The Politics of Inflation and Economic Stagnation: Theoretical Approaches and International Case Studies

By Leon N. Lindberg; Charles S. Maier | Go to book overview
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5
Conditions for Trade Union Wage Restraint

Colin Crouch

Some schools of thought attribute inflation to governments' maintenance of over-full employment, in response to public pressure for high employment and for a combination of high public spending and low taxation which is itself inflationary. At first sight this excludes organized labor as a cause. But labor is an important element in articulating that public pressure and may therefore be said to "cause" inflation, even if its wages pressure can have no more than a once-and-for-all effect. Inflation of this kind may be regarded as a form of class compromise. Labor has gained enough power to secure high levels of employment and public spending, the former strengthening its bargaining position with capital. But it is not able to replace capital in any way, and capital will therefore seek to retain its position in the distributive struggle. Assuming continuation of the balance of political forces that led to the original government stance on spending, taxation, and employment, the resulting strain will be borne by the price level.1

But a high level of inflation may lead to demands for a revision of priorities. It will certainly lead to a deterioration in the country's payments balance, pressure on its exchange rate, and possibly international indebtedness; and there will be powerful pressure on the government to deflate the economy. Thus the consequences of inflation will be a reverse for the labor movement, entailing a reduction in its political and economic

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1
Brian Burkitt, Trade Unions and Wages: Implications for Economic Theory ( Bradford, U. K.: Bradford University Press, 1975), remarks that the union movement has been able "to secure sufficient power to disturb the smooth operation of the capitalist system while possessing insufficient strength to achieve fundamental changes in its social ethos and power structure."

-105-

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