The Outlook for the 1970’s: Open or Repressed Inflation

“The Outlook for the 1970's: Open or Repressed Inflation.” In Sudha R. Shenoy (ed.) A Tiger by the Tail: The Keynesian Legacy of Inflation. A 40-Years’ Running Commentary on Keynesianism. London: Institute of Economic Affairs (Hobart Paperback 4), 1972.


“In the last 40 years monetary policy has increasingly committed us to a development which has recurrently made necessary further measures that weakened the functioning of the market mechanism. We have now reached a point when it is widely proposed to combat the effects of our policy by further controls which would not only make the price mechanism wholly ineffective, but also make inevitable an ever increasing central direction of all economic activity.

The developments begin with the acceptance of the given structure of money wages as not capable of being altered by the lowering of any wages, and the consequent demand that total money expenditure be raised sufficiently to take up the whole supply of labor at whatever wage rates prevailed. The result of this policy has been not only greatly to increase resistance to the lowering of any wage, but also to remove the main safeguard in the past to pushing wages above the point where the current supply of labor could be sold without further monetary expansion; i.e., to remove the acknowledged responsibility of the trade unions for the unemployment caused by their wage policies.”