Personal Income Distribution and Inflation

Abstract

An essential undercurrent of all our present inflations, one of the main contributions to the long-term trend of a rising price level over time, can be identified as a political process, as the consequence of near ubiquitous social aspirations. More and more, differences in personal income are no longer to be regarded as socially legitimate. Differences in ability and effort are less and less considered to be "natural" causes of a hierarchy of earnings. In a political society with universal and equal adult suffrage that which is no longer accepted as "right" and "just" is exposed to strong pressures towards change, pressures either for direct political intervention or at least for political permissiveness if social forces of change in the desired direction act autonomously. It is this permissiveness with which we are mainly concerned here. Attempts to equalize all incomes, to abolish income differentials, are nowadays common and vigorous. These attempts to equalize incomes on a microeconomic level — and not so much the attempt to change the distributive shares of profits and wages, an attempt which in itself is only one aspect of a more general move towards distributive equality — are the basic cause of our present inflations. They must be considered the basic cause because, though it would be possible to check them by much political effort, this effort because of the basic underlying social value judgements is not undertaken.