DISTRIBUTIONAL CONFLICT AND INFLATION
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Distributional Conflict and Inflation Theoretical and Historical Perspectives Richard C. K. Burdekin Associate Professor of Economics Claremont McKenna College Claremont, California and Paul Burkett Professor of Economics Indiana State University Terre Haute, Indiana &
-- First -- DOI published in Great Britain 1996 by MACMILLAN PRESS LTD Houndmills, Basingstoke, Hampshire RG21 6XS and London Companies and representatives throughout the world A catalogue record for this book is available from the British Library. ISBN 978-1-349-39368-8 10.1057/9780230371736 ISBN 978-0-230-37173-6 (ebook) First published in the United States of America 19% by ST. MARTIN'S PRESS, INC., Scholarly and Reference Division, 175 Fifth Avenue, New York, N.Y. 10010 Library of Congress Cataloging-in-Publication Data Burdekin, Richard C. K. (Richard Charles Keighley), 1958- Distributional conflict and inflation : theoretical and historical perspectives I Richard C. K. Burdekin and Paul Burkett. p. em. Includes bibliographical references and index. 1. Inflation (Finance}-Case studies. 2. Monetary policy-case studies. 3. Distribution (Economic theory-case studies. I. Burkett, Paul, 1956-. II. Title. HG229.H85 1996 332.4'1---ilc20 96-33704 CIP Richard C. K. Burdekin and Paul Burkett 1996 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London WI P 9HE. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. 10 9 8 7 6 5 4 3 2 I OS 04 03 02 01 00 99 98 97 96
To: Yanjie, Eileen and Emma -RCKB For PJB -PGB
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Contents Acknowledgements Introduction 1 viii Part I Methodological and Theoretical Perspectives 1 Conflict Inflation as an Analytical Approach 13 2 Non-Activist Monetary Policy from a Conflict Perspective 37 3 Conflicting Claims and Monetary Policy Rules: A Theoretical View 57 Part II Case Studies of Conflict Inflation 4 Money, Credit and the Wage-Price Spiral in Post-World War I Germany 79 5 Real Wages and the Role of Distributional Conflict in the German Hyperinflation and Stabilization 105 6 Government Budgetary and Private-Sector Pressures on US Monetary Policy: Some Preliminary Evidence 128 7 Conflicting Claims and Inflation in the Post-World War II US Economy 141 Part III Conflict Inflation in the Open Economy 8 Open Economy Aspects of the Currency Depreciation in Germany After World War I: Conflicting Claims and Vicious Circles 165 9 Conflict Inflation and Currency Depreciation in Latin America 175 10 Monetary Accommodation, Conflicting Claims, and the European Monetary System 202 11 Some Concluding Policy Perspectives 225 References 231 Notes 258 Index 293 vn
Acknowledgements The authors are indebted to the many friends and colleagues who offered useful commentary on one or more chapters in this book at various stages of their development, including John Devereux, Amitava Krishna Dutt, the late (and much lamented) Ross Eckert, Tom Goodwin, Charles Hu, Peter Liu, Gaines Post, Don Richards, Sam Rosenberg, Pierre Siklos, Rodney Smith, Evan Tanner, Mark Wohar, and, especially, Tom Willett. Sole responsibility for what is contained in the following pages resides with the authors, however. We have benefited from the many anonymous referees who read earlier versions of the journal articles that form the basis for many of the book's chapters, and are grateful to the following journals for granting us permission to reprint: British Review of Economic Issues, Economic Inquiry, Economic Notes, the Manchester School of Economic and Social Studies, the Review of Radical Political Economics, Rivista Internazionale di Scienze Economiche e Commerciali, and Weltwirtschaftliches Archiv. Both authors have had the advantage of working with excellent graduate research assistants over the years. Among those whose work facilitated the production of this book, we want to mention Ida Huang, David Plevyak, Ignatius So and Jianghong Yu. Thanks also to Debbie Zamparello for the professional typing work while the authors were housed at the University of Miami. Meanwhile, we would like to extend gratitude to our students and colleagues at Claremont and Indiana State for providing the kind of challenging and collegial environment necessary for productive research. Richard Burdekin would also like to thank Dean Anthony Fucaloro and Claremont McKenna College for financial support for the preparation of this book. His largest debt, however, is to his wife and children for all the time given up to preparing the final manuscript. Richard Burdekin's in-laws, Delong Feng and Shuqin Shi, once again provided invaluable support during the frenzied attempts to complete the work on schedule. Paul Burkett would like to extend loving gratitude to Suzanne Carter, Shaun Hussey, Patrick Burkett and Molly Burkett for bearing with the wild mood swings associated with the completion of this book. vm