Abstract
In this chapter we discuss, in detail, developments in the Federal Republic of Germany, until the unification in 1990 also known as West Germany, the US, the United Kingdom and Italy from the end of the 1960s to the mid-1980s.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
The discount rate was the interest rate for the Bundesbank's main refinancing operations at the time. It determined the money market interest rate.
- 2.
However, the wage formula that had become popular in West Germany in the 1950s had a catch. If it is actually followed, then a wage-price spiral is unleashed in the event of a price level shock. Attempts at redistribution via wage policy are also only possible to a very limited extent. A policy in this direction also leads to wage-price spirals (cf. Chap. 7).
- 3.
In this figure and later in the corresponding figures for the US, the United Kingdom and for Italy, the GDP deflator has been chosen as the basket of goods rather than the consumer price index. The differences between the two indices are mostly small, but the GDP deflator is the broader index and more meaningful for our purposes. For example, the GDP deflator is much less affected by real estate bubbles and higher prices for land.
- 4.
In periods of economic weakness, the volume of production falls faster than employment. This leads to statistically rising unit-labour costs. The opposite effect is found in the first phase of upswings.
- 5.
In the effective exchange rate index, bilateral exchange rates are weighted according to a country's trade integration. In the real effective exchange rate, price level changes at home and abroad are removed. Thus, the real effective exchange rate shows the development of a country's price competitiveness.
- 6.
The euro-dollar market emerged early after the Second World War, as the Soviet Union did not want to hold its dollar assets in the US for political reasons, preferring instead to hold them in London.
- 7.
Budget deficit and net borrowing respectively budget surplus and net lending should express the same thing.
- 8.
This advantage is usually referred to as seigniorage gain.
- 9.
“Organized labour and President Carter announced today a ‘national accord’ on economic policy intended to bring union leadership into a more visible partnership with the Administration. From the Administration's viewpoint, the centrepiece of the accord was the agreement ratified today by the executive council of the American Federation of Labor and Congress of Industrial Organizations that labour would fill five of 15 seats on a new Pay Advisory Committee” (Cowan 1979, para. 1 and 2).
- 10.
- 11.
The term ‘historic compromise’ was used by Italian Communist leader Enrico Berlinguer in 1973 to indicate a possible governing coalition between the DC and the PCI (Moliterno 2000).
- 12.
In 2009, the mechanism was watered down as on a firm level operational adjustments to centrally negotiated agreements were made possible.
- 13.
Italy used the instrument of capital controls until the 1990s.
- 14.
Thus, in the first quarter of 1977, the price index increased from 143 to 149, i.e. by 6. This value was multiplied by the “contingenza point” of 2389. This gave 14,334, so monthly wages were automatically increased by 14,334 lira at the end of the first quarter (Leonardi et al. 2019).
- 15.
Haavelmo (1945) already made it clear that a simultaneous increase in government revenue and expenditure has an expansionary effect, since part of the tax payments come from private sector savings, while the government does not save.
- 16.
In the 1970s, almost all employees in West Germany were covered by regional collective agreements. In 1996, 70% of all employees in West Germany were still covered. In 2019, this figure was only 46% in former West Germany and 34% in the eastern parts of Germany (Kohaut 2020). In 2015, statutory minimum wages were introduced in Germany as a reaction this erosion in wage bargaining coverage.
