Economists have proposed two main theories to explain the recent spike in prices. Progressives have attributed the rise in inflation to corporate greed and have suggested price controls in response. Other economists have turned back to the New Consensus in Macroeconomics that arose in the 1970s in response to steep inflation blamed on the large Keynesian fiscal expansion of the preceding decades. Matías Vernengo writes that neither camp has correctly diagnosed the problems with current inflation. Proponents of Greedflation overlook the price stability of the last few decades even as market concentration increased. On the other hand, advocates of the New Consensus similarly forget their history and the commodity shocks and price-wage spiral that were the real culprit for inflation in the 1970s.
Conventional wisdom suggests that the Great Inflation of the 1970s resulted from the failures of the old Keynesian Consensus that had pushed for excessively large fiscal expansion, combined with a relatively weak reaction by the deferential Federal Reserve under Arthur Burns, which was too close to President Richard Nixon’s administration to pursue a more aggressive anti-inflationary policy. The Federal Reserve lost credibility, in this view, and inflation expectations accelerated. The consensus that formed after Fed Chair Paul Volcker’s strongly contractionary monetary policy and the stabilization of the economy in the 1980s, fundamentally influenced by Milton Friedman, suggested that an independent central bank, concerned with inflation, could maintain price stability, and that the level of unemployment would take care of itself. This New Consensus in Macroeconomics, later reinforced by the inflation-targeting-policy framework to manage inflation expectations, held its ground more or less until the collapse of the subprime housing market bubble and the Global Financial Crisis that ensued in 2008-9.
By then it was clear that the American economy had structural problems and that economic growth had slowed down, and maybe the New Consensus needed some rethinking. Robert Gordon suggested that the reasons for the slowdown were fundamentally concerned with the smaller effects of the third Industrial Revolution, related to information technology and automation, as compared to previous technological breakthroughs that had a large impact on productivity and required large public investment in infrastructure. The general mood was captured by Lawrence Summers with the revival of the old Keynesian notion of secular stagnation. In this view, the lower opportunities for productive investment implied that the economy would have to adapt to lower levels of growth, and this was related to the declining bargaining power of workers, lower wages, and wage share in total income. This would require higher levels of government spending, but in this view, as exemplified by Olivier Blanchard’s presidential address to American Economic Association, this was not a problem, since in an environment of low interest rates, fiscal expansion and higher public debt levels were relatively safe.
In a sense, the 2008-9 crisis, and the critiques of the New Consensus, had gone some way into allowing for a return of the old Keynesian Consensus, and the notion that government intervention is necessary if the economy is to grow fast and maintain low levels of unemployment. Inflation, in this view, was not a significant problem, and, perhaps, even a higher inflation target than the Fed’s 2% goal would be acceptable. Blanchard famously suggested doubling the target rate to about 4%, and eventually, Jerome Powell, the Fed’s current chairman, announced a more flexible approach to targeting that would allow for higher temporary levels of inflation, maintaining the 2% level over an indeterminate period of time.
It is worth noticing that many authors, particularly those closer to the Monetarist views of Friedman, resisted this view. Inflation hawks remained vigilant and certain that the same excesses of the 1960s would bring back inflation eventually. For example, in 2009 Allan Meltzer warned against the dangers of excessive monetary expansion after the 2008-9 crisis, saying that “the enormous increase in bank reserves — caused by the Fed’s purchases of bonds and mortgages — will surely bring on severe inflation if allowed to remain.” The Covid-19 pandemic and the acceleration of inflation, particularly after the beginning of 2021, has strengthened the position of those that always saw price stability as the only reasonable goal for macroeconomic policy. John B. Taylor has suggested recently that unless the Fed commits to a rule-based inflation target approach we will be entering a new era of high inflation.
Perhaps more importantly, Summers, who, together with Blanchard, represented the effort within the profession to rethink the New Consensus that had prevailed since the 1970s, suddenly changed his view on the relative risk of secular stagnation versus the danger of accelerating inflation. Summers argued strongly against the further extension of pandemic relief at the beginning of President Joseph Biden’s administration, and more generally against further fiscal expansion. Summers very stringently pressed for more aggressive monetary policy, arguing that inflation resulted fundamentally from a labor market that was beyond full employment, and that higher and persistent unemployment would be needed for controlling inflation. His views have been very influential in policy circles, and the Fed has gone into one of the fastest cycles of interest rate hikes in history. Note that, in this view, inflation is ultimately the result of excessive government spending during the pandemic and a slow reaction from Powell, which allowed inflation expectations to accelerate and undermined the credibility of the Fed. This assessment is very much in line with the post-Volcker consensus of what happened in the 1970s.
