ABSTRACT
Since World War II, inflation in capitalist democracies often has been exacerbated by the refusal of monetary authorities to restrict the money supply. Once inflation becomes relatively large and permanent and most strategic prices—wages, rents, debts, exchange rates, and taxes—are indexed, economic relations change considerably. In general, exporters have a much better defense against inflation than wage earners, and the latter have smaller inflationary losses than landlords. Foodstuffs have a much bigger weight in the low-income index; thus, when food prices rise other prices, this index indicates more inflation than the wider income range index. In 1982, facing a decisive year-end election for state governors and the congress, the government eased somewhat the orthodox attack on inflation. The Brazilian government enjoined employer groups and labor union confederations to negotiate a so-called Social Pact but failed to put forward any concrete proposal for new regulation of prices and wages.