References
Agartz V (1953) Expansive lohnpolitik. WSI-Mitteilungen 6:245–247
Amadeo K (2022) US budget deficit by year compared to GDP, the National Debt, and Events. https://www.thebalancemoney.com/us-deficit-by-year-3306306. Accessed 24 Oct 2022
Ameco (2023) Ameco database. https://economy-finance.ec.europa.eu. Accessed 06 Oct 2023
Bank for International Settlements (2022) Effective exchange rate indices. https://www.bis.org/statistics/eer.htm. Accessed 12 Dec 2022
Bank of England (2017) Research datasets. https://www.bankofengland.co.uk/statistics/research-datasets. Accessed 06 Dec 2022
Bruce A (2019) Not so sterling: a history of UK currency crises, reuters. https://www.reuters.com/article/us-britain-eu-sterling-crises-idUSKCN1UR4UK. Accessed 26 Oct 2022
Deutsche Bundesbank (2022b) Lange Zeitreihen zur wirtschaftlichen Entwicklung in Deutschland. aktualisierte Ausgabe, Frankfurt a.M
Deutsche Bundesbank (1969) Monatsbericht, Dezember. Frankfurt a.M
Deutsche Bundesbank (1974). Monatsbericht, Juni, Frankfurt a.M.
Deutsche Bundesbank (1986) Monatsbericht November. Frankfurt a.M
Deutsche Bundesbank (1987) Monatsbericht Dezember. Frankfurt a.M
Burton AA, Butkiewicz JL (2017) The political economy of wage and price controls: evidence from the Nixon tapes. Public Choice 170:63–78
Calleo DP (1981) Inflation and American power. Foreign Aff 59:781–812
Cowan E (1979) Carter and unions announce accord on inflation curbs. New York Times, 29th of September. https://www.nytimes.com/1979/09/29/archives/carter-and-unions-announce-accord-on-inflation-curbs-a-pay.html. Accessed 25 Oct 2023
Deleidi M, Meloni WP (2014) Italian economic trends and labor market reforms: a 50-years overview. Department of Economics – Roma Tre, ASTRIL – Associazione Studi e Ricerche Interdisciplinari sul Lavoro. https://mpra.ub.uni-muenchen.de/64416/. Accessed 28 Apr 2023
Dünhaupt P (2011) The impact of financialization on income distribution in the US and Germany: a proposal for a new adjusted wage share. Macroeconomic Policy Institute Working Paper 7/2011
Trading Economics (2023) Data, online. https://tradingeconomics.com. Accessed 02 Oct 2023
Economist (2017) Britain: back to being the sick man of Europe?. https://www.economist.com/buttonwoods-notebook/2017/07/19/britain-back-to-being-the-sick-man-of-europe. Accessed 07 Nov 2023
Emminger O (1986) D-Mark, dollar, Währungskrisen. Erinnerungen eines Bundesbankpräsidenten, Deutsche Verlagsanstalt, Stuttgart
Fleming M (1962) Domestic financial policies under fixed and floating exchange rates. IMF Staff Pap 9:369–379
FRED (Federal Reserve Bank of St. Louis) (2023) Economic Research. https://fred.stlouisfed.org. Accessed 07 Oct 2023
Galli E, Padovano F (2008) Sustainability and determinats of Italien public deficits before and after Maastricht. In: Neck R, Sturm J (eds) Sustainability of Public Debt. MIT Press, Cambridge MA
Haavelmo T (1945) Multiplier effects of a balanced budget. Econometrica 13:311–318
Healy G (2011) Remembering Nixon’s wage and price controls, Washington Examiner. https://www.washingtonexaminer.com/remembering-nixons-wage-and-price-controls. Accessed 24 Oct 2022
Heine M, Herr H (2022) Fiskalische Spielräume für eine offensive Wohnungsbaupolitik. IPE Working Paper Nr. 176
Heine M, Herr H, Kaiser c (2006) Wirtschaftspolitische Regime westlicher Industrienationen. Baden-Baden, Nomos
