Inflation

Abstract

The economic significance of the rate of inflation and the need to specifically target economic policy towards the reduction of inflation has come to the fore in the latter part of the twentieth century in all Western capitalist economies, supplanting unemployment as the ‘great evil’ of our time. Perhaps this is not quite so surprising given that prices have risen faster over the past fifty years than in any similar period since 1694, with the index of prices rising threefold between 1694 and 1948, but rising twenty-fold since (MacFarlane and Mortimer-Lee, 1994). This is illustrated in Figure 12.1. Apart from the inflationary period of the First World War, low rates were recorded throughout the twentieth century until the 1970s.