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Summary: The inflationary surge of the 1970s has long served as a cautionary tale, and that episode has shaped how central banks have carried out their mandates ever since. Two recent books revisit the standard narrative about that period in light of the 2021–23 inflation, offering sharply contrasting lessons for the future.


A defining feature of inflation is its tendency to leave a lasting mark on the stories we tell ourselves about how the economy works. Economists often stress the need to “anchor” expectations about future inflation, but our interpretations of past price surges can be as consequential, if not more so.

For decades, the global inflationary surge of the 1970s served as a powerful cautionary tale that guided monetary policymaking in the United States and abroad. It also shaped early perceptions of the post-COVID-19 inflation spike, which began in mid-2021, peaked in mid-2022, and receded by mid-2023. With that episode now behind us, the question remains: What stories will we tell ourselves about it?

The standard narrative of the 1970s holds that fiscal policy in the late 1960s was excessively expansionary. As powerful labour unions ratcheted up wage demands, OPEC-engineered oil price shocks accelerated the trend, fuelling a runaway wage-price spiral. Central banks, facing political pressure, expanded rather than contracted the monetary base. Then, in 1979, Paul Volcker became chair of the US Federal Reserve and imposed sky-high interest rates, reducing credit sharply. While the “Volcker Shock” plunged the American economy into a deep recession and increased unemployment, it finally brought inflation under control.

Inflation, the classic story goes, rises when too much money chases too few goods and services. To contain it, Volcker tightened monetary policy and anchored expectations about its future trajectory. Inflation did not return after the Fed began to ease up in 1982, because central banks’ willingness to raise rates bolstered their credibility. As a result, expectations – and with them inflation itself – remained subdued.

The lesson was clear: central banks must be politically independent – free to manage price levels by adjusting short-term interest rates at their discretion. This became the standard playbook that shaped monetary policy well into the twenty-first century.

But the inflationary surge of 2021-23 called into question both the effectiveness of that strategy and the assumptions underlying it. Do we need a new story about what drives inflation? Two recent books tackle this question, and their answers could not be more different.

On the side of orthodoxy is Brian Griffiths’s Inflation Is About More Than Money. A grizzled veteran of the United Kingdom’s inflation battles of the 1970s who later became Prime Minister Margaret Thatcher’s chief policy adviser, Griffiths believes that the old inflation playbook is “clearly still of value.” Had governments followed it during and after the pandemic, he argues, the 2021-23 inflationary surge would not have been nearly as severe.

Mark Blyth and Nicolò Fraccaroli take the opposite view. The key takeaway from their book, Inflation: A Guide for Users and Losers, is that “the inflation playbook we inherited from the 1970s and ‘80s might be filled with the wrong plays.” More provocatively, Blyth and Fraccaroli contend that the current framework itself rests on a false narrative. If stories about inflation shape economic policy, they write, then we need new ones to keep future price increases in check without crushing ordinary people.

The Limits of Monetarism

As an unapologetic defender of the Volcker playbook, Griffiths naturally begins his account with the familiar inflation narrative. He subscribes to the economic doctrine known as “monetarism,” a modern variant of the older quantity theory of money captured by Milton Friedman’s famous dictum: “Inflation is always and everywhere a monetary phenomenon.”

In today’s world of fiat currency, governments can create money at will. Inflation, the monetarists argue, rises when fiscal or monetary authorities inject too much of it into the economy. A central tenet of this doctrine is that demand for money is stable: any increase in the money supply will inevitably be spent on goods rather than stored as savings. Another is that there are predictable “lags” between monetary expansion, the resulting boost in output, and the eventual increase in prices.

Monetarism provides a one-size-fits-all explanation: in the long run, reckless monetary and fiscal expansion inevitably stokes inflation. Economies may diverge from this pattern for a time, but eventually succumb to it. After all, that is what happened in the 1970s. And that is why, as early as August 2020, Griffiths was sounding the alarm. Confronted with the extraordinary monetary and fiscal stimulus rolled out in response to the COVID-19 pandemic, he warned that inflation was imminent.

That prediction proved correct, but was monetarism truly vindicated? Even Griffiths concedes that the version of monetarism Friedman and he championed in the 1970s needs to be revised. He now promotes what he calls “pragmatic monetarism,” which acknowledges that supply-side shocks can trigger transitory bouts of inflation and that, in the short term, demand for money is not stable.

Griffiths also points to the lesson central banks learned in the 1980s, when, in line with monetarist doctrine, they tried to control the aggregate money supply. Measuring – let alone managing – the total quantity of money proved impossible, partly because private banks create money “endogenously” whenever they offer loans. Thus, in reality, the money supply may follow demand, not government-decreed supply.

