Professor Tim Congdon calls for a return by central banks to targeting the quantity of money as an answer to the incipient threat of inflation (“Let’s revive the seventies habit of targeting the money supply”, Letters, March 9). However, he ignores an important and fundamental change in the economic structure of the world’s developed economies since the early 80s.

While the monetary measures taken by Paul Volker in 1982 to defeat the inflation of the 1970s successfully led to the so-called Great Moderation of the next 25 years, what reinforced this trend was a parallel shift in the global labour market. Globalisation, moving millions of jobs from developed to developing economies, together with the IT and later the artificial intelligence revolutions, resulted over the same period in a steady fall in the returns to labour.

As a recent study by the Bureau of Labour Statistics showed, over the last five decades middle-class earnings in the US, adjusted for inflation, have fallen by more than 11 per cent. The present federal minimum wage of $7.25, adjusted for inflation, would be more than $20.

At the same time the US Gini inequality coefficient has soared. It is not difficult to see a link between these statistics and the fall in both inflation and growth. A broad-brush targeting of the money supply of the kind advocated by Professor Congdon would no doubt vanquish inflation but the social cost would continue to be dire.

More than 100 years ago Henry Ford doubled the wages of his workers. His answer to the reactions of his angry competitors was: “If I don’t pay them well, who’s going to buy my cars?”.

After the growing disparity of the last 40 years, there is a need for a more equitable balance between capital and labour, achieved through fiscal rather than monetary measures. The recently-passed $1.9tn recovery bill in the US will not be the last of its kind.