Demand-led growth under political constraints: a long-run model of conflict inflation

The disciplinary and distributive role of unemployment has long been acknowledged in economic theory and is at the heart of conflict inflation theory. In this article, we combine conflict inflation and growth in an autonomous demand-led model with endogenous distribution. In this way, we extend typical results of conflict inflation models to the long run, finding the following: (a) an inverse relation between the unemployment rate and inflation, in line with the non-accelerationist Phillips curve; (b) an inverse relation between the growth rate of autonomous demand and the unemployment rate and, for this reason; (c) a direct relation between the growth rate of autonomous demand and the wage share. The relationship described in (c) reveals the underlying conflict over the determination of growth patterns, paving the way for an analysis of the political economy of autonomous demand, and in particular, of fiscal and monetary policies. We conclude that macroeconomic policy constitutes another dimension of the conflict between classes over the division of the social product.