Beyond Inflation Targeting
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Beyond Inflation Targeting

Assessing the Impacts and Policy Alternatives

Edited by Gerald A. Epstein and A. Erinc Yeldan

This book, written by an international team of economists, develops concrete, country specific alternatives to inflation targeting, the dominant policy framework of central bank policy that focuses on keeping inflation in the low single digits to the virtual exclusion of other key goals such as employment creation, poverty reduction and sustainable development.
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Chapter 4: Income, Class and Preferences Towards Anti-Inflation and Anti-Unemployment Policies

Arjun Jayadev


Arjun Jayadev1 INTRODUCTION 4.1 From one important point of view, indeed, the avoidance of inflation and the maintenance of full employment can be most usefully regarded as conflicting class interests of the bourgeoisie and the proletariat respectively, the conflict being resolvable only by the test of relative political power in the society. Harry Johnson (Johnson, 1968, p. 986) Among the casualties of the advent of the rational expectations revolution in the 1970s was a rich vein of political economy which analysed the macroeconomic dynamics of unemployment and inflation as deriving from distributive struggles between capitalists and workers (Bach and Stephenson, 1974; Boddy and Crotty, 1975; Hibbs, 1977; Rosenberg and Weisskopf, 1981; Rowthorn, 1977). This approach often made explicit the class conflict innate in Keynesian accounts of the Phillips curve trade-off and in considerations of the natural rate of unemployment.2 While the details of these studies varied, the argument, with slight modifications, remained the same: workers and capitalists had opposing and irreconcilable differences in the trade-off between inflation and unemployment. Such ‘conflict theories’ not only gave political explanations for the trajectory of inflation and unemployment (most notably in the work of Hibbs (1977)) but also thereby provided direct predictions for the preferences of individuals towards anti-unemployment and anti-inflation policies based on their position within the social stratification. Specifically, the working class, broadly classified, is more concerned about reducing unemployment than firm owners. Unemployment reduces the lifetime income of workers directly and also exerts a downward pressure on wages by reducing the...

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