chapter  2
16 Pages

The Rise and Fall of the 'New Inflation' and 'Old New-Economics'

Incomes Policies - No Answer to Inflation On the whole, incomes policies have been striking failures - the record is woeful as is the continued insistence on their application by some governments. Whatever the guise, ultimately an incomes policy adds up to the traditional attempt to control and freeze wages. Economic justification is sought on the grounds that inflation is essentially caused by a wage-price spiral, or too much money chasing too few goods. A variation of this classical theory of inflation is that money wages exceed advances in productivity and thus force up costs which in turn hoist prices. All this is assumed, of course, to occur in the personal consumption sector and to be measured by the consumer price index.