Argument: High inflation and economic instability have historically led to authoritarian regimes

Issue Report: Dollarization


  • Steven Horwitz, “Microfoundations and Macroeconomics: An Austrian Perspective”, Routledge, 2000 “As inflation began to separate wealth from want-satisfying production and rewarded those with superior financial know-how , it is also not surprising that those on the losing end of the inflation would blame the “market” for the perceived injustices in the distribution of wealth any political figure or party who can tap into that combination of anti market and anti internationalist sentiment can easily make it sound like contractual relationships are subversive of social cooperation(…) and that a more intentional form of “cooperation” enforced by the state will better bring about social stability and cohesiveness With the economic chaos that inflation creates, along with the perceived injustices in the distribution of wealth, it is also understandable that societies suffering from significant levels of inflation would move away from contract and toward hegemony as the basis for social order. This is the ultimate danger inherent in the move from markets to political resource allocation processes. The danger is no less present in democratic societies than in non democratic ones. The concept of a hegemonic society does not necessarily require totalitarianism. (…).All the sots of interventions we have seen ,and might see to combat the effects of inflation necessarily involve a substitution of command and control for contract and exchange. These interventions might well be passed by a democratically elected legislature, but they are still pushing the social order away from the contractual cooperation and toward hegemonic relationships,through perhaps more polycentric one than would be the case in a true dictatorship.