Recognising this, central banks abandoned the use of monetary aggregates and instead relied on adjusting short-term interest rates as an indirect way of controlling prices. Griffiths admits that monetarism cannot be reduced to “a precise quantitative relationship.” Quoting Friedrich von Hayek, he concedes that while the quantity theory of money is true, it should not be taken “literally.”

In the face of this insight, Griffiths offers a revised story, according to which the root cause of inflation is always a government-induced increase in the money supply. The effects, however, take time to unfold. An injection of liquidity may at first stimulate the production of goods and services or drive up the value of assets like stocks, bonds, real estate, and art. But in the long run, inflation will rise.

The Moral Case Against Inflation

According to Griffiths, this dynamic characterised the period between 2008 and 2021. In the wake of the global financial crisis, monetary policies worldwide became extraordinarily expansionary, as central banks cut interest rates to zero (and sometimes below) and began to buy up assets – an “unconventional” tool known as quantitative easing (QE). Yet, in a blow to monetarism, the post-crisis recovery was weak and consumer price inflation failed to materialise, even as asset prices soared. Inflation finally returned in 2021, seemingly vindicating the long-run logic of monetarism.

But how inflation is addressed is just as important as its causes. Inflation, according to Griffiths, is a form of “deceit” and “theft,” a regressive tax through which governments strip citizens of their wealth. By eroding confidence in the value of money, inflation also diminishes the certainty that underpins commerce and public life. Witch hunts against profiteers, labour strikes, and rent hikes contribute to social strife and erode faith in government and democracy.

Inflationary societies, Griffiths warns, lose their moral bearings: citizens demand ever more from their governments, which respond by printing money, fuelling more inflation and further eroding trust. He recalls British society descending into “anarchy” in the 1970s as public morals – even basic decency – broke down. (During the so-called Winter of Discontent of 1978-79, the dead went unburied for weeks due to strikes.)

Many commentators, Griffiths notes, still confuse inflation’s consequences with its causes. If prices rise because workers demand higher wages than they deserve, that is not the cause of inflation; it is the downstream effect of an earlier increase in the money supply.

For Griffiths, there is only one cure: economic pain. He insists there is “no evidence” that episodes of high inflation have ever ended without interest-rate hikes, public-spending cuts, and job losses – disproportionately borne by low-income households. To rein in the growth of the money supply, he argues, central banks must raise rates and accept high unemployment and recession.

True to form, Griffiths urged central banks to hike interest rates long before they finally acted in late 2021. Their delay, he maintains, stemmed from having been saddled with additional responsibilities, from financial regulation to climate policy, which distracted policymakers from their core mandate of maintaining price stability.

Griffiths rightly observes that government debts around the world today have reached levels once seen only in wartime. To counter this and force permissive democracies to limit public spending, he advocates adopting debt brakes modelled on those of Germany and Switzerland. He also calls for a revival of Victorian moral rectitude, though he admits that the nineteenth century “had many shortcomings” and “regrettable episodes.”

In Griffiths’ telling, the 2021-23 inflationary spike ultimately vindicated the prevailing narrative of the 1970s and 1980s – and the playbook it produced. But given that capitalism thrives on “radical uncertainty,” inflation often surges unexpectedly. The solution, then, is a culture of moral certainty, social trust, and renewed focus on monetary aggregates in central-bank deliberations.

Inflation Wars Are Class Wars

At its core, Griffiths’s inflation story is a defence of austerity: to prevent runaway price growth, governments must tighten their belts. That logic dominated policymaking after the 2008 crisis but faded over the 2010s, paving the way for sweeping fiscal stimulus when the pandemic brought the global economy to a halt. By 2022, however, as prices soared, austerity made a comeback.

This is where Blyth and Fraccaroli enter the debate, building on their earlier work on austerity discourse and its consequences. The two do not reject the monetarist mantra, but they liken saying that “inflation is always and everywhere a monetary phenomenon” to insisting that “shootings are always and everywhere a ballistic phenomenon.” While true, it tells you nothing about who pulled the trigger or why.

That analogy captures Blyth and Fraccaroli’s approach, which is to peel back the averages embedded in consumer price indices to examine which prices are actually rising and for whom. They hold up the evidence, much of it drawn from the 2021-23 surge, against the prevailing inflation story and find that it often collapses under scrutiny.

One narrative Blyth and Fraccaroli reject outright is that inflation’s root cause is always an increase in the money supply driven by government spending. Tracing how US citizens used their pandemic relief checks, they show that the cash left after covering mortgage payments and credit card bills could not possibly explain the scale of the 2021-23 price increases. Moreover, some countries that provided only limited stimulus, like Germany, experienced worse inflation than others that spent far more.

