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Inflation Eats the Rich

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In September, Joe Manchin came out with a good ol’ Wall Street Journal explainer titled, ‘Why I Won’t Support Spending Another $3.5 Trillion.’ He declares: “An overheating economy has imposed a costly ‘inflation tax’ on every middle – and working-class American.”

Manchin says he can’t pass a highly popular spending bill due to his concern for the middle and working class. This is laughable on its face – just in case the reader is not familiar with Manchin: he voted against the $15 minimum wage (though it would have benefited thousands in his own state), he advocated to end unemployment for struggling workers during COVID because he felt it was too generous and incentivized laziness, and he has fought for strict means testing and work requirements as a condition of any government benefit (e.g. stipend checks, the child tax credit, and even, paid leave) for the same disgusting reasons. He is adamantly against raising the corporate tax rate, and killed the billionaire wealth tax. All while he comfortably can choose to work, or not, from the safety of his yacht and his coal fortune. He has no concