Introduction

Chapter 11 brought our evolutionary-Keynesian account of macroeconomic developments to the present. By the mid-1990s it was widely assumed that the battle against inflation was won, supposedly an omen of good things to come. Governments and the monetary authorities continue to warn of the dangers of reigniting inflation, but these cautions are drowned out by a growing belief in market capitalism's imminent renewal. The performance of the American economy since the mid-1990s is proof enough for the optimists; low inflation, low official unemployment and rising output growth are outshone only by the phenomenal rise of the stock market. Using the American experience as evidence of the effciency of the market system, a ‘neoliberal’ model is cited as the universal cure for economic woes. But the market did not deliver low inflation, restrictive policy did; and, even with the aid of policy, it took a very long time to get inflation back to golden age rates, and then only at the cost of high unemployment that has lasted longer than the golden age. During the period from 1970 to 1994, when inflation exceeded its golden age rates, average unemployment in the OECD economies studied increased by 155 per cent, rising from 2.9 per cent to 7.4 per cent. Until 1998, average unemployment continued at rates only slightly less than two and a half times those in 1970 (see table I.1 for sources).