10
An acceleration of the inflation, equivalent to a change
(or attempted change) in income distribution will happen,
if starting from the above transmission model, either the
trade unions increase their real wage target, or the
employers increase their profit mark-up, or the farmers ask
and are granted higher prices for their products. It is
evident, to my mind, from this description, that inflation
is the expression of a political conflict about income
distribution. This is illustrated also by the observation
that the greater or lesser degree of chronic inflation in
different countries plausibly depends on the existence of
a climate of compromise or of confrontation respectively.
This means that also a solution to inflation problems must
largely be found on a political plane.
It must be stressed that inflation means different things
in different countries depending on institutions: It is
borne more lightly in one set of institutions than in
another (U.S.!).
Finally, without undue cynicism, it may be noted that inflation
provides relief to other problems, such as the public debt.
Indeed in a situation of high interest rates when governments
borrow on long term at very high rates the prospect of inflation
subsiding is not one of unmitigated blessing. If a country
is settled with a lot of such debt inflation subsiding to low
levels will probably induce an increase in indirect taxation
which in turn will stimulate inflation again.