Inflation in the Welfare State

Inflation in the Welfare State

Inflation has presented an intractable problem for post-Keynesian aggregate demand management. It has not responded to direct intervention through wage-price controls. A failure of policy has been reinforced by a failure of explanation. Neither high employment and “low” unemployment rates pressing on labor costs and hence on prices, nor the growth of corporate market power imparting an “upward bias” to, price levels, persuasively explain the persistence of inflation. But inadequate as they are, such explanations remain important for the assumptions from which they derive-is., assumptions as to the underlying stability or self-adjusting nature of the economic system. By maintaining a certain level of unemployment, it is believed, wage claims and therefore price pressures can be moderated; and by “promoting competition,” the market power of corporations can be curbed. The system’s equipoise can thus in time be restored.

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