Whether the interest rate hikes will lead to a recession is still unclear, even though the limits imposed by debt ceiling negotiations on fiscal policy make it more likely and imply that from now on monetary policy is the only game in town, at least until the next presidential election. More importantly, the significant deceleration of inflation over the last year has gone hand in hand with a relatively stable level of unemployment, that is relatively low by historical standards, even if the official unemployment rate overstates the tightness of the labor market. The decline in the inflation rate with a relatively low unemployment rate contradicts Summers’ diagnosis and the New Consensus notion that the economy is beyond the natural rate of unemployment.
The main alternative to the conventional wisdom of the New Consensus has been the belief that “corporations are raising prices because they can—because they have enough monopoly power to do so,” as noted recently by Robert Reich. In this view, the greater oligopolistic power of corporations and their ability to greedily increase their profit margins, almost without limit, would explain the recent inflationary bout. Greedflation, or profit-led inflation, would be the main culprit of the current circumstances. Corporate power has certainly been on the rise, and that is the basis for why this historical period has been called a New Gilded Age. The solution for progressives that associate the recent inflationary acceleration with corporate behavior is an old one: price controls. The policy prescription was revived by Isabella Weber, who studied the use of price controls during World War II. The virulent critiques of her proposal indicate that pro-market ideologues, fearful of any government scheme that smacks of planning, were seriously committed to foreclosing the debate and resorted to ad hominem attacks rather than debating her ideas.
Price controls can and did work well under certain conditions, particularly during World War II when enforcement was vigorous. However, under less strict implementation in the 1970s, the price and wage controls employed during the Nixon administration were seen as a failure, and the subsequent stabilization, which in the conventional story was all due to the Volcker Shock, reinforced the view that Keynesian policies had gone too far, and that a degree of monetary austerity was needed for stabilization. Of course, the decline in commodity prices, oil in particular, and the weakening of the trade unions during the Reagan years played an important role in the stabilization of prices.
Yet, the Greedflation explanation has significant problems, like the view that pandemic relief and Fed inaction were the culprits for the recent spike in inflation. For one, corporations did not become suddenly more powerful or greedy in early 2021. Corporate power has been on the rise for decades, and the period has been one of price stability, famously dubbed the Great Moderation by Ben Bernanke, even if the price moderation resulted from stagnant wages, rather than independent central banks. The original Gilded Age, one might add, was a period of deflation. Certainly, corporate power when combined with a vigorous labor movement can lead to incompatible income claims and the acceleration of inflation, as did happen in the 1970s. But this is unlikely to take place now. Forty years of pro-globalization policies, with the consequent deindustrialization, and decreasing unionization, had eroded workers bargaining power. In that respect, this is not a rerun of that ‘70s show.
However, in another important respect, our current inflationary crisis does resemble the 1970s. The inflation acceleration of the 1970s did not show that Keynesian policies were inefficient or had caused the acceleration of prices. As noted by James Tobin back then, inflation resulted from the oil shocks and the price-wage spiral. But inflation reinforced the social problems that led to the collapse of the old New Deal coalition and the Keynesian Consensus, ushering the Conservative Revolution and the New Consensus in Macroeconomics. The Pandemic inflation acceleration has undermined the revival of Keynesian ideas, and the revision of the New Consensus model that was under course. Instead of the concern with secular stagnation, we are back to inflation paranoia.
Articles represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty.
