Class Conflict and the “Natural Rate of Unemployment”
Author(s)
Pollin, Robert
Abstract
The conventional argument that low rates of unemployment would lead to accelerating inflation stems from the so-called natural rate of unemployment theory, a term first advanced by Milton Friedman (1968). The natural rate theory is not just about predicting a precise unemployment-rate figure below which inflation must inexorably accelerate, even though many mainstream economists have presented the natural rate theory in this way. At a deeper level, the natural rate theory is an expression of the idea that, in a capitalist economy, sustaining full employment at decent wages is a difficult proposition that depends on how the inherent conflicts between workers and capitalists are resolved. As such, the natural rate theory actually contains a legitimate foundation in truth amid a welter of sloppy and silly predictions. Despite the numerous and sometimes egregious failings of the model, it still captures – along with the Marx (1967)/Kalecki (1971) framework – basic truths about the nature of class conflict in the contemporary economy.
