Economics, Inflation, and the Role of the State: Political Implications of the McCracken Report

Abstract

A recent report commissioned by the OECD,Towards Full Employment and Price Stability, represents an attempt by mainstream economists to account for world capitalism's economic difficulties during the 1970's, and to prescribe solutions. Although the report identifies the key sources of inflation and recession as political and social, it carefully analyzes only economic processes. Yet it makes a political argument: that democratic states must discipline their citizens more effectively in order to conform to the requirements of capitalism. This conclusion rests on unexamined normative assumptions, and fails to consider questions of political feasibility. The report is deficient both as explanatory theory (due to its political and sociological naivete) and as policy science (due to its pervasive ideological bias). Its weaknesses indicate the need for better political and sociological analysis to complement economic theories of inflation and recession.