>{Eugene] pulled two sentences out of Jim's long post, but you can also
>find them in context below.
>Jim wrote:
>>
>>If conditions of
>> international competition and the like allow it, then the bosses try to
>> compensate for rising unit labor costs (nominal wage & benefits
>> divided by
>> average labor productivity) by raising prices faster.
>
>>
>>In addition, fast growth (corresponding to low unemployment) pulls up
>> raw-material prices, which cause business to raise output prices if
>> international competition conditions allow.
>
>My question is this: If "international competition conditions allow" them
>to raise prices, why don't they? I. e. why wait for the excuse and/or the
>pressure to raise prices? What businesses live for is raising prices --
>they don't hang back. I've never understood this "rising labor costs" as
>the cause of inflation.
there's also such a thing as intranational competition. Not only might an
individual business lose sales if it raises prices (as buyers shift to
buying from other companies or industries) but persistent ability to earn
monopoly profits attracts entry from other industries. [If they all face
cost pressure pretty much at the same time, however, this constraint is
weakened.] Though monopoly is an important phenomenon (it's part of
competition in my book), it's hardly the dominant force that Paul Baran
wrote about in THE POLITICAL ECONOMY OF GROWTH or John K. Galbraith wrote
about in THE NEW INDUSTRIAL STATE, where companies could rely on stable
markets, little price competition, and tremendous ability to plan ahead. In
fact, it seems to me that markets are more competitive now than 30 years
ago (at least in the US). This can be seen in the insecurity of corporate
tenure these days and the frantic efforts to restore the quiet life,
non-price competition as the main mode, and the ability to plan.
Jim Devine [EMAIL PROTECTED] & http://liberalarts.lmu.edu/~JDevine
