THE CONCEPT OF MACROECONOMIC COST AND ITS UTILITY

The proposed "Variable Domestic Cost" includes all net payments by sectors belonging to the productive system (enterprises, credit institutions and government) to all other sectors (households, private non-profit organizations and the rest of the world). Compared with the rate of growth of demand, represented by Gross Domestic Marketable Product at current prices, the rate of growth of VDC per unit produced forms the "profitability function of the nation." Profitability is positively related to the rate of economic growth and to the price/cost relation. A relative deceleration of unit VDC stimulates economic growth, which enlarges the positive difference between price and cost, and that, in turn, accelerates economic growth. Inversely, a relative acceleration of unit VDC brakes economic growth, while a slowdown in production raises unit costs and depresses prices. The resulting fall in profitability stops economic growth.
The main explanatory variables of demand are World trade, monetary and fiscal policy and import prices. The main components of VDC are enterprises' wage costs, social benefits minus social contributions and the government wage bill minus direct taxes payable by households. The fact that in West Germany all these unit costs were increasing more slowly than in France explains why Geman economic growth, much slower than French before 1975, outpaced it after that year, achieving a lower rate of inflation, a larger positive balance of trade and a higher appreciation of the national currency.
The concept of VDC is a useful contribution to the theories of inflation and of economic fluctuations and provides a possible explanation of structural unemployment. Maintaining VDC at a lowest possible level should be considered a major object of economic policy.     

NATIONAL ACCOUNTS AS AN INSTRUMENT FOR THE ANALYSIS OF THE SOURCES OF STAGFLATION AN EXAMPLE: FRANCE AND GERMANY, 1971–79

Stagflation is a combination of an increasing rate of inflation with a decreasing rate of real growth. It appears when the inflationary gap of production costs raises faster than the inflationary gap of expenditures on Gross Domestic Marketable Product. The decomposition of these two gaps into their main elements gives then the possibility of determining the sources of the inflationary increase in costs and the causes of the relative retardation of the inflationary increase in expenditures. The main cause of stagflation in 1974 for France and Germany was the huge rise in oil prices which had not been immediately followed by an equal rise in prices of their exports. The inflationary rise in wages is an almost permanent factor of stagflation in France; in Germany its responsibility is involved only before 1975. In France the insufficient increase in the inflationary gap of expenditures was mainly due to the restrictive monetary policy and to the official price regulation. In Germany the restrictive monetary policy also contributed to the slowdown in demand in 1974 and 1975. In 1977, on the contrary, the main cause of stagflation was the slackening of export demands due to the world recession and the revaluation of the DM.     

INFLATION, REDISTRIBUTION OF FACTORS AND UNEMPLOYMENT: ILLUSTRATED BY THE CASE OF FRANCE

This paper examines the causes and consequences of the inflationary process in terms of its impact upon the national accounting flows, illustrated by the case of France during the period 1966–76. The first section of the paper discusses the apparent causes of inflation, and lays out the circuits through which inflation is propagated. The second section looks behind the apparent causes to examine more closely the reasons for the observed behavior. The final section considers the consequences of inflation in terms of factor allocation, and in turn its impact upon unemployment, the balance of payments, and the rate of growth.