ORGANIZING AN OPPOSITION TO PRICE INFLATION

Publication Date01 Jun 1958
DOIhttp://doi.org/10.1111/j.1467-9485.1958.tb00366.x
AuthorJ. C. R. Dow
ORGANIZING AN OPPOSITION TO PRICE INFLATION
THOSE
economists who have favoured the
cost push
explanation
of inflation have been much readier to diagnose the problem than
to suggest a cure. Those who believe that inflation is due to excess
demand have the remedy already stated-Disinflate. But what can
the cost-inflationist say?
To explain inflation as an effect of pressure exerted by trade
unions
or
similar bodies is to argue that inflation is more a political
than an economic problem. We are accustomed to thinking of inflation
as an economic phenomenon: and an economist has to overcome an
inner resistance before proposing political rather than economic
solutions. But this hesitation is irrational. The underlying argument
of the present note is that if it
is
true that inflation owes its origin
to certain features in the present balance of power, then its solution
can only be sought along political lines.
One consequence of the belief that inflation is a political problem
is, paradoxically, that it is possible to believe that something like
the Council on Prices, Productivity and Incomes could play a useful
r61e.l Opinion on most matters connected with inflation being very
divided, there is no point in arguing the nuances, and this note is
intentionally brief.
I
The present division of opinion is at two levels. First, there are
differences of view about how price inflation works. Second, even
among those who make the same diagnosis, there may be even wider
differences of view about how to cure it. The second question extends
well beyond economic matters and involves questions
of
political
strategy. Even if one hopes people can agree
on
economic questions,
they will certainly evaluate political possibilities differently. All chess
players agree
on
the rules, but there are many different ways of
winning the game. What follows then is very much a matter of
judgement. The fundamental division in the
diagnosis
of the problem
may be put very shortly. Some people believe that the rise of prices
and of wages is entirely due to too much demand. They argue that
1This note was originally written for submission
to
the Council on Prices,
Productivity and Incomes, and may still have interest. My approach seems
to
me to have something in common with that
of
Mr. Robertson in the
preceding note. But the approach by Mr. Flanders is certainly an alternative
route
to
a solution, and
Mr.
Flanders seems
to
me
to
make an impressive
case for it.
175

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