Early neoliberals blamed inflation on the welfare state and development ambitions, not economics.

Evidence

At the 1958 MPS meeting, the Mexican law professor Gustavo Velasco argued that such politicisation in his country was the consequence of underdevelopment. The harmful effects of inflation in Mexico had been primarily psychological, he argued. ‘Mexico has had and still has inflation because it has lived beyond its means.’ Velasco attributed the underlying causes of inflation to three factors: the welfare state, the desire for economic betterment, and the desire for economic development. Inflation, he argued, resulted from access to subsidised goods and services (provided by a government that acted as a ‘third-dimensional Santa Claus’), upward pressure on wages as a result of trade union action, and over-investment by the government. — Jessica Whyte, The Morals of the Market, 301

Categorization

• SEED: Essay angle: the prehistory of blaming inflation on welfare generosity and public expectations, a framing that later anchored austerity doctrine.
• CANDY: The depiction of government as a ‘third-dimensional Santa Claus’ giving subsidized goods is a memorably pithy period quote.
• XREF: connects to: Neoliberals wanted an international order forcing anti-inflationary policy onto states — Dieter Plehwe, Quinn Slobodian & Philip Mirowski (eds.), Nine Lives of Neoliberalism, 425

Broader Connections

• Neoliberals wanted an international order forcing anti-inflationary policy onto states #expands (0.75) — Dieter Plehwe, Quinn Slobodian & Philip Mirowski (eds.), Nine Lives of Neoliberalism, 425