The structuralist theory of inflation was proposed by :
G. Myrdal and P. Streeten
G. Myrdal and P. Streeten — option 1.
What the structuralist theory says. Developed in the 1950s by Gunnar Myrdal and Paul Streeten, and elaborated for Latin America by the Economic Commission for Latin America, it holds that inflation in a developing economy is not primarily a monetary phenomenon but the symptom of structural rigidities — bottlenecks that prevent supply from responding when demand grows.
| Bottleneck | How it generates inflation |
|---|---|
| Agricultural | Food output cannot rise quickly — land tenure, irrigation, low productivity — so food prices lead the general price rise as incomes grow |
| Foreign exchange / balance of payments | Export earnings stagnate while imports of capital goods must grow, forcing devaluation and imported inflation |
| Fiscal or resource | A narrow tax base leaves the state unable to fund development except by deficit financing |
| Infrastructure | Power, transport and credit shortages cap output whatever the demand |
Why the distinction matters for policy. This is the point of the theory, not a historical footnote :
| Monetarist view | Structuralist view | |
|---|---|---|
| Cause of inflation | Excess growth of the money supply — “always and everywhere a monetary phenomenon” | Rigidities on the supply side of a developing economy |
| Remedy | Monetary restraint; control credit and deficits | Investment to remove the bottlenecks — agriculture, infrastructure, exports |
| Cost of the remedy | Contraction and unemployment | Slower, but preserves growth |
Why the other names appear. Milton Friedman is the leading monetarist — the opposing position, so he is the sharpest distractor. V. N. Pandit worked on inflation in the Indian context. Fritz Machlup is associated with the economics of information and knowledge production rather than inflation theory.
The Indian relevance is direct: episodes of Indian inflation have repeatedly been led by food and fuel rather than by aggregate demand, which is the structuralist pattern and the reason the debate is examined in this syllabus.
Hence, the answer is G. Myrdal and P. Streeten.
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