there's no sign whatsoever of the wage-price spiral that, in the 1970s, turned a temporary shock from higher oil prices into a persistently high rate of inflation.
He also identifies a mainspring of that wage-price spiral: union power,
Here's an example of the way things used to be: In May 1981, the United Mine Workers signed a contract with coal mine operators locking in wage increases averaging 11 percent a year over the next three years. The union demanded such a large pay hike because it expected the double-digit inflation of the late 1970s to continue; the mine owners thought they could afford to meet the union's demands because they expected big future increases in coal prices, which had risen 40 percent over the previous three years.
At the time, the mine workers' settlement wasn't at all unusual: many workers were getting comparable contracts. Workers and employers were, in effect, engaged in a game of leapfrog: workers would demand big wage increases to keep up with inflation, corporations would pass these higher wages on in prices, rising prices would lead to another round of wage demands, and so on.
The point isn't that unions were greedy. They were doing what they were supposed to do under the Wagner Act--protecting their members interests--in a period of inflationary expectations (fueled in part by the big contracts won by other unions). Yet the larger social result of this institutional arrangement was a destructive game of leapfrog in which the most powerful labor organizations (like the UAW) did quite well, but those without collective bargaining power--that is, most people--got it on the chin. And it took the brutal early-80s recession to wring inflation out of the economy.
Today, though, there's little union power--and little threat of stagflation, says Krugman:
But where are the unions demanding 11-percent-a-year wage increases? ...
And since there isn't a wage-price spiral, we don't need higher interest rates to get inflation under control.
OK. But then why do Democrats want to legislate a restoration of organized labor's power by allowing unions to sign up workers without secret ballots? Do they want to bring back the wage price spiral? The irony seems lost on Krugman, though it's hard to believe it really is.
I suspect it's simply a train of thought Krugman doesn't want to follow right now. His plan for reducing income inequality is built, in part, on rebuilding union strength. Doubt about the wisdom of that effort would complicate things--quite apart from whether it's what his Democratic fan base wants to hear ... 2:59 A.M. link
Dare to Gush: He's not excitable. He's "open to the moment"! ... 1:32 A.M.