The Inflationary Impact Of Unemployment

Based on economic events and policies in the UK and USA, this text argues against the New Right claim that inflation causes unemployment. The effects of unemployment on unemployed people are investigated and the impact of inflation on the distribution of income and wealth are assessed.

Originally published in 1985 and contributed to by internationally renowned economists, this volume discusses theoretical issues and country-specific experiences to review the underlying causes of the stagflation of the 1970s and early 1980s, as well as summarizing the kinds of macro-policies that were adopted to deal with the stagflation.

The world economy has undergone a fundamental transformation in recent decades and theoretical structures inherited from the 1930s through the 1950s, while retaining large elements of truth, are inadequate to deal with current problems. Benjamin Higgins feels that for a society such as the United States a fiscal policy needs to be adopted that can deal simultaneously with existing unemployment and inflation. He suggests three possible governmental policies: stimulating a high rate of long-run growth, by use of reward innovations and by maintaining the highest possible level of scientific and technical activity; isolating regions that are generators of inflation and others that are pools for unemployment; and establishing a system of direct controls similar to those used in wartime. Higgins describes the transformation of the cogent prewar business cycle, with its alternations of inflation or unemployment, then a transitional period of underemployment equilibrium and secular stagnation, and finally, the strange new world of today, one with economic fluctuations in the form of shifting trade-off curves and loops. He then applies his new paradigm to current problems, showing why they cannot be managed through macroeconomic monetary and fiscal policy. Higgins offers case studies of efforts to fight inflation and unemployment, and to reduce regional gaps, to show their strengths and weaknesses. It can be said that unemployment always results from too many people chasing too few jobs, and inflation is always caused by too much money chasing too few goods and services. Beyond such banal generalizations, Higgins maintains there is no single cause for either unemployment or inflation, and thus no single cure can be prescribed for either, let alone for both at once. Nor is it to be expected that the appropriate cure will prove to be the same in all countries at all times. He suggests that an optimal blend of monetary and fiscal policy that will produce the "minimum discomfort" is a good start. Employment Without Inflation will be of direct policy interest to economists, sociologists, and national planners.

Arguing that the consequences of the unemployment crisis could have been avoided by better government policies, particularly less restrictive monetary control, the contributors examine the effect of the zero-inflation policy adopted by the Bank of Canada and the role of unemployment insurance on the unemployment crisis of recent years. Their analysis includes discussion of various facets of unemployment in France, Germany, and Japan for comparison. Contents Introduction - Brian K. MacLean and Lars Osberg Digging a Hole or Laying the Foundation? The Objectives of Macroeconomic Policy in Canada - Lars Osberg The Unbearable Lightness of Zero-Inflation Optimism - Pierre Fortin (UQAM) Real Interest Rates and Unemployment - John Smithin (York) Using the NAIRU as a Basis for Macroeconomic Policy: An Evaluation - Mark Setterfield (Trinity College) Does Unemployment Insurance Increase Unemployment? - Shelley Phipps (Dalhousie) Why Do We Know So Little About Unemployment Determination and UI Effects? - Tony Myatt (UNB) Unemployment Insurance and Unemployment - Revisited - Lars Osberg The Rise of Unemployment in Ontario - Andrew Sharpe (Centre for the Study of Living Standards) Unemployment among Canada's Aboriginal Peoples - Helmar Drost (York) Unemployment Persistence in France and Germany - Dominique Gross (Simon Fraser) Low Unemployment in Japan: The Product of Socio-economic Coherence - Patrice de Broucker (Statistics Canada) A Macroeconomic Policy Package for the 1990s - Mike McCracken (Informetrica). Both critical of past performance and optimistic about future possibilities, The Unemployment Crisis makes a timely and valuable addition to current literature on economic policy.

Controlling inflation is among the most important objectives of economic policy. By maintaining price stability, policy makers are able to reduce uncertainty, improve price-monitoring mechanisms, and facilitate more efficient planning and allocation of resources, thereby raising productivity. This volume focuses on understanding the causes of the Great Inflation of the 1970s and ’80s, which saw rising inflation in many nations, and which propelled interest rates across the developing world into the double digits. In the decades since, the immediate cause of the period’s rise in inflation has been the subject of considerable debate. Among the areas of contention are the role of monetary policy in driving inflation and the implications this had both for policy design and for evaluating the performance of those who set the policy. Here, contributors map monetary policy from the 1960s to the present, shedding light on the ways in which the lessons of the Great Inflation were absorbed and applied to today’s global and increasingly complex economic environment.

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Originally published in 1979, this reader presents an industrialist view of the labour market and economics as they stood at the time in the United States. The essays collated aim to answer macroeconomic questions on this topic as well as exploring issues related closely to employment and inflation. This title will be of interest to students of business and economics.