Herr H (2020) Functional income distribution in economic paradigms: the failure of the neoclassical approach and alternatives. In: Decker S, Elsner W, Flechtner S (eds) Principles and pluralist approaches in teaching economics. Routledge, Towards a Transformation of Science, London, pp 229–242
Herr H, Hübner K (2005) Währung und Unsicherheit in der globalen Ökonomie. Eine geldwirtschaftliche Theorie der Globalisierung, Transfer, Berlin
Herr H, Kazandziska M (2011) Macroeconomic policy regimes in western industrial countries. Routledge, London
Herr H, Nettekoven Z (2021) International money, privileges and underdevelopment. In: Bonizzi B, Kaltenbrunner A, Ramos RA (eds) Emerging economies and the global financial system. Post Keynesian Analysis, Routledge, London, pp 116–136
Herr H, Spahn H-P (1989) Staatsverschuldung Zahlungsbilanz und Wechselkurs. Außenwirtschaftliche Spielräume und Grenzen der Finanzpolitik. Regensburg, Transfer
Herr H (1987) Der Euro-DM-Markt. Theoretische Erfassung, empirische Entwicklung und Einfluss auf die nationale Geldpolitik. WZB Discussion Paper, IIM LMP 87–7
Higgs R (1980) Carter’s wage-price guidelines: a review of the first year, Independent Institute. https://www.independent.org/news/article.asp?id=2187. Accessed 24 Oct 2022
IMF (2022b) World economic outlook databases. https://www.imf.org/en/Publications/SPROLLS/world-economic-outlook-databases. Accessed 15 Feb 2023
Istat (Instituto Nazionale de Statistica) (2022) Data. https://www.istat.it/it/archivio/25004. Accessed 22 Dec 2022
Kohaut S (2020) Tarifbindung geht in Westdeutschland weiter zurück. In: IAB-Forum 13. Mai 2020. https://www.iab-forum.de/tarifbindung-geht-in-westdeutschland-weiter-zurueck/. Accessed 14 Apr 2023
Lee K, Shin H (2021) Varieties of capitalism and East Asia: long-term evolution, structural change, and the end of east Asian capitalism. Struct Chang Econ Dyn 56:431–437
Leonardi M, Pellizzari M, Tabasso D (2019) Wage compression within the firm: evidence from an indexation scheme. Econ J 129:3256–3291
Livi M (2020) Italien 1968 und 1977: Schicksalsjahre einer Generation, Hypothesis. https://tribes.hypotheses.org/1495. Accessed 28 Oct 2022
Manacorda M (2004) Can the scala mobile explain the fall and rise of earnings inequality in Italy? A semiparametric analysis, 1977–1993. J Law Econ 22:585–613
Mauro L, Buiatti C, Carmeci G (2012) The origins of the sovereign debt of Italy: a common pool issue?, Center for North South Economic Research, Working Paper 12
Minsky HP (1979) Financial interrelations, the balance of payments and the dollar crisis. In: Aronson JD (ed) Debt and the less developed countries. Westview Press, Boulder, pp 103–121
Moliterno G (2000) Encyclopedia of contemporary Italian culture. Routledge, London
Mundell R (1962) Capital mobility and stabilization policy under fixed and flexible exchange rates. Can J Econ Polit Sci 29:475–485
Namuth M (2012) Gewerkschaften in Italien. FES-Studie, Berlin
Nelson E (2000) UK Monetary Policy 1972- 97: a guide using taylor rules. Bank of England Working Paper, No. 120
OECD (2023) data. https://data.oecd.org/. Accessed 03 Oct 2023
Riese H (1986) Theorie der Inflation. Mohr, Tübingen
Sachverständigenrat (1970) Sachverständigengutachten 1987. Deutscher Bundestag, Bonn
Sachverständigenrat (1987) Sachverständigengutachten 1987. Deutscher Bundestag, Bonn
Scharpf FW (1987) Sozialdemokratischen Krisenpolitik in Europa. Campus, Frankfurt a. M.
