“Don’t look at me for inflation. Look in your fridge.” Charles Mudede
There are two reasons why we talk so much about inflation these days. A: A lot of Americans don’t like it and yet don’t understand it. Two: Republicans see it as the best way to regain control of Congress this year.
Regarding the first reason, ordinary Americans hate inflation even when it is very low. As Zachary D. Carter pointed out in a recent Atlantic post: “In 2013, when inflation was non-existent, a majority of Americans cited inflation as ‘a really big problem’. It’s less popular today.”
We can blame this irrational anti-inflation sentiment entirely on conditioning for several reasons.
On the one hand, inflation is obviously not a bad thing for those who hold debt, many of which belong to the working class. On the other hand, American voters disdain price inflation only selectively. They hate when it hits commodities, but they’ve been conditioned, mostly by the mainstream, not to feel exactly the same way about stock market price inflation or price inflation on the real estate market. Regarding the latter, you even have the curious situation that rent inflation goes almost unnoticed when the consumer price index (CPI) is discussed. These are food, gasoline, clothing, etc. But it only takes a moment of reflection to see that no inflation is approaching average basket than that of housing.
Like Seattle Times Business journalist Heidi Groover wrote in August 2021 that Seattle’s median (not average) rent rose 4% in June of that year, and it was “the sixth straight month with an increase after a steep decline last year, according to rent-tracking company Apartment List.” What makes rent so important is its size relative to other basic assets. This is where David Harvey’s theory of mass and rate is so useful and makes seemingly very complicated phenomena very clear.
Harvey, considering one of the theories of Marxist economics, the falling rate of profit, points out that what matters in economics is not the rate of profit but its size. This means that a small company that makes 15% profit on $500,000 in revenue is a small sum compared to a company that only makes 3% profit on $500 billion in revenue. . Scale or mass is what matters. This reasoning can be applied to the goods and services that make up the consumer price index.
Rent or housing is the primary burden for the working classes, 50% of whom “earn less than $10.22/hour…which is below the poverty line for a family of three.” Thus, even a 4% increase constitutes a considerable budgetary shock for workers. Also, and I must stress this, the housing options as an IPC are very limited. You can’t make cuts in housing with the same ease that you can, say, in food. Reducing meat consumption is far from risking starvation; but a reduction in housing costs strongly increases the risk of homelessness.
These aspects of inflation are almost never discussed. Instead, voters are told that the problem is only one type of inflation, consumer goods. And they are only told that the cause of this inflation is, as the only economist interviewed in the Seattle TimesJacob Vigdor’s article said: “too much money for too few goods”. In economics, this is called demand inflation, which became a key concept in an economic program promoted by the center-left American and British Keynesians who, in the 1960s, synthesized the unorthodox concepts of The general theory of employment, interest and money (1936) with the orthodox views of the neoclassical school. We call this neo-Keynesian synthesis. This gave the world the Phillips curve, a policy tool that capitalist states could use to manage demand-driven inflation.
The basic idea of the Phillips curve was that a government had to make one of two decisions (one balance, one compromise) when it came to inflation. Was he going to support wage increases and full employment at the risk of inflation, or support a large amount of extreme poverty (unemployment) to kill power/demand pull? The Phillips curve offered a model for managing inflation and working class power. This seemed to work for a few years as economic growth (GDP) was strong. But in the 1970s it was challenged and overthrown by right-wing and business interests due to a totally irrelevant economic shock (the 1973 oil crisis) that resulted in stagflation (no economic growth combined with inflation). But the oil crisis, which was real and hit the US economy hard, was a classic example not of demand-driven inflation, but of its opposite, cost-driven inflation.
Cardi B laments inflation: “Everything is high” https://t.co/40EnCw0wJv
—MSN (@MSN) February 11, 2022
Inflation can be triggered by the lack of competition in the market. This hard fact, of course, is not maintained by the mainstream media at all. But a market that has only one major seller (monopoly) or buyer (monopsony) is, at all times, good or bad, naturally exposed to price inflation. Little is said about that, about mergers, about the concentration of capital. No. it has to be demand-driven inflation, and the source of that demand is, of course, the government. During the pandemic, it is believed, the US government pumped far too much money into the economy, and the result was too much demand.
The GOP thinks it’s a winning ticket to 2022 because voters are too dumb to investigate its logic: The government gave workers money during a historic global economic crisis, and it has everything. spoils. So it was better to hurt workers than to have all this inflation which, in truth, has more to do with corporate mergers than with government spending.
Searing inflation is increasing pressure on the Federal Reserve to take drastic action to control prices https://t.co/IWue37HTCz
— CNN (@CNN) February 11, 2022
But how will the GOP handle inflation once it takes office? Raise interest rates, which will only weaken the power of the working class. And because much of the working class is deeply in debt, it will hit them harder than during the Reagan years, when a 20% borrowing rate was used to kill inflation and unions. This time around, the ordinary voter will wake up in the morning and see a credit card bill that will make their eyes pop and their heart pump like never before.