Aggregate demand, conflict and capacity in the inflationary process

This paper focuses on an alternative perspective on inflationto that of the non-accelerating inflation rate of unemployment(NAIRU). It indicates that there are no automatic forces leadingto a level of aggregate demand consistent with constant inflation.Inflationary pressures arise from conflict over income shares,and from cost elements, with the price of raw materials, especiallyoil, being the most important. There are supply-side factorsimpinging on the inflationary process, which arise from thelevel of productive capacity (relative to aggregate demand).The supply-side constraints are viewed as arising from capacityconstraints, rather than from the operation of the labour market.