For fear of inflation: The move to neo-liberalism....

[RadioRaheem84]

During the crisis of the late 70s, capitalist nations were faced with the option of inflation, stagnation and rising debt. They chose instead to undue the deals of the previous economic policies that fostered such a high standard of living in favor of neoliberalism.

The Monthly Review school says that there shouldn't have been a fear of inflation, meaning there was going to be inflation but that shouldn't have scared anyone but the ruling class. Why were they afraid of inflation? Why should workers not be afraid of it when faced with that or neo-liberalism?

[RadioRaheem84]

Anyone? If this doesn't make that much sense to most, I appologize. I am just trying to understand the capitalist concern for inflation and why it isn't or shouldn't really be a concern to most workers, according to the MR school?

[Dimentio]

Workers are affected less by inflation due to the fact that they in general lack savings in the form of money, whereas the petty-bourgeoisie has all the reason to fear inflation. At the same time, keynesian governments utilised high inflation in the 1960's to push down unemployment numbers while increasing their support amongst workers with fictional wage increases which were eaten up by the inflation which partially was caused by said wage increases.

[Aesop]

Also when inflation is high the government normally raises interest rates to reduce it, due to workers more likely having debts than savings this raises the interest on their debts, which is one reason why workers see it as undesirable.

However, if I am not mistaken the crisis in the 1970s was due to stagflation, in which interest rates were high and inflation was rising, which was caused by the OPEC oil crisis and the end great boom which started from the end of the Second World War, which neo-liberalism or some sort of substantial cuts to the social security and to wages was on the agenda with all the main parties, as it could no longer be sustained without profits been eaten into.

[CartCollector]

Yeah actually the cause of the stagflationary period in the 70s depends on who you ask. Keynesians will say that it's caused by the oil crisis because in their macroeconomic model inflation and unemployment are opposite each other and you can't have both at the same time. This is why the West didn't know how to react to it once it happened and led to a reluctance to use Keynesian theory in the West. So outside of Keynesian theory, what did the West have? That's right, laissez-faire economics, which put the stagflationary blame on Big Government and taxes. And so Reagan and Thatcher came to save the day from the evils of government spending. Laissez-fairers still, to this day, blame government for stagflation, along with every other economic ill. But while this was happening, Keynesians studied the stagflationary period and came up with the idea that there's actually two types of inflation- demand-pull (caused by a money supply that's too large and has low unemployment) and cost-push (caused by an essential commodity, like oil, going up in price and has high unemployment). And so Keynesians were once again allowed to show their heads in public and argue why we should give giant amounts of government cash to corporations and banks during recessions.