ABSTRACT
One of the largest changes in economic policy since the war has been the virtual disappearance of full employment as a policy objective and its replacement by the control of inflation. Inflation, we are led to believe, is caused by governments expanding the amount of money in the economy in order to create jobs. While unemployment afflicts an unfortunate minority of the working population, inflation presents a more general and potent threat: corroding savings, damaging the lives of those on fixed incomes (especially pensioners), undermining longterm investment, fostering industrial militancy, while reducing confidence in sterling and destroying its trading value on the world’s money markets. Inflation threatens those traditional social values-hard work, self-reliance, personal enterprise and thrift-that are commonly regarded as the bedrock of a prosperous, stable society. Containing inflation will encourage investment, thereby restoring economic prosperity and social wellbeing. Seen from this angle, we might well conclude (in ex-Chancellor Norman Lamont’s phrase) that unemployment is a “price well worth paying” for the restoration of financial stability.
