Inflation, Structural Change, and Distribution Conflict: Lessons for Economic Policy
The standard theory of inflation is that it is a global phenomenon that can only last and intensify because of a wage price spiral that expresses a fundamental conflict between capital and labor. Without seeking to deny this aspect of the problem, we aim to show that inflation also has a structural aspect, making the distributional conflict more complex to analyse and requiring an anti-inflation policy that is not limited to monetary policy. The challenge is to prevent the economy from shifting from a low-inflation to a high-inflation regime, from structural to global, out-of-control inflation.
Inflation, which had all but disappeared for forty years, has made a comeback. Initially, this was viewed as a transitory phenomenon, characteristic of a period of return to stability after a disruption deemed global and exogenous1. However, the successive financial, health, and environmental crises are both symptoms and drivers of major structural change. The inflation observed initially stems from tensions on the markets for raw materials, agricultural production, and industrial components, which has had a differentiated impact on production costs and prices in many sectors of activity (Bernanke and Blanchard, 2023). All this is taking place within a context where companies are facing technological disruptions and shifts in preferences that require a drastic overhaul of production methods. The automotive sector is particularly…