Schulten T (2002) A European solidaristic wage policy? Eur J Ind Relat 8:173–196
Schultz GP (1993) Turmoil and triumph: diplomacy, power, and the victory of the American ideal. Charles Scriber’s Sons, New York
Senner R, Sornette D (2018) The holy grail of crypto currencies: ready to replace fiat money?, Discussion Paper April, Department of Management, Technology and Economics, ETH Zurich
Spychalski M (2011) Labor costs and inflation. https://www.marquetteassociates.com/research/labor-costs-and-inflation. Accessed 09 Sept 2022
Statistisches Bundesamt (2022a) Destatis, Volkswirtschaftliche Gesamtrechnungen Inlandsproduktberechnung. Lange Reihen ab 1970. https://www.destatis.de/DE/Themen/Wirtschaft/VolkswirtschaftlicheGesamtrechnungen. Accessed 17 May 2022
Statistisches Bundesamt (2023) Database. https://www.destatis.de/DE/Home/_inhalt.html. Accessed 30 July 2023
Steininger R (2020) Der Vietnamkrieg. https://www.bpb.de/themen/nordamerika/US/317398/der-vietnamkrieg/. Accessed 23 Oct 2022
Stetson D (1972) Labor aims at pay curb in Its Nixon Ambush. In: The New York Times, January 9, 1972. https://www.nytimes.com/1972/01/09/archives/labor-aims-at-pay-curb-in-its-nixon-ambush.html. Accessed 25 Oct 2022
Stute D (2014) Chronik der Rassenunruhen in den US. https://www.dw.com/de/chronik-von-rassenunruhen-in-den-US/a-18085477. Accessed 23 Oct 2022
Tabellini G (1988) Monetary and fiscal policy coordination with high public debt. In: Giavazzi F, Spaventa L (eds) High public debt–the Italian experience. Cambridge University Press, Cambridge, pp 90–126
Thomasberger C (1990) Vom „kranken Mann Europas“ zur dynamischen Industrienation. Das „Modell“ Italien“ und der Einfluss des EWS. In: Spahn H-P (Hrsg.) Wirtschaftspolitische Strategien. Probleme ökonomischer Stabilität und Entwicklung in Industrieländern und der Europäischen Gemeinschaft. Transfer: Regensburg, 195–218
US Bureau of Labour Statistics (2022b) Employment cost summary, July 29. https://www.bls.gov/news.release/eci.nr0.htm. Accessed 08 Nov 2022
US Bureau of Labour Statistics (2022a) Current employment statistics–CES (National). https://www.bls.gov/ces/. Accessed 06 Nov 2022
US Office of Management and Budget (2022) The white house. https://www.whitehouse.gov/omb/. Accessed 28 Apr 2023
Verdi (2022) Zum Vorwurf, Heinz Kluncker habe 1974 Willy Brandt gestürzt. https://www.verdi.de/ueber-uns/idee-tradition/gruendungsgewerkschaften/++co++1c26342a-b918–11e1–7184–0019b9e321e1. Accessed 10 Sept 2022
Wirtschaftslexikon24.com (2022) Gesetz zur Förderung der Stabilität und des Wachstums der Wirtschaft. ww.wirtschaftslexikon24.com. https://www.wirtschaftslexikon24.com/d/gesetz-zur-förderung-der-stabilität-und-deswachstums-der-wirtschaft/gesetz-zur-förderung-der-stabilität-und-des-wachstums-der-wirtschaft.htm. Accessed 18 Oct 2022
World Bank (2023) Data. https://data.worldbank.org. Accessed 05 Oct 2023
Author information
Authors and Affiliations
Rights and permissions
Copyright information
© 2024 The Author(s), under exclusive license to Springer Nature Switzerland AG
About this chapter
Cite this chapter
Heine, M., Herr, H. (2024). Inflation and Macroeconomic Management in Selected Countries from the Late-1960s to the Mid-1980s. In: The Resurgence of Inflation. Financial and Monetary Policy Studies, vol 57. Springer, Cham. https://doi.org/10.1007/978-3-031-52740-1_4
Download citation
DOI: https://doi.org/10.1007/978-3-031-52740-1_4
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-031-52739-5
Online ISBN: 978-3-031-52740-1
eBook Packages: Economics and FinanceEconomics and Finance (R0)