decided to change the rules going in the other direction, destroying private-sector unions, undermining one side of the wage/price spiral. This key part of the "neoliberal policy revolution" destroyed 1970s-era inflationary hangover (inflation's resistance to recessions). They broke the back of stagflation by breaking the back of organized labor. (This also destroyed the old "industrial heartland" in the US, but that's another story.) -- Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own way and let people talk.) -- Karl, paraphrasing Dante. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