Wataalamu wa uchumi wamependekeza nadharia mbili kuu za kueleza ongezeko la hivi karibuni la bei. Wapinzani wa maendeleo wamesema kwamba ongezeko la bei ya ghali ni sababu ya pupa ya makampuni na wamependekeza kwamba bei zidhibitiwe. "Wanadharia wa uchumi wa kiuchumi wa New Consensus in Macroeconomics (NCCM) ni nadharia ya kiuchumi ya kiuchumi ya Marekani iliyoanzishwa mnamo 1970 kwa sababu ya ""upanuzi mkubwa wa kifedha wa Keynesian"" katika miaka ya 1970." Matías Vernengo anaandika kwamba hakuna upande wowote ambao umegundua kwa usahihi matatizo ya mfumuko wa bei wa sasa. Watetezi wa Greedflation hupuuza utulivu wa bei wa miongo michache iliyopita hata wakati mkusanyiko wa soko ulipoongezeka. Kwa upande mwingine, watetezi wa New Consensus kwa njia hiyo hiyo husahau historia yao na mshtuko wa bidhaa na kuongezeka kwa bei ya mshahara ambao ulikuwa kisababishi halisi cha mfumuko wa bei katika miaka ya 1970. Uwezo wa kawaida unaonyesha kwamba mfumuko mkubwa wa bei wa miaka ya 1970 ulisababishwa na kushindwa kwa makubaliano ya zamani ya Keynesian ambayo ilisukuma upanuzi mkubwa wa kifedha, pamoja na athari dhaifu ya Fedha ya Shirikisho chini ya Arthur Burns, ambayo ilikuwa karibu sana na utawala wa Rais Richard Nixon kufuata sera ya kupambana na mfumuko wa bei. Fedha ya Shirikisho ilipoteza uaminifu, katika mtazamo huu, na matarajio ya mfumuko wa bei yalipanda. Mkataba ulioundwa baada ya Fed Mwenyekiti Paul Volcker's nguvu contractionary sera ya fedha na utulivu wa uchumi katika miaka ya 1980, kimsingi kuathiriwa na Milton Friedman, alitoa wazo kwamba benki kuu huru, wasiwasi na mfumuko wa bei, inaweza kudumisha utulivu wa bei, na kwamba kiwango cha ukosefu wa ajira itakuwa huduma ya wenyewe. "Mtazamo huu mpya katika uchumi wa jumla, baadaye kuimarishwa na mfumo wa sera ya ""kufikia bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei ya bei." Wakati huo ilikuwa wazi kwamba uchumi wa Marekani ulikuwa na matatizo ya muundo na kwamba ukuaji wa kiuchumi ulikuwa umepungua, na labda Mapatano Mapya yalihitaji kufikiriwa upya. "Robert Gordon alisema kuwa ""sababishi za kupungua kwa kasi ya maendeleo ni athari ndogo za mapinduzi ya tatu ya viwanda, kuhusiana na teknolojia ya habari na automatisering, ikilinganishwa na mafanikio ya teknolojia ya awali ambayo yalikuwa na athari kubwa kwa uzalishaji na kuhitaji uwekezaji mkubwa wa umma katika miundombinu.""" Hali ya jumla ilikamatwa na Lawrence Summers na uamsho wa dhana ya zamani ya Keynesian ya kusimamishwa kwa ulimwengu. Kwa maoni haya, fursa za chini za uwekezaji wa uzalishaji zilimaanisha kwamba uchumi ulilazimika kukabiliana na viwango vya chini vya ukuaji, na hii ilihusiana na kupungua kwa nguvu ya mazungumzo ya wafanyakazi, mishahara ya chini, na sehemu ya mshahara katika mapato ya jumla. Hii ingehitaji viwango vya juu vya matumizi ya serikali, lakini katika mtazamo huu, kama ilivyoonyeshwa na ujumbe wa rais wa Olivier Blanchard kwa Chama cha Uchumi cha Amerika, hii haikuwa tatizo, kwani katika mazingira ya viwango vya chini vya riba, upanuzi wa kifedha na viwango vya juu vya deni la umma zilikuwa salama. Katika hali fulani, mgogoro wa 2008-2009 na ukosoaji wa New Consensus ulikuwa umepelekea kurudi kwa old Keynesian Consensus na wazo kwamba uingiliaji wa serikali ni muhimu ikiwa uchumi unakua haraka na kudumisha viwango vya chini vya ukosefu wa ajira. Kwa maoni ya Fed, mfumuko wa bei haukuwa tatizo kubwa, na labda hata lengo la mfumuko wa bei la juu kuliko lengo la Fed la 2% lingekuwa