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Inflationary Trends

What can governments' do when confronted with demands which outrun their resources? To meet the demands is impossible to reject them may result in defeat at the next election or even a violent revolutionary overthrow. The answer-is repression or inflation or both. One why most developing countries turn toward some type of dictatorship is simply to stifle citizen demands.: If the government does not have to face elections and the army protects it from revolutionary violence, it may be able to resist indefinitely the demands that it provide its people a higher standard of living immediately not in some remote future. If nationalistic propaganda can identify a foreign adversary or a minority group within the nation which can serve as , a scapegoat and be blamed. for economic difficulties, then the government's position . is even stronger.  Inflation is worldwide, although communist countries often conceal it by holding the posted price and letting the shelves empty out; meanwhile, goods or services in short supply can be purchased only by making extra "undercover" payments [Simis, 1982]. While inflation has many causes, the main one is that inflation is a way of avoiding hard economic decisions. Governments, faced with demands which cannot be met by tax revenucs, print more money (usually by a rather complicated and indirect process). The result is that many people have more money, while the amount of goods and services for sale remains unchanged, so the prices float upward.

Inflation reduces the impulse to save, since money in the future will be worth less money today. It makes any kind of public or private economic planning difficult and threatens the security of everyone. The greatest victims of inflation are probably the poor, _who spend most of their income for necessities which usually show the largest price increases [Heilbroner and Thurow, 1981, p. 25].- No one defends inflation, yet nearly everyone promotes it. Nearly all of us feel under paid cry for Nearly all with something to sell wan~ higher prices. The inevitability of inflation was neatly illustrated by a television documentary on the _social security- system. Every person interviewed felt that social security benefits were too low; every person interviewed felt that his or her social ,security taxes were too high.  Everyone wanted to pay less and-get more. The inescapable result is higher government deficits, more printing-press money and more inflation. Doesn't anyone want to control spending? yes! Everyone wants to cut government· spending, provided someone else's ox is gored. Urban consumers -want to cut farm price supports, farmers want to cut urban grants, pacifists want to cut defense costs, and so it goes: Everyone has a favorite program to expand-teachers want higher educational grants, environmentalists want more environmental protection, the energy-poor Northeast wants energy subsidies, and the arid Southwest wants more dams. President Reagan, perhaps the most fervent cost of the century, sponsored the largest peacetime increase in defense costs in Ll.S. history. Legislators, anxious to offend no one, try to give something to so the budget edges One wonders whether it is possible for f1 democratic government to control expenses or whether the inherent pressures toward .increase are unmanageable.

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