Monetary and Fiscal Strategies for Ending Inflation
Inflation is increasingly becoming a problem around the world (... in the United States inflation rates are currently the highest in over 40 years) and consumers everywhere are feeling the pressures of elevated costs.
My book on The Prospects for Zero Inflation begins by defining inflation and discusses ways in which it is measured.
I then share with you a new metaphor I have created to describe the process of inflation, and look at historical case studies on the impact inflation has had on the social fabric, along with monetary and fiscal strategies for ending inflation.
In Chapter 9, a new method of taxation is explored that empowers citizens to make democracies even more democratic...
A friend asked, "Most Western central banks target 2 pct inflation. Would zero be better? That is what it was throughout much of history in peacetime under gold standards, wasn't it? Would it make sense in an industrial and post-industrial age?"
Great question. My 19-year-old self asked the same question. (The book was written as a 20th birthday gift to myself.) To quote from the book: Is zero inflation possible? I believe it is. (Arthur Burns, former head of the U.S. Federal Reserve System, apparently thought so too. When asked what he considered an acceptable rate of inflation, he replied, “An acceptable rate of inflation? An acceptable rate? Why, zero. Zero!”)
I haven't been advocating for a static M3, however, but for inflation targeting that tracks the growth of productive output. A metaphor / mental model that describes the process of inflation offered in the book makes this clear...
Inflation targeting as an instrument of central bank policy did not exist when I wrote this book in 1984. New Zealand introduced it in 1990. Canada was the second country to formally adopt inflation targeting in February 1991. The United Kingdom adopted inflation targeting in October 1992 after exiting the European Exchange Rate Mechanism.
The title of the book (The Prospects for Zero Inflation) essentially asks the same question my friend did. Except for a Foreword by Ambassador KP Fabian, I've retained the 1984 version of the book verbatim. If I were to choose a title for the book today it would be Monetary and Fiscal Strategies for Ending Inflation (also the title of a talk I delivered at the Calcutta Management Association in 1995 and the Rotary Club of Kodaikanal in 1996)...
Foreword by Ambassador K.P. Fabian
In 1984 Imon Ghosh handed me a copy of his book The Prospects for Zero Inflation. I was struck by the brevity and the elegant but rigorous reasoning of the book on a subject of vital importance. I am glad that the book is being republished as its value and relevance to our times are in no way diminished by the passage of time.
I recall a conversation in 1991 with Dr. Manmohan Singh, the Finance Minister who opened up India's economy. We were on a flight to Bombay from Delhi. I asked him: While tackling inflation, apart from looking at the statistics given by his officials, did he consult one or two housewives? He asked a counter question: Why should the housewives be consulted as the officials gave scientifically accurate figures. I responded that the decision makers should know how inflation affected and afflicted the household. I do not think I won the argument. I honestly feel that Imon's book should be read by our policy makers, bureaucratic and political.
Imon is a polymath, a dwindling tribe as nowadays scholars know more and more about the less and less. An over mathematicized Economics is divorced from the ground realities. We need to bring back the Political Economy of the 19th century and move away from the Economic Sciences of the 20th century. Imon has made a singular contribution by showing us that it is possible to have a people-centred economics. His ideas about taxation in chapter 9 deserve attention. Imon has wisely argued the case for the tax payers to have a major say in how the money they paid is spent. We the public will be glad to see another book from the same author focused on this matter with actionable recommendations appropriate to the largest democracy.
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This book should be translated into other languages, Indian and foreign, as it is of universal interest.
K.P. Fabian
Professor, Indian Institute of International Law and Former Ambassador of India to Finland, Qatar, and Italy.
New Delhi, 7th May 2017.
Imon Ghosh is a senior management professional with over 25 years of experience in the corporate sector and academia, including as Head of Training for a Fortune 100 MNC in India, and as Director of the Academy of HRD. He is the founder of the Inclusive Growth and Financial Stability Forum and has been an NHRDN National Professor.
Imon is a life member of the All India Management Association, National HRD Network and the Indian Society for Training & Development, as well as the Indian Economic Association, Indian Econometrics Society and the Indian Society of Labour Economics.
Author of books on Inflation, and on Reducing Poverty to Accelerate Economic Growth, and numerous articles, Imon also contributed a chapter on India's Sustainable Economic Growth: Challenges & Prospects published in the United Service Institution of India's Strategic Yearbook 2017. (The USI is Asia's oldest think tank, founded in 1870.)
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