la kukubalika. Blanchard alipendekeza kuongeza kiwango cha riba kwa asilimia 4 na Jerome Powell, mwenyekiti wa Fed, alitangaza mbinu ya kubadilika kwa viwango vya riba ili kuwezesha viwango vya juu vya mfumuko wa bei, na kudumisha kiwango cha asilimia 2 kwa muda usiojulikana. Ni muhimu kutambua kwamba waandishi wengi, hasa wale walio karibu na maoni ya Monetarian ya Friedman, walipinga maoni haya. "Wanachukizwa na mfumuko wa bei waliendelea kuwa macho na kuwa na uhakika kwamba ""mashambulizi"" yaleyale ya miaka ya 1960 yangeleta mfumuko wa bei tena hatimaye." "Kwa mfano, mwaka 2009 Allan Meltzer alionya dhidi ya hatari za upanuzi wa fedha kupita kiasi baada ya mgogoro wa 2008-9 akisema kwamba ""ongezeko kubwa la akiba ya benki"" linalotokana na ununuzi wa Fed wa dhamana na mikopo ya nyumba ""bila shaka litaleta mfumuko wa bei ikiwa itaruhusiwa kubaki kali." "Taylor amesema: ""Ikiwa Fed haitajiunga na mpango wa kuweka lengo la mfumuko wa bei, tutakuwa tunaingia katika enzi mpya ya mfumuko wa bei.""" "Hata hivyo, Summers, ambaye pamoja na Blanchard aliwakilisha juhudi ndani ya taaluma ya kufikiria upya ""Mapatano Mapya"" ambayo yalikuwa yametawala tangu miaka ya 1970, ghafla alibadilisha mtazamo wake juu ya hatari ya uharibifu wa uchumi dhidi ya hatari ya kuongezeka kwa mfumuko wa bei." Summers alisisitiza vikali dhidi ya upanuzi zaidi wa misaada ya janga mwanzoni mwa utawala wa Rais Joseph Biden, na kwa ujumla dhidi ya upanuzi zaidi wa kifedha. Summers alisisitiza sana sera kali zaidi ya fedha, akisema kuwa mfumuko wa bei ulisababishwa kimsingi na soko la kazi ambalo lilikuwa zaidi ya ajira kamili, na kwamba ukosefu wa ajira wa juu na wa kudumu unahitajika kudhibiti mfumuko wa bei. Maoni yake yamekuwa na ushawishi mkubwa katika duru za sera, na Fed imeingia katika moja ya mzunguko wa haraka zaidi wa kuongezeka kwa viwango vya riba katika historia. "Kama ilivyoelezwa hapo juu, ""Inflation ni matokeo ya matumizi ya serikali kupita kiasi wakati wa janga na athari ya polepole kutoka kwa Powell, ambayo iliruhusu matarajio ya mfumuko wa bei kuharakisha na kudhoofisha uaminifu wa Fed.""" "Hiyo ni kwa sababu ya ""mtazamo wa Volcker"" wa miaka ya 1970." Kama ongezeko la kiwango cha riba litasababisha mfumuko wa uchumi bado haijulikani, ingawa mipaka iliyowekwa na mazungumzo ya kiwango cha deni juu ya sera ya kifedha hufanya iwe uwezekano zaidi na ina maana kwamba kuanzia sasa sera ya fedha ni mchezo pekee katika mji, angalau hadi uchaguzi ujao wa rais. "Kitu muhimu zaidi ni kwamba kupungua kwa kiwango cha mfumuko wa bei mwaka jana kumeshirikiana na kiwango cha chini cha ukosefu wa ajira, ambacho ni cha chini kwa viwango vya kihistoria, hata kama kiwango rasmi cha ukosefu wa ajira kinazidisha ""ukosefu wa ajira.""" Kupungua kwa kiwango cha mfumuko wa bei na kiwango cha chini cha ukosefu wa kazi ya kuajiriwa kunapingana na utambuzi wa Summers na dhana ya New Consensus kwamba uchumi uko zaidi ya kiwango cha asili cha ukosefu wa kazi ya kuajiriwa. Njia mbadala kuu kwa hekima ya kawaida ya Mapatano Mapya imekuwa imani kwamba "makampuni ni kuongeza bei kwa sababu wanaweza" kwa sababu wana nguvu ya kutosha ya udhibiti wa kufanya hivyo, "kama alibainisha hivi karibuni na Robert Reich. Kwa maoni haya, nguvu kubwa ya oligopolistic ya makampuni na uwezo wao wa greedily kuongeza faida yao, karibu bila kikomo, ingekuwa kueleza mapigano ya hivi karibuni ya mfumuko wa bei. Uchochezi wa pupa, au mfumuko wa bei unaoongozwa na faida, ungekuwa kisababishi