For A New Liberty by Murray Newton Rothbard

Author:Murray Newton Rothbard [Rothbard, Murray Newton]
Language: spa
Format: epub
Tags: Divulgación, Ciencias sociales
Publisher: ePubLibre
Published: 1972-12-31T23:00:00+00:00

MONEY AND INFLATION

What, then, does this resurgent Austrian theory have to say about our problem?[2] The first thing to point out is that inflation is not ineluctably built into the economy, nor is it a prerequisite for a growing and thriving world. During most of the nineteenth century (apart from the years of the War of 1812 and the Civil War), prices were falling, and yet the economy was growing and industrializing. Falling prices put no damper whatsoever on business or economic prosperity.

Thus, falling prices are apparently the normal functioning of a growing market economy. So how is it that the very idea of steadily falling prices is so counter to our experience that it seems a totally unrealistic dream-world? Why, since World War II, have prices gone up continuously, and even swiftly, in the United States and throughout the world? Before that point, prices had gone up steeply during World War I and World War II; in between, they fell slightly despite the great boom of the 1920s, and then fell steeply during the Great Depression of the 1930s. In short, apart from wartime experiences, the idea of inflation as a peacetime norm really arrived after World War II.

The favorite explanation of inflation is that greedy businessmen persist in putting up prices in order to increase their profits. But surely the quotient of business “greed” has not suddenly taken a great leap forward since World War II. Weren’t businesses equally “greedy” in the nineteenth century and up to 1941? So why was there no inflation trend then? Moreover, if businessmen are so avaricious as to jack up prices 10 percent per year, why do they stop there? Why do they wait; why don’t they raise prices by 50 percent, or double or triple them immediately? What holds them back?

A similar flaw rebuts another favorite explanation of inflation: that unions insist on higher wage rates, which in turn leads businessmen to raise prices. Apart from the fact that inflation appeared as long ago as ancient Rome and long before unions arrived on the scene, and apart from the lack of evidence that union wages go up faster than nonunion or that prices of unionized products rise faster than of nonunionized, a similar question arises: Why don’t businesses raise their prices anyway? What is it that permits them to raise prices by a certain amount, but not by more? If unions are that powerful, and businesses that responsive, why don’t wages and prices rise by 50 percent, or 100 percent, per year? What holds them back?

A government-inspired TV propaganda campaign a few years ago got a bit closer to the mark: consumers were blamed for inflation by being too “piggy,” by eating and spending too much. We have here at least the beginning of an explanation of what holds businesses or unions back from demanding still higher prices: consumers won’t pay them. Coffee prices zoomed upward a few years ago; a year or two later they fell sharply because of consumer

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