The beneficial economic effects of all freeing regulations and measures that allow to reduce inflation and strengthen flexibility, competition, innovation and productivity, do not only remain in those factors that favour stabilization but through them can exercise a considerable positive influence on the creation of employment. For this it is necessary to remember some notions of theory and economic policy regarding the relationship between unemployment and inflation.
For the last twenty years at least, serious doubts have been raised about the effectiveness of demand policies inspired by the Keynesian models that sustained the apparent empiric evidence of the Philips curve. It is widely known that in 1958, Phillips published an article that as a typical example of the unknown effects that take place in the world of ideas and in the economic environment, had a decisive influence, on theory as much as on economic politics. In that article, a relationship of exchange was established of decreasing character between the rate of variation of monetary wages and that of unemployment. The empiric analysis was carried out initially for the English economy and was also projected to other countries. Lipsey carried out the theoretical analysis, inserting it in the Keynesian pattern insinuating that the rate of salary inflation is the result of excess demand in the job market. Samuelson and Solow drew up the model again, modifying the Philips curve and establishing a relationship, also decreasing, between inflation and unemployment. That inverse relationship soon become dogma for the incomprehensible vicissitudes of scientific opinion, and exercised a decisive influence on and attraction for the political representatives of all tendencies. The accountable politicians believed they had found the Philosopher's stone that allowed them to choose the combinations of inflation and unemployment desired in each situation. This produced an enviable security and satisfaction for them.
The house of cards that sustained the macroeconomics of that charmed city began to collapse with the loss of empiric stability of the relationship and through the contributions of Friedman and Phelps, with the problems that arise from a lack of micro-economic foundation especially in the job market. Soon the workers begin to negotiate real wages with the absence of monetary illusion, keeping in mind the rate of prospective inflation when signing their contracts. Then the natural rate of unemployment appears that is the level of balance of the work market where the expected rate of inflation coincides with the effective rate. According to the accelerationist theory, when incorporating workers' and managers' expectations, expansive policies are not capable of reducing unemployment below the natural rate in the medium and long term, and the Philips curve tends to be vertical in the long term, located at the level of the natural rate of unemployment. We become conscious again that inflation is a monetary phenomenon and that there is no trade-off between inflation and long-term unemployment. When they exist they are transitory and unstable; demand policies cannot affect growth and long term employment. Any artificial attempt at maintaining the unemployment rate below the natural one will accelerate inflation and, as an important colophon for our arguments, the natural rate of unemployment can only change by improving micro-economic supply policies.
With the contributions of Rational Expectations and the models of the new classics, one can conclude theoretically, and it is also observed empirically that demand policies, besides generating uncertainties and instability, do not have effects on revenue and employment as long as they do not surprise the economic agents since these learn from systematic fraud. One can conclude then that inflation rates can decrease without costs in unemployment terms and that politicians should be believable on the part of citizens. When the economic agents get used to living in an economic environment where they observe the establishment of the free markets, and seriousness in the fiscal and monetary politics of macroeconomic character, making an effort to act in an anti-inflationist way, the costs of reducing inflation are practically nonexistent. In favour of the anti-inflationist culture, they then play on the expectations of the citizens. If the situation that is glimpsed on the macroeconomic horizon is a context where politicians enjoy little credibility and rigidities remain here and there in the different sectors, deflation is an arduous and almost impossible task then. The nucleus of the Keynesian thesis has even been denied by the facts when observing that the fiscal deficit is not only expansive but rather it could be the cause of the depression. High levels of indebtedness cause depressive consequences. "The countries of the European Union are a clear example of the depressive consequences caused by swollen levels of indebtedness. If the public deficit stimulated the economy, continental Europe would have been living an intensive recovery for several years now. Cutting fiscal imbalances has expansive effects because it cuts interest rates, which stimulates investment. If that cutting is also perceived as permanent, the social and economic agents advance future tax discounts, which stimulates private expense. This is to a great extent what is happening now in Spain." (Bernaldo de Quirós, 1998)
The conclusion is reached therefore that the relationship between inflation and unemployment not only does not fall, but rather the effects of the agents' expectations, the supply policies, liberalization of the markets, globalisation and international freedom of capitals make this relationship positive. That is to say, that with less inflation there is less unemployment. With more inflation there is uncertainty, escape from capitals, and more unemployment.
If this reasoning is correct, all that favours the culture of stability, saving and deflation would give rise to that, besides direct, voluntary or formal short term employment, the seed and germ of increment of employment in society be planted by the indirect route of decreasing inflation and without silly fears of deflation because of the increment of innovative productivity.

Joseph John Franch Menéu
Gaceta de los Negocios, Madrid 1998