Jay writes:
>I wanted to take a quick survey of whether inflation remains an "economic
issue." I'm helping Bob Carson update his "Economic Issues Today," ...
>I've been trying to formulate a reasonable "radical" position on the
inflation issue, drawing from work by Dean Baker, Bob Pollin, Doug. From
what I can tell, prior to the last decade or so, there really hasn't been a
left consensus on inflation. <
On the causes of inflation, you might want to see the URPE publication THE
IMPERIL LED ECONOMY (macro volume), one of whose articles is by yours
truly. I think a left consensus on then proximate causes of inflation can
be summarized by an equation brought to the fore by Otto Eckstein and more
recently embraced by Robert J. Gordon:
inflation = demand inflation (SR Phillips curve) + supply-shock inflation +
inertial or built-in inflation
Most economists (except die-hard monetarists) see the first two terms as
generally accepted. There is little debate except about the details. The
last term -- what David Gordon called "structural inflation" -- is
typically called "inflationary expectations" by the neoclassicals. As an
"expectations" term, it can be abolished pretty quickly. In the left lit,
on the other hand, it refers to the unresolved conflicts over the
production and distribution of the product; it is also called the "wage
price spiral" theory. (As Albert Hirschman pointed out in his essay on
inflation in Chile (in JOURNEYS TOWARD PROGRESS), having inflation avoids
overt class conflict over distribution, though it can in turn intensify
class conflict. See also Rowthorn's article in the first issue of the
CAMBRIDGE JOURNAL OF ECONOMICS.) Because these conflicts are persistent,
inertial inflation doesn't go away over night the way some neoclassical
theories have it.
In the left conflct theory of inflation, there seem to be several ways to
abolish structural inflation under capitalism:
1) victory over labor organizations and the like that are one basis for
conflict theory. A general increase in market competition also helps here,
since part of any inertial inflation theory is that many economic units
have some price-setting power.
2) incomes policies, which often mean the same as #1.
3) a social-democratic type pact that institutes incomes policies without
repression.
4) reliance on falling oil prices and the like (beneficial supply shocks)
to counteract inertial inflation.
5) labor-market policies can lower the inflation-threshold rate of
unemployment (a.k.a. the NAIRU) by bringing in new supplies of labor-power,
abolishing structural unemployment, etc.
>Moreover, Doug and Bob P disagree on an elected vs. non-elected FRB (if
I've got this wrong, please elucidate). <
That's an issue on the demand side of inflation, and I'll leave it to Doug
& Bob. But if someone can figure out a way to solve inflation on the
supply-side, the Fed loses some of its role. That seems be a good thing.
>If Marx were alive today, what would his policy prescription for dealing
with inflation?<
Marx didn't advocate policies, unless the workers were actually in power
(e.g., the CRITIQUE OF THE GOTHA PROGRAM). I doubt he would advocate any
of the list I produced above and I wouldn't blame him; absent democratic
control over the state (or at least a lot of pressure on the state from
outside by mass popular movements), almost any policy is likely to turn out
to be anti-worker. But maybe the messages received at our seance were
inaccurate representations of his true views.
in pen-l solidarity,
Jim Devine
[EMAIL PROTECTED] & http://clawww.lmu.edu/1997F/ECON/jdevine.html
