The Morals of the Market by Jessica Whyte

Author:Jessica Whyte
Language: eng
Format: epub, pdf
Publisher: Verso Books

Inflated Expectations

The reliance of the immanent laws of the market on extra-economic violence and the imposition of a moral code is clear even in relation to the most technical of areas: the Chicago Boys’ remedies for inflation. From the Chicago perspective, inflation is not merely one problem among others; it is a spanner in the well-oiled market machine. For price signals and market sovereignty to replace human direction in shaping human behaviour, price stability is essential. During their Chicago studies, Pinochet’s economists had been converted to the tenets of monetarism, for which inflation, in Friedman’s often-repeated dogma, was ‘always and everywhere a monetary phenomenon’ – a product of a more rapid increase in the money supply than in output.82 Friedman depicted Chicago’s ‘counter-revolution in monetary theory’ – which displaced Keynesian attempts to foster economic stability through taxation and public spending – as ‘a scientific development that has little ideological or political content’.83 In his 1976 Nobel Prize lecture, he struck a technocratic tone, arguing that the ‘socially destructive inflation’ and ‘suppression of human freedom’ afflicting many countries were not results of ‘evil men’, nor of ‘differences of values among citizens’, but of erroneous judgments about the consequences of government actions.84

In truth, the realities underpinning inflation were deeply political, as Friedman implicitly recognised. The correlate of the monetarist conviction that inflation is always caused by an increase in the supply of money is that it occurs because governments want to ‘provide “goodies” for their supporters and constituents’ without increasing taxes.85 As we saw in the previous chapter, the Mexican MPS member Gustavo Velasco attributed his country’s inflation to excessive popular expectations in the context of a welfare state. The Chicago economists also saw inflation as a ‘moral crisis’ bound up with heightened expectations and a failure of personal and familial responsibility among the working class in a context of victorious political struggles.86

As early as 1958, on a panel devoted to inflation at the MPS conference in Princeton, Friedman argued that inflation damaged free societies by strengthening unions, which were more able to win pay rises in inflationary conditions, and by generating pressure for government subsidies and price controls to protect people from rising prices.87 Friedman’s fellow panellist, the French philosopher Jacques Reuff, gave an even starker account of the problem: ‘Inflation is a far greater threat to liberty throughout the world today than Marxism’, he told his fellow liberals.88 Reuff argued that inflation weakened the regulatory role of the price mechanism and discouraged submission to its dictates. In Friedman’s view, the only solution to inflation was restraint, both on the part of the people, who should avoid demanding government intervention in the face of a downturn, and on the part of government, which should refuse to bow to such demands. ‘The crucial problem’, which in 1958 remained largely unresolved, was ‘how to get such “restraint”’.89

The problem of restraint was all the more difficult because, as Friedman later recognised, some benefited from inflation while others suffered, so ‘society is divided into winners

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.