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Inflation and Social Justice

Published online by Cambridge University Press:  24 September 2024

J. M. Jackson
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Inflation has been one of the most serious and persistent of our post-war economic problems. Few people however take it seriously, for despite die repeated balance of payments crises it has produced, the threatened disaster has not overtaken us. Many indeed attribute the maintenance of full employment to the same forces that have produced inflation. They recognize that inflation may have incidental evils, but in their fear of unemployment they hesitate to adopt certain kinds of measures that may be necessary for the control of inflationary forces.

Inflation raises both economic and moral problems. It is the economic aspects that must be studied first, for without an understanding of how inflation comes about it is impossible to consider the moral problems associated with the process; nor can questions of social justice be discussed without a knowledge of the effects of inflation.

Inflation is a situation in which there is a general rise in prices as a result of an excessive demand for goods and services. When the demand for any commodity increases (or the supply of it is restricted) there is a tendency for the price to rise. When the overall demand for goods increases and the supply remains unchanged there is a general rise in prices. This idea is not so readily understood as the rise in price when the demand for some one commodity increases. The demand for one commodity may increase because people buy more of it and less of other things. How can the general demand increase? All incomes are rewards for making a contribution to production, either by working, supplying capital, accepting the risks of industry, or hiring out land. Every penny received by firms producing goods is distributed in wages, rent, and interest, or retained as profits.

Type
Research Article
Information
Blackfriars , Volume 38 , Issue 445 , April 1957 , pp. 163 - 170
Copyright
Copyright © 1957 Provincial Council of the English Province of the Order of Preachers

References

1 There are also ‘transfer incomes’. The Government may tax people who earn incomes by contributing to production and use part of the revenue to provide benefits for those who are unable to cam an adequate income for themselves, e.g. the aged and widows.

2 Although gold may have originally been chosen as money because it was valuable, today its value springs from the fact that i t is used as money. If the present system, where notes and bank deposits serve as money, were abandoned and only gold used (with notes and bank deposits serving purely as substitutes for gold) the general level of prices would fall considerably. Countries like South Africa, which produce gold, would then be able to buy greater quantities of all kinds of goods From other countries than they can at present.

3 The banks now keep a cash reserve equal to 8 per cent of their deposits.

4 W. Stark: The Contained Economy (Aquinas Paper No. 26, Blackfriars Publications, 1956). pp. 12–16.

5 If bank loans were free of interest there would be several economic anomalies. There would of course be a greatly increased demand for loans, and the banks would have to devise some system of priorities to check this demand, being unable to do so by means of the rate of interest. Moreover, those who obtained loans from the banks would be in a favoured position vis-à-vis those who borrowed from other sources and were charged interest.

6 This will be true particularly of the smaller saver, who will buy gilt‐edged securities or purchase an annuity. The richer person who keeps art of his savings in ordinary share will find that his dividends increase as a result of the price rise.

7 With the existing distribution of income, no adequate control of inflation would be possible without reducing the consumption of the working class, unless cuts can be made either in government expenditure or in investment.