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Inflation: an international monetary problem or a national social phenomenon?

Published online by Cambridge University Press:  26 October 2009

George Zis
George Zis
Affiliation:
University of Manchester
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Extract

To reduce, and ultimately stabilize at lower levels, the rate of price inflation is rapidly becoming the main economic objective of all industrialized countries. For policy makers inflation is currently a problem as serious as was the problem of unemployment during the inter-war years. Yet, governments' attempts to control inflation have not on the whole been successful. This relative failure may well be attributed to a wrong diagnosis of the nature of the problem, leading to the application of inappropriate cures. Economists have advanced a variety of diagnoses of the causes of inflation which have provided the bases for various policy prescriptions. Essentially, however, there are two schools of thought.

Type
Research Article
Information
Review of International Studies , Volume 1 , Issue 2 , July 1975 , pp. 98 - 118
Copyright
Copyright © British International Studies Association 1975

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References

page 99 note 1 The discussion will be confined to the Group of Ten countries, that is the United States, the United Kingdom, Canada, Sweden, Japan, Germany, France, Italy, Belgium and the Netherlands.

page 99 note 2 Johnson, H. G., ‘A Survey of Theories of Inflation’, in Essays in Monetary Economics (London, 1969), pp. 104–42Google Scholar.

page 100 note 1 Schultz, C. L., 'ectoral Shifts and Inflation’, in Ball, R. J. and Doyle, P (eds.) Inflation(London, 1969), pp. 209–18Google Scholar.

page 100 note 2 Phillips, A. W., ‘The Relationship Between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom 1861–1957 Economica, xxv, (1958), pp. 283–99Google Scholar.

page 101 note 1 Bach, G. L., The Neiv Inflation: Causes, Effects, Cures (New York, 1973Google Scholar). See also Jones, A., The Neiv Inflation: The Politics of Prices and Incomes (London, 1973)Google Scholar.

page 101 note 2 Harrod, R., ‘The Issues: Five Views’, in Hinshaw, R. (ed.), Inflation as a Global Problem (London, 1972), pp. 43–45Google Scholar.

page 101 note 3 Marris, S., ‘World Inflation: Panel Discussion’ in Claassen, E. and Salin, P. (eds.), Stabilisation Policies in Interdependent Economies (London, 1972), pp. 303–6Google Scholar.

page 101 note 4 T.Balogh, ‘Labour and Inflation’, Fabian Tract 403 (London, 1970).

page 101 note 5 Bispham, G. A., ‘The Current Inflation and Short-term Forecasting’, in Parkin, M. and Sumner, M. (eds.), Incomes Policy and Inflation (Manchester, 1972), pp. 250–67Google Scholar.

page 102 note 1. Support for incomes policies has been voiced by economists who do not regard inflation as a cost-push or sociological phenomenon. Paul Einzig, for example, although accepting the monetary nature of inflation, nevertheless argues that incomes policies can usefully complement demand management policies, especially during periods when governments desire to reduce the rate of inflation. See Einzig, P., Foreign Exchange Crises (London, 1970)CrossRefGoogle Scholar.

page 102 note 2 Galbraith, J. K., The New Industrial State (London, 1967)Google Scholar.

page 102 note 3 Schultz, op. cit.

page 102 note 4. Galbraith, op. cit. p. 251.

page 102 note 5. Ibid. p. 262.

page 102 note 6 Levinson, C., Capital Inflation and the Multinational(London,. 1971)Google Scholar.

page 103 note 1 Hines, A. G., ‘Trade Unions and Wage Inflation in the United Kingdom 1893–1961’, Review of Economic Studies, xxxi (1964), pp. 221–52CrossRefGoogle Scholar.

page 103 note 2 Godfrey, L., ‘The Phillips Curve: Incomes Policy and Trade Union Effects’, in Johnson, H. G. and Nobay, A. R. (eds.), The Current Inflation (London, 1971), pp. 99–124CrossRefGoogle Scholar; J.Taylor, ‘Incomes Policy, the Structure of Unemployment and the Phillips Curve: The United Kingdom Experience 1953–70’, in M. and M.Sumner (eds.), op. cii. pp. 182–200; and Pencavel, J. H., ‘An Investigation into Industrial Strike Activity’, Economica, xxvii (1970), pp. 239–56Google Scholar.

page 103 note 3. Ashenfelter, O. C., Johnson, G. E. and Pencavel, J. H., ‘Trade Unions and the Rate of Change of Money Wage Rates in United States Manufacturing Industry’, Review of Economic Studies, xxxix (1972), pp. 27–54CrossRefGoogle Scholar.

page 103 note 4 Ashenfelter, O. C. and Johnson, G. E., ‘Bargaining Theory, Trade Unions and Industrial Strike Activity’, American Economic Review, lix (1969), pp. 35–49Google Scholar.

page 103 note 5 Johnston, J. and Timbrell, M., ‘Empirical Tests of a Bargaining Theory of Wage Rate Determination’, The Manchester School, xli (1973), pp. 141–67CrossRefGoogle Scholar.

page 104 note 1 Ward, R. and Zis, G., ‘Trade Union Militancy as an Explanation of Inflation: An International Comparison’, The Manchester School, xlii (1974), pp. 46–65CrossRefGoogle Scholar.

page 104 note 2 Purdy, D. and Zis, G, ‘Trade Unions and Wage Inflation in the U.K.: A Re-appraisal’, in Laidler, D. and Purdy, D. (eds.), Inflation and the Labour Market (Manchester, 1974), pp. 1–37Google Scholar.

page 104 note 3 D. Purdy and G. Zis, son the Concept and Measurement of Trade Union Militancy‘, in D.Laidler and D. Purdy (eds.), Inflation and the Labour Market, op. cit. pp. 38–60.

page 104 note 4 Ibid.

page 104 note 5. Ibid.

page 106 note 1 See, for example, Hicks, J., The Crisis in Keynesian Economics (Oxford, 1974)Google Scholar; Phelps Brown, E. J., ’The Analysis of Wage Movements under Full Employment’, Scottish Journal of Political Economy, xviii (1971), pp. 233–43CrossRefGoogle Scholar; Wiles, P., ‘Cost Inflation and the State of Economic Theory’, Economic Journal, lxxxiii (1973), pp. 377–98CrossRefGoogle Scholar ;-T. Balogh, op. cit.; R. Harrod, op. cit.

page 106 note 2 Inflation: The Present Problem (O.E.C.D., 1970)Google Scholar.

page 106 note 3 J. Genberg, ‘A Note on Inflation Rates under Fixed Exchange Rates’, in M. Parkin and G. Zis (eds.), Inflation in the World Econom (Manchester, forthcoming).

page 107 note 1 No figures are available for France for 1968,

page 108 note 1 Inflation; The Present Problem, op. cit.

page 108 note 2. Economic Outlook(O.E.C.D., 1973)Google Scholar.

page 109 note 1 Cagan, P.et al., Economic Policy and Inflation in the Sixties (Domestic Affairs Studies, Washington, D.C., 1972)Google Scholar. See also M. Parkin, M. Sumner and A. R. Jones, ‘A Survey of the Econometric Evidence of the Effects of Incomes Policy on the Rate of Inflation’, in M. Parkin and M. Sumner (eds.), op. cit. pp. 1–29; andUlman, L. and Flanagan, R. J., Wage Restraint: A Study of Incomes Policies in Western Europe(Berkeley, 1971)Google Scholar.

page 109 note 2 Ward and Zis, op. cit.

page 109 note 3. Johnson, H. G., Inflation and the Monetarist Controversy (Dr F. de Vries Lectures, Amsterdam, 1972)Google Scholar; Johnson, H. G., ‘Inflation: A Monetarist View’, in Further Essays in Monetary Economics (London, 1972), pp. 325–37Google Scholar; and Mundel, R., Monetary Theory: Inflation, Interest and Growth in the World Economy (Goodyear Publishing, California, 1971)Google Scholar.

page 109 note 4 Friedman, M., ‘The Counter-Revolution in Monetary Theory’ (I.E.A. Occasional Paper, no. 33, London, 1970)Google Scholar

page 110 note 1 Divergent monetary policies give rise to balance of payments disequilibria, which if not promptly eliminated undermine the stability of the international monetary system. R. Triffin has on numerous occasions advocated the co-ordination of monetary policies among countries and suggested that the growth of international liquidity be brought under international control. Such reforms could be conducive to world price stability as well as to promoting confidence in the durability of the international monetary system. See Triffin, R., “The Balance of Payments Seesaw’, in Fellner, F.et al. (eds.), Maintaining and Restoring Balance in International Payments (Princeton, 1966), pp. 85–110Google Scholar.

page 111 note 1 R. Cross and D. Laidler, ‘Inflation, Excess Demand and Expectations in Fixed Exchange Rate Open Economies - Some Preliminary Empirical Results’, in M. Parkin and G. Zis (eds.), op. cit.

page 112 note 1 N. Duck, M. Parkin, D. Rose and G. Ziss ‘The Determination of The Rate of Change of Wages and Prices in the Fixed Exchange Rate World Economy, 1956–70’, in M. Parkin and G. Zis (eds.), op. cit.

page 113 note 1 That is, since the spring 1973 domestic rates of inflation have largely been determined by the actions of national governments. The argument that the increases in oil prices are responsible for the acceleration of inflation during 1974, which is popular particularly in the United Kingdom, apart from confusing relative and absolute prices, is unacceptable when we consider the relative experience of different countries. All that one needs to do is to compare Germany, which is as dependent on oil imports as any country, and the United Kingdom. The former' rate of inflation in 1974 was less than half that of the United Kingdom. The difference between the two countries is to be found in the difference in the rates of growth of their money supply.

page 113 note 2 D. Laidler, ‘The Phillips Curve, Expectations and Incomes Policy’, in H. G. Johnson and A. R. Nobay (eds.), The Current Inflation, op. cit. pp. 75–98.

page 114 note 1 Laidler, D., ‘Information, Money and the Macroeconomics of Inflation’, Swedish Journal of Economics, Ixxvi (1974), pp. 27–42Google Scholar.