A major outcome of the affluent society’s fixation on fighting scarcity, inequality and insecurity by maximizing production arises in the form of the tendency to permanent inflation. Inflation is inevitable in Galbraith’s eyes, once governments are committed to running the economy at near full employment and waiting complacently for the benefits of growth to trickle down throughout society. This situation is institutionalized through the interaction of wages and prices and the bifurcated industrial structure of modern capitalism. Moreover, he argues that the conventional economic weapons of fiscal and monetary policy are inadequate to the task of keeping inflationary pressures at bay, a fact widely known but just as widely ignored in polite society. Galbraith’s arguments turn out to be prescient in the light of developments in the 1970s and 1980s but need substantial qualification when looking at what has happened over the past 20 years. Deflation rather than inflation threatens in the wake of the GFC, as happened in the early 1930s and, In Japan, in the 1990s.
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