Blyth and Fraccaroli question the very notion of root causes or timeless regularities. In their view, the economy is driven by a never-ending series of short-term events and shocks, with causal chains that are multifaceted and cumulative rather than reducible to a single rule. What matters least to them is what Griffiths thinks matters most: that inflation and hyperinflation start the same way. Hyperinflation, they note, is exceedingly rare, and the most recent price surge bears no resemblance to one.

Instead of focusing solely on what triggered the post-pandemic inflationary burst, Blyth and Fraccaroli examine what sustained it. While they acknowledge that government spending may have played some role, they place greater weight on supply bottlenecks that accompanied the transition out of COVID-19 lockdowns – drawing parallels to the years after World War II – and the aftershocks of Russia’s invasion of Ukraine.

More fundamentally, is inflation really such a scourge? As Blyth and Fraccaroli point out, mass unemployment is far more damaging to a society overall. Still, inflation’s effects are uneven. Low-income households, for example, spend most of what they earn on essentials like food, so when food prices spike, they are hit especially hard. Retirees living on savings also lose out as inflation erodes the value of their nest eggs. By contrast, households with fixed-rate mortgages may even benefit, as inflation erodes the real value of their debt and softens the blow to purchasing power.

The burden of inflation varies across countries. In the US, for example, rising gasoline prices are felt more acutely because Americans rely so heavily on driving. Whether a country is a debtor or a creditor also makes a huge difference: borrowers benefit from the decline in the real value of their debts, while creditors are repaid in devalued currency.

But the biggest winners of 2021-23 were undoubtedly large corporations. The fossil-fuel sector, supercharged by Russia’s war in Ukraine, reaped record profits. In other sectors, firms with monopoly or near-monopoly power passed on rising costs to consumers and seized the moment to boost their profit margins – a phenomenon known as “sellers’ inflation.”

This raises the question: Is inflation a weapon of class warfare? In terms of its effects, the answer, for Blyth and Fraccaroli, is a resounding yes.

What Economists Still Get Wrong About Inflation

Many mainstream economists misread the 2021-23 episode in real time, warning that government spending was overheating labour markets and that wages were poised to pull ahead of prices – the dreaded wage-price spiral of the 1970s. But, aside from a few outliers like Lithuania, that spiral never materialised. In the US, for example, real wages fell, while corporate profits soared.

And yet, by late 2021, central banks had already dusted off the Volcker playbook and begun to hike interest rates. Higher rates, the theory went, would trigger a recession and lead to a rise in unemployment, which in turn would reduce inflation. But that’s not what happened. While inflation cooled, labour markets remained hot.

Was it an “immaculate disinflation”? Hardly. Blyth and Fraccaroli cite research questioning the effectiveness of interest-rate hikes as an anti-inflation tool. At best, their impact is indirect. What higher interest rates reliably do is choke off investment – a lasting harm, since investment determines the path of future productivity growth. As they point out, the supposed trade-off between inflation and unemployment is just that: a statistical relationship that may be worth keeping in mind, but, as Hayek warned, should never be taken literally as a precise quantitative rule.

What is certain is that raising rates always creates winners and losers. In 2023, US banks earned $162 billion, eurozone banks €152 billion ($166 billion), and UK banks £39 billion ($42.5 billion) by keeping deposit rates low while pocketing higher returns from central banks. Rate hikes, in other words, padded bank profits even as monetary policymakers touted them as an anti-inflation tool.

But wait: wasn’t it Volcker’s shock therapy that ended the inflationary surge of the 1970s? Blyth and Fraccaroli are unconvinced. In their view, Volcker’s blunt hammer was both unnecessary and applied too late. Once the supply-side shocks passed, they argue, inflation would likely have receded on its own, without the high unemployment and developing-world debt crisis triggered by the Fed’s rate hikes. For Blyth and Fraccaroli, the 1970s were one long “transitory” episode – though that raises the question of what the term “transitory” really means.

To be sure, Blyth and Fraccaroli’s reinterpretation of the 1970s and 1980s is unorthodox and bound to spark intense debate. They go even further, suggesting that the low inflation of the past four decades was not due to politically independent central banks “anchoring” expectations, but rather the result of other forces: the decline of unions, the rise of digital inventory systems, and the availability of cheap labour from the Global South driving down production costs.

The upshot is that the policy playbook must be rewritten. While Blyth and Fraccaroli are not opposed to raising interest rates in certain circumstances, they also consider a wide range of tools that rarely receive serious attention, such as price controls, consumption subsidies, buffer stocks, and windfall taxes.

Their larger point is that policymakers should use multiple tools, often in combination, rather than relying almost exclusively on interest-rate hikes. Crucially, a measure that works in one context may fail in another. During the 2021-23 surge, for example, price controls proved effective in Spain, but backfired in Hungary, owing to differences in the energy component of each country’s consumer price index.

Blyth and Fraccaroli ground their arguments in economic research, but their vision extends beyond it and even beyond Griffiths, who rightly emphasises culture, social ties, and morality. They reject one-size-fits-all models in favour of an institution- and context-specific approach that takes history seriously and accounts for the groups, classes, and firms that shape economies.

The misreading of 2021-23 offers a telling example. Many economists confidently predicted that rising wages would drive up inflation. But they overlooked the collapse of union density and bargaining power since the 1970s, which made a replay of “wage-push” inflation highly unlikely. They also ignored the growing economic concentration that enabled “sellers’ inflation” in the first place.

Too often, economists have clung to outdated inflation narratives and abstract economic models instead of examining the evidence more closely. As a result, we know far less about inflation than we should. Even Griffiths, who criticises central bankers’ pre-pandemic reliance on models that assumed inflation would always remain at 2% simply because central bankers said it would, might agree with this point.

This is not to suggest that economics should be discarded. The quantity theory of money remains valuable, provided it is not taken literally. But we must acknowledge its limits. As Blyth and Fraccaroli show, making sense of inflation requires an understanding of history, political economy, sociology, and psychology. For decades, economists have credited low inflation to “anchored expectations,” without ever asking people what they actually expected. Encouragingly, that is finally starting to change.

The Next Inflation Battle

There are, of course, alternative explanations beyond those offered by Griffiths and by Blyth and Fraccaroli. Even so, their books highlight the central fault lines in today’s inflation debate. Griffiths’s book – essentially an expanded version of his 2020 article – often reads like a premature victory lap, written before inflation eased in the summer of 2023. Blyth and Fraccaroli, by contrast, wrote theirs with the benefit of hindsight and a fuller set of evidence about the 2021-23 surge, much of which undermines Griffiths’s claims.

But Griffiths’s arguments must not be dismissed. The fact that government debt has now climbed to record peacetime levels is cause for serious inquiry, if not necessarily alarm. And one need not pine for the reign of Queen Victoria to appreciate how destabilising sudden bouts of inflation can be. The 2021-23 surge, which toppled political incumbents worldwide, is a case in point, given the role it almost certainly played in returning Donald Trump to the US presidency. Strikingly, Blyth and Fraccaroli say little about these political consequences, or about how inflation affects electoral outcomes.

All told, I find Blyth and Fraccaroli more persuasive than Griffiths, partly because I share their intellectual sensibilities: more comfortable with uncertainty, sceptical of “always and everywhere” arguments, and attuned to politics. A book like theirs, which refuses to bow to received wisdoms and monetarist dogma, could not have been published a decade ago, perhaps not even five years ago.

Still, as fresh and compelling as they are, their arguments will – and should – face pushback. Notably, while Blyth and Fraccaroli poke holes in the old inflation paradigm, they stop short of offering a new one. Their motto – “there really is no single timeless and true story about inflation” – is admittedly far less catchy than Friedman’s “inflation is always and everywhere a monetary phenomenon.”

Fortunately, arguments don’t need to be timeless to be persuasive or influence policymaking. The freshness of Blyth and Fraccaroli’s analysis stands in sharp contrast to Griffiths’s reliance on dated citations and culture-war touchstones from the 1970s. The intellectual momentum, fuelled by a post-2008 wave of academic research, is clearly behind them.

For all their differences, Griffiths, Blyth, and Fraccaroli agree on one thing: with rising government debt and looming climate-driven supply shocks, the next macroeconomic regime is more likely to be inflationary than deflationary. What happens will be decided as much by politics as by ideas. If these books are any indication, the next inflation battle won’t look anything like the last.

Mark Blyth and Nicolò Fraccaroli, Inflation: A Guide for Users and Losers (W. W. Norton, 2025).
Brian Griffiths, Inflation is About More Than Money: Economics, Politics, and the Social Fabric (London Publishing Partnership, 2025).

Jonathan Levy, Professor of History at Sciences Po, is the author of Ages of American Capitalism: A History of the United States (Random House, 2021) and The Real Economy: History and Theory (Princeton University Press, 2025). His future work will include a global history of money and a history of climate change focused on Houston, Texas. Copyright: Project Syndicate.