Wages and Panic Buttons

[Jim heartfield]

In message <001401bedf4e$9df90b60$5ef246d1 at epinet.org>, Max Sawicky
<sawicky at epinet.org> writes
>
>One must distinguish between inflation resulting from
>singular events like the oil price spikes, and that
>observed in 'normal' economic periods.  The 70's
>experience does not invalidate the proposition that
>as a routine matter, higher inflation is associated
>with higher wage and GDP growth.  The recent two-year
>period in the U.S. is a welcome break, brief so far,
>in a much more long-standing patter of wage stagnation.

I'm not sure that the seventies stagflation can be explained away as an
external shock (especially since it was US oil drillers who first forced
up the price). If it were merely a contingent influence it would not
have had the effect that it did.

I agree with Max's point that you have to look at different periods in
their specificity. But doesn't that extend to mean that inflation in one
period might mean something quite different from inflation in another.
In the seventies there was a quite conscious strategy to devalue the
wage bill by allowing inflation to take its course, a mistake that
allowed industry to raise prices without corresponding productivity
increases taking advantage of the loose money supply. Consequently
inflation became a cover for stagnation.

-- 
Jim heartfield