NFLATIONARY TENDENCIES, resulting in rising wages and prices, have prevailed in most countries since the end of World War II. In certain countries, at certain times, they have been due primarily to a tendency for general demand to exceed potential supply. Many governments have tried to counteract these inflationary pressures by relying on fiscal and monetary policies. In other countries, and at other times, however, inflationary tendencies have been due primarily to the attempt of labor as a whole to secure higher real rewards than correspond to its productivity, or to an attempt to maintain wage differentials that are incompatible with the current distribution of demand between different types of labor. The success of such attempts, which presupposes imperfect competition in the labor market, makes it possible for wages to rise faster than productivity even though the real demand for labor may not be, on balance, excessive in the economy. Prices, as a consequence, also tend to rise. A wage-price spiral comes into existence; wages and prices push each other up. Governments, in attempting to resist inflation by influencing wages, may have in mind their effects on the demand for final consumer goods or their effects on costs of production. As income received by a factor of production, wages largely determine the level of consumption in the economy. As a payment to a factor of production, wages enter into costs. Anything that keeps down the level of wages will, therefore, tend to moderate the increase in prices both by reducing consumption demand and by reducing costs of production. The effects of wage changes on the balance of payments also operate through the two channels. On the demand side, a reduction in wages will reduce the level of consumption and hence the need for imports, while