The Solution

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The Solution

The solution that is emerging has no generally accepted name.

It recognizes that an uncontrolled struggle for more m come brings an inflation that defeats some or most of these efforts and that the traditional methods of control - monetary and fiscal policy either do not work or work by hurting the least affluent, the least employable, those with least control over their prices and incomes.

This we've seen.

And the solution accepts that no single group can carry the burden of restraint.

It must be fairly distributed among all groups.

In practice governments begin with consultation.

They seek agreement from the principal groups in the economy that they will hold their demands to affordable increases in income increases that, on the whole, are consistent with stable prices and general social equity.

This means that wage increases must be kept to what can be afforded without forcing up prices.

It means also a companion price policy for the large corporations, one that does not take advantage of the pay restraint while allowing unavoidable cost increases to be passed along. This is another way of saying that profits must be kept in line with general past experience. And there must be a similar understanding and restraint on minimum wages, the pay of civil servants, farm support prices, pensions, transportation costs, other publicly-controlled incomes and prices. Understanding on these matters must be sought through government-led negotiation and conciliation. However, having done everything possible to reach a Consensus, the government must also retain the power to enforce the result.


Interested in Capital Maintenance

Economic Policy Becomes Political Policy

At a minimum, economic policy becomes far more dependent on political skill than on economic wisdom.

As organizations, groups and individuals gain authority over their incomes, free themselves from the control of the market, they contribute to inflation in two ways.

They raise their prices or wages, the most important dimension of income.

Prices, including wages, for some are costs for others.

So these increases directly shove up prices -what most economists have come to accept as cost-push inflation.

The second inflationary effect works through bank lending, a... see: Economic Policy Becomes Political Policy


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