The meaning of an inflation crisis: steel, Enron, and macroeconomic policy

Wesley W. Widmaier

Journal of Post Keynesian Economics, 2005, vol. 27, issue 4, 555-573

Abstract: How do crises shape policy possibilities? While some scholars cast crises as material shocks, this paper offers a Post Keynesian or constructivist theory of crises as events that agents interpret. It contrasts opposing Galbraithian and classical interpretations of the 1962 steel crisis and the 2000-2001 California energy crisis. Whereas Galbraithian interpretations of the former stressed abuses of market power and legitimated wage-price guideposts, classical interpretations of the latter stressed regulatory excesses and delayed the imposition of price caps. This paper concludes that the absence of wage-price guidelines compelled the post-1970s use of austerity to limit inflation, explaining reduced U.S. growth.

Date: 2005
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DOI: 10.1080/01603477.2005.11051461

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