In the past, inflation was associated with growth, often over-rapid growth. The great economic depressions of the late nineteenth century and the 1930s had been accompanied by deflation: precipitate falls in prices and wages caused, as it seemed to observers, by over-rigid currencies and chronic under-spending by governments and citizens alike. But in 1970s Europe the conventional pattern seemed no longer to apply. Instead, western Europe began to experience what was inelegantly dubbed ‘stagflation’: wage/price inflation and economic slowdown at the same time.
