Mr. Fertig is a columnist on economic affairs, New York World Telegram and Sun and other Scripps-Howard newspapers, in which this column first appeared August 24, 1959.
Warning! Inflationists (and those who fall under their influence) are now operating under an effective disguise. Since they know that the word inflation is unpopular, they do not dare to openly endorse it. Instead, they try to achieve their objective by hiding behind a more popular word.
The inflationists’ new device is to wave the banner of "growth." Of course, they say, we are against inflation. Of course, they assert, we are not in favor of zooming prices. But after all, they quickly ask, isn’t growth the really important thing—shouldn’t we achieve growth (with government in the driver’s seat as planner and spender) even at the expense of some inflation?
By phrasing the issue this way they imply that inflation promotes growth. They imply that anti-inflationary measures and a stable or declining price level actually prevent growth. These assertions are made despite a long history which proves that the opposite is true. Inflation actually endangers sound growth. Much factual evidence on this growth-inflation subject is available, but within this brief column we have room for only a few instances.
German and British Experience
Take the course of the Federal Republic of Germany and of
Another historic instance of growth is the period in the
These are just two instances of growth and anti-inflation going hand in hand. Other recent cases are the
A False Conflict
Recently, statements by several important figures reveal how widespread is this growth-inflation policy. Dag Hammarskjold, Secretary-General of the United Nations, recently stated that modern industrial nations have been inclined to favor policies aimed at price stability instead of encouraging growth. (Note how he poses a false conflict.) Price stability has not been well won, he said, if its cost is economic stagnation—even though the stagnation is on a high level. Mr. Hammarskjold’s statement turns out to be a slightly disguised brief in favor of inflation, which has nearly ruined so many European nations. In this country, on the TV program "Meet the Press," Governor Nelson Rockefeller was asked whether he agreed with President Eisenhower that inflation is "the great issue of our national life." Governor Rockefeller hesitated and said, "I’m not sure. I think this is certainly an integral part of the total issue. I think the economic growth of our country and the adequacy of job opportunities… are the root, really."
As the Twig Is Bent
Now it certainly would be unfair to call the Governor an inflationist, although his liking for expanded, costly government activities is well known. But it is evident, from his statement that he has come to the same fallacious assumptions that the inflationists make. His thinking is no different from that of Professor Sumner Slichter of Harvard, who must be given due credit for openly and honestly advocating "creeping" inflation.
Similar logic is employed by the Democratic Advisory Committee and by Mr. Leon Keyserling. They persistently urge cheap money, giant-sized government expenditures, and budgets unbalanced temporarily (they hope) to create growth.
Increased Saving and Increased Investment
There is only one way to achieve growth—that is, by increased savings and by increased investment in the tools of production. In this way there is a greater flow of goods resulting from every hour of human labor. Anti-inflationary policies encourage growth because people are inclined to save more when they have a conviction that the dollar they put aside today for future use will not be eaten up by the price increases of tomorrow. People save less when they are convinced that the dollar saved today may be worth only 50¢ or only a dime after many years.
Those who think that it is up to the government to create growth overlook the fact that increased productivity depends upon the intelligence, work, and thrift of individuals and corporations. People—not government—create growth. All the government can do is to encourage people to save and invest. This is accomplished by curtailing government spending and encouraging sound fiscal and monetary policies. The evidence is plain that sound growth is achieved by fighting inflation, not by encouraging it.