Although macroeconomic policy might be primarily directed at meeting a target for inflation, or unemployment, it can also have unintended effects on the balance of power between the principal actors in the economy – as Mark Blyth pointed out in an article entitled Global Trumpism: Why Trump’s Victory Was 30 Years in the Making and Why It Won’t Stop Here.
- Government policies designed to reduce unemployment after the Second World War had the unintended effect of increasing inflation, as workers were able to demand higher wages when they could easily switch jobs at a time of full employment. Worker power peaked in the 1970s.
- The subsequent policy of reducing inflation, by increasing interest rates, benefited the lenders. It also caused consumer demand to fall, though, as people could no longer afford to borrow money to buy the things they wanted. The resulting unemployment increased the power of employers.
Blyth ascribed the worldwide political backlash, that he called ‘Global Trumpism’, to people’s resentment at their loss of relative power and prosperity – and argued, in an interview entitled “Global Trumpism” And The Revolt Against The Creditor Class, that it will result in further economic change.
Scott Sumner has made The Case For Nominal GDP Targeting, which simultaneously manages inflation and employment. It is argued that this would lead to greater economic stability, but it doesn’t appear to address the issues of inequality and the balance of power between employers and workers.
It is clear that macroeconomic management may be designed to achieve steady economic growth or stability, but it cannot avoid having social and political repercussions.