Bernd
07/12/2019 (Fri) 02:52:13
No.27969
del
07/12/2019 (Fri) 02:52:13
No.27969
del
Inflation
How was inflation kept in check as unemployment decreased by the millions? In fact, there was inflationary pressure. It picked up by 1938, not at the beginning of recovery.
Returning to the contemporary economists who debated work creation: many objected to it on the ground that government stimulus would just increase inflation, negating any benefit it could provide. Others argued that this held true in conditions of full employment, but not when there was idle capacity, and therefore, governments could spend but only as much as necessary to get rid of unemployment, with too much spending causing inflation.
From 1933 onwards the German economy grew while the unemployed found work and there was little inflation. By 1938 the military-industrial complex and related sectors were still booming while the workforce was almost fully employed. All the conditions for inflation were there. Workers wanted better pay and employers were willing to provide it to continue expanding their businesses.
It was contained by a growing bureaucratic barrier: the suppression of wage growth at 1933 levels, which was already in place for years and extensive price controls. The wage freeze was partially circumvented in industries with less central oversight (ironically favoring subcontractors and suppliers over immediate producers of armaments) through “accelerated
promotion, high-status apprenticeships, retraining schemes, hiring bonuses, improved working conditions and a variety of supplementary social benefits”.
Wage and price suppression had the side effect of nullifying market mechanisms for reassigning labor between industries, demanding more bureaucratic oversight to replace those mechanisms. Detailed information was gathered on every worker. Regional migration was restricted. Rural workers were prohibited from taking industrial jobs; this backfired when farmers found a loophole by no longer employed their sons at all. And the state gained the power to conscript labor.
So under conditions expected not to produce inflationary pressure, there was none, and under conditions expected to produce it, it existed. No surprise here.
How was inflation kept in check as unemployment decreased by the millions? In fact, there was inflationary pressure. It picked up by 1938, not at the beginning of recovery.
Returning to the contemporary economists who debated work creation: many objected to it on the ground that government stimulus would just increase inflation, negating any benefit it could provide. Others argued that this held true in conditions of full employment, but not when there was idle capacity, and therefore, governments could spend but only as much as necessary to get rid of unemployment, with too much spending causing inflation.
From 1933 onwards the German economy grew while the unemployed found work and there was little inflation. By 1938 the military-industrial complex and related sectors were still booming while the workforce was almost fully employed. All the conditions for inflation were there. Workers wanted better pay and employers were willing to provide it to continue expanding their businesses.
It was contained by a growing bureaucratic barrier: the suppression of wage growth at 1933 levels, which was already in place for years and extensive price controls. The wage freeze was partially circumvented in industries with less central oversight (ironically favoring subcontractors and suppliers over immediate producers of armaments) through “accelerated
promotion, high-status apprenticeships, retraining schemes, hiring bonuses, improved working conditions and a variety of supplementary social benefits”.
Wage and price suppression had the side effect of nullifying market mechanisms for reassigning labor between industries, demanding more bureaucratic oversight to replace those mechanisms. Detailed information was gathered on every worker. Regional migration was restricted. Rural workers were prohibited from taking industrial jobs; this backfired when farmers found a loophole by no longer employed their sons at all. And the state gained the power to conscript labor.
So under conditions expected not to produce inflationary pressure, there was none, and under conditions expected to produce it, it existed. No surprise here.