The riddle of inflation—a new answer
INFLATION will not be stopped, many economic commentators assert, until large corporations and big unions quit pushing up wages and prices. This conventional, Galbraithian explanation assumes that, in an economy at or near full employment, corporate managers encounter little resistance to price rises. Enabled to pass on higher costs, they do not balk at ever larger wage demands made by unionists who seek to outpace the price changes. Thus, the upward spiral of administered prices and negotiated wages generates inflation in the modem industrial state.