Book contents
- Frontmatter
- Contents
- List of Tables and Figures
- List of Abbreviations
- Acknowledgments
- A Note on Terminology
- 1 Social Democracy in the Macroeconomy
- 2 Politics, Economics, and Political Economy
- 3 Why Was There No Social Democratic Breakthrough in the Twenties?
- 4 The Creation of the Social Democratic Consensus
- 5 The Breakdown of the Social Democratic Consensus
- 6 Social Democracy in the Twenty-first Century
- Notes
- References
- Index
- Title in the Series
5 - The Breakdown of the Social Democratic Consensus
Published online by Cambridge University Press: 17 September 2009
- Frontmatter
- Contents
- List of Tables and Figures
- List of Abbreviations
- Acknowledgments
- A Note on Terminology
- 1 Social Democracy in the Macroeconomy
- 2 Politics, Economics, and Political Economy
- 3 Why Was There No Social Democratic Breakthrough in the Twenties?
- 4 The Creation of the Social Democratic Consensus
- 5 The Breakdown of the Social Democratic Consensus
- 6 Social Democracy in the Twenty-first Century
- Notes
- References
- Index
- Title in the Series
Summary
The only reason we have unemployment is that governments are using it to contain, or to reduce, inflation.
(Richard Layard 1986: 29)In essence, the viability of the growth regime of the post-1945 era depended on the ability to contain inflation without recourse to sharply restrictive macroeconomic policies. In practice, this meant increasing reliance on income policies, since the price and quantity controls of the immediate postwar period could not be continued indefinitely. Yet, relying on income policies is always a precarious strategy. Ultimately trade unions are organizations designed to benefit their members in wage bargaining and not to function as an additional instrument in macroeconomic policies. During the sixties the strategy of relying on microeconomic policies to contain inflation increasingly came into conflict with the organizational logic of the trade unions, especially so because many countries experienced a further reduction in unemployment rates during that decade. The wave of labor unrest that spread across Western Europe in the late sixties therefore was not the prelude to a further strengthening of the left but rather the first announcement of the end of social democracy's ideological hegemony. The disintegration of income policies as an instrument for containing nominal wages spelled the danger of an inflationary spiral. As in the early twenties, the only feasible policy in such a constellation, for social democratic and non–social democratic governments, would be to reintroduce unemployment in order to contain inflation.
- Type
- Chapter
- Information
- Money, Markets, and the StateSocial Democratic Economic Policies since 1918, pp. 160 - 221Publisher: Cambridge University PressPrint publication year: 2000