Conflict Inflation: Keynesian Path Dependency or Marxian Cumulation?

Notions of conflict inflation have been central to neo‐Marxian and post‐Keynesian economics. There are tensions, however, within the Marxian/post‐Keynesian camp. Post‐Keynesians emphasize weak feedback effects between price and wage inflation, thereby preserving the importance of aggregate demand in the determination of output and employment in the medium and long run. Like Kalecki in his famous analysis of “Political aspects of full employment”, Marxists typically suggest, on the contrary, that if unemployment is kept low, cumulative increases in workers' power and militancy imply severe limitations of aggregate demand policy in the long run. The paper discusses these rival perspectives and their implications, suggesting that (i) valid Marxian concerns are likely to derail ambitious reform programs that rely on fiscal expansion, (ii) Kalecki's analysis failed to recognize the centrality of inflation for aggregate demand policy and the multidimensional character of class conflict, and (iii) rather than focus on the wage struggle, labor movements may benefit from prioritizing political and institutional change.