kikuu cha hali ya sasa. "Uwezo wa makampuni umekuwa ukiongezeka, na hiyo ndiyo sababu ya kipindi hiki cha kihistoria kuitwa ""Nguvu Mpya ya Dhahabu.""" Suluhisho kwa ajili ya maendeleo ambayo kuhusisha hivi karibuni mfumuko wa bei ya mtiririko wa bei na tabia ya ushirika ni moja ya zamani: udhibiti wa bei. Isabella Weber, mwanasayansi wa Marekani, alitoa maoni yake juu ya matumizi ya udhibiti wa bei wakati wa Vita Kuu ya Pili ya Dunia. "Makosoa makali ya pendekezo lake yanaonyesha kwamba wanasiasa wa ""soko"" wanaotisha mpango wowote wa serikali unaosikia kama mipango, walikuwa wamejitolea sana kuzuia mjadala na wakakimbilia mashambulizi ya ad hominem badala ya kujadili mawazo yake." Usimamizi wa bei unaweza kufanya kazi vizuri na ulifanya kazi vizuri chini ya hali fulani, hasa wakati wa Vita vya Pili vya Ulimwengu wakati utekelezaji ulikuwa mkali. Hata hivyo, chini ya utekelezaji wa chini ya ukali katika miaka ya 1970, udhibiti wa bei na mshahara uliotumika wakati wa utawala wa Nixon ulionekana kuwa kushindwa, na utulivu uliofuata, ambao katika hadithi ya kawaida ulikuwa wote kwa sababu ya Volcker Shock, uliongeza maoni kwamba sera za Keynesian zilikuwa zimekwenda mbali sana, na kwamba kiwango cha ukandamizaji wa fedha kilihitajika kwa utulivu. Kwa kweli, kupungua kwa bei ya bidhaa, hasa mafuta, na udhaifu wa vyama vya wafanyakazi wakati wa miaka ya Reagan, ilicheza jukumu muhimu katika utulivu wa bei. Hata hivyo, ufafanuzi wa Greedflation una matatizo makubwa, kama vile maoni kwamba misaada ya janga na Fed kutofanya kazi walikuwa wahalifu kwa spike ya hivi karibuni katika mfumuko wa bei. Kwa mfano, kampuni hazikuanza kuwa na nguvu au pupa mapema mwaka 2021. "Mashirika ya fedha yamekuwa yakiongezeka kwa miongo kadhaa, na kipindi hicho kimekuwa cha utulivu wa bei, maarufu kama ""Uwezo Mkubwa wa Kupunguza Bei"" na Ben Bernanke, hata kama kupunguza bei kulitokana na mshahara wa chini, badala ya benki kuu huru." Huenda mtu akaongeza kwamba Enzi ya Kwanza ya Dhahabu ilikuwa kipindi cha kupungua kwa bei ya bidhaa. Kwa kweli, nguvu ya ushirika ikishirikiana na harakati ya wafanyakazi yenye nguvu inaweza kusababisha madai ya mapato yasiyolingana na kuongezeka kwa mfumuko wa bei, kama ilivyotokea katika miaka ya 1970. Lakini haiwezekani kwamba hilo litatukia sasa. Miaka arobaini ya sera za kuunga mkono utandawazi, pamoja na kuondolewa kwa viwanda, na kupungua kwa ushirika, ilikuwa imeharibu nguvu za wafanyikazi za kujadiliana. Kwa hivyo, hii sio marudio ya kipindi cha miaka ya 70. Hata hivyo, katika hali nyingine muhimu, mgogoro wetu wa sasa wa mfumuko wa bei unafanana na miaka ya 1970. Mfumuko wa bei ya bei katika miaka ya 1970 haukuonyesha kwamba sera za Keynesian hazikuwa na ufanisi au zilikuwa zimesababisha kuongezeka kwa bei. Kama ilivyoelezwa na James Tobin wakati huo, mfumuko wa bei ulisababishwa na mshtuko wa mafuta na kuongezeka kwa bei na mishahara. Lakini mfumuko wa bei uliongeza matatizo ya kijamii ambayo yalisababisha kuanguka kwa muungano wa zamani wa Mpango Mpya na Mapatano ya Keynesian, na kuanzisha Mapinduzi ya Uhifadhi na Mapatano Mapya katika Uchumi wa Makro. Mfumuko wa bei ya bei wa janga umeharibu uamsho wa mawazo ya Keynesian, na marekebisho ya mfano wa New Consensus ambayo ilikuwa ikiendelea. Badala ya kuwa na wasiwasi na kukoma kwa uchumi, tumerudi kwenye wasiwasi wa mfumuko wa bei. Makala zinawakilisha maoni ya waandishi wao, si lazima yale ya Chuo Kikuu cha Chicago, Booth School of Business, au kitivo chake.