Full text: Expansion, Stagnation und Demokratie - 1982 Heft 2 (2)

rapidly passed on in lower prices; increased demand sometimes caused
spectacular increases in prices. Arthur Lewis' studies4 have shown that
the huge improvements in sugar cultivation brought no beneflt to the
farmer or planter, since prices feil as fast and fully in proportion to the
rise in yields per acre.
It is this combination of highly competitive primary product prices
and rigid industrial prices which was characteristic of the 20s and 30s of
this Century, and no doubt contributed to the severity of the Depression
after 1929. World War I ushered in an inflation the whole world over
which came to an end with a bang in Britain in 1921, and in other leading
industrial countries in various years up to 1925. From then on prices
were stable or gently falling, until the Great Depression which brought
primary product prices crashing down, and made industrial prices
moderately lower. Althought the experience of individual countries
differed a great deal I think one can say that the inter-war period was on
the whole another period characterised by falling rather than rising
As against that the experience of the post World War II period was a
very different one. The much-heralded post-war recession which
wrought such havoc after World War I did not materialise. For a time it
looked like Coming at around 1949, but then the outbreak of the Korean
war brought an end to this, and ushered in a unique period of prosperity
and industrial expansion marked by a steady creeping inflation in all
industrial countries, combined with a remarkable stability of raw
material prices on the average (many individual commodities tended to
fluctuate up and down but in the average the level of prices in 1970 was
the same as in 1950). Industrial growth in the U. S. and U. K. owed a
great deal to heavy armament expenditure after 1951; in Japan, Italy and
Germany on the other hand to an unprecedented export boom in steel,
machinery, ships, motor cars, chemicals and many other commodities.
But it meant continued füll employment in Britain, and to a lesser
degree in the U. S., and an unprecedented expansion of employment
(particularly industrial employment), through immigration from abroad
or the countryside in Germany, Italy and Japan. (Fast growing countries
had on the whole a higher rate of creeping inflation than the slow
growing ones.)
However, since the early 1970s we have entered a new phase of far
more rapid inflation - a world wide inflation which has had no previous
precedent in peace-time either in its wide-spread nature or in its
amplitude, combined with relatively stagnant Output and sharply rising
unemployment. Manufacturing Output in Britain in December 1980 was
no higher than it was in 1967 (and it is 21 per cent lower than the peak
Output in 1973). In the course of 1980 alone there was an unprecedented
fall in Output of 15 per cent. In other leading industrial countries (with
the exception of the U. S.) progress has slowed down to around 2 per
cent a year (as against a customary 5 per cent in the 1950s and 1960s)
though in contrast to Britain Output has not actually fallen. World
commodity prices stopped rising in 1974 and then feil for a time; then

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