Ways progressives lose: inflation

Lots of soul searching is taking place right now about how the Democrats lost the election to Donald Trump.

This year I’ve been supporting the work of one of the world’s leading experts on inflation, the US-based German economist, Isabella Weber.

Isabella is prodigiously busy and productive somehow managing to keep to a full teaching schedule, production line of academic papers and book writing whilst also crowbarring her way into the opinion pages and studios of elite agenda setting media.

It’s hard to get in The New York Times, FT, Bloomberg or Atlantic unless you are already considered part of the economics thought leadership elite.

As far back as 2021 Isabella correctly called the political consequences of the inflation spike that many believe contributed to the collapse of the Democratic vote last week, reviving the concept of “Seller’s inflation” to explain the conflict, corporate profit margins and climate-based factors, at the root of the cost of living crisis that’s wrecked livelihoods across the global north.

What did she get in response? Abuse. Particularly from the mostly male, pale and stale economics establishment.

What’s surprised me has been how absent inflation has been from the UK think tank and campaigning space. Apart from a couple of reports by the Institute for Public Policy Research, sporadic efforts by trade union Unite and the efforts of economist James Meadway the cost of living crisis has more or less passed without note, a natural and a more-or-less acceptable consequence of covid and war.

There has been some campaigning but nothing that will leave a mark on Treasury or Bank of England thinking the next time inflation emerges to rob families of their financial security.

What’s puzzled me most has been the unwillingness of left-leaning economists to challenge the orthodoxies around anti-inflationary policy. The unwillingness to challenge our approach to inflation by citing the examples of countries like Greece, Spain or France that took “unorthodox” steps to tackle the consequences of inflation by imposing things like price caps or limits on the amount of margin that corporates can take. The example of corporates like Carrefore who banned the sale of goods offered by price gougers like Pepsi.

We’ve been weirdly silent about it, all of it.

When the current inflationary cycle kicked off, the UK’s complacent economic and media club reached for predictable and outdated explanations: inflation is always caused by wages, they said. It’s this type of “unthinking” that makes it easy to inflict higher and higher interest rates on a public that is reeling after years of stagnant wage growth. The only ones who benefit are the wealthy elite.

It’s a problem if an inflation crisis caused by war and composed mostly by corporate profit (not wages as everyone including the Bank of England initially sought to claim) left 10 million families without enough food and fails to prompt a shift in how we think about price stability and its impact on voters. This lack of thinking means there will be no change to the Bank of England’s thinking about price stability, no conversation at all about what drove inflation and the role that corporate profiteering played in protecting margins while people’s literal food consumption dropped through the floor.

It leaves the door open to reactionary explanations when inflation occurs next time around. It’s already clear that the Trump regime will blame state spending, “green stuff” and…. wages again, when inflation re-occurs.

Some would argue that the lack of discussion is down to funding models, the absence of any money from donors to fund campaigning alternatives to orthodox pricing policies.

Sure, funding is not limitless, but it’s also a matter of choice and I’ve seen no appetite among progressives to challenge the assumptions of interest rate setters or to unsettle the cosy consensus that accepts it is normal for companies to keep and expand margins in a cost of living crisis, as ordinary people starve.

Which brings us back to the US and the spectacular defeat of the Democrats. As an outsider one of the most jarring aspects of the Biden administration was the mismatch between the rhetoric of Dems on inflation and their actions.

Biden regularly - and correctly - pointed the finger of blame at corporates for their price gouging, shrinkflation and greed, even taking out an ad in the middle of the SuperBowl to berate companies for rinsing the American public in the midst of the crisis.

Yet aside from technocratic anti-trust measures that the public barely notice, he did nothing to show and tell the voters that he was on their side against inflation as they traversed the grocery aisles of the US. No price caps on healthy food basics, no additional taxes on the extortionate margins taken by nappy makers.

If inflation is part of the mix of reasons why US voters rejected the Democrats then - unlike the UK - it wasn’t because of a lack of effort by progressive groups to bump corporate-driven inflation up the agenda in a way that landed with ordinary people.

No, it was the failure of a progressive and technocratic elite to actually act that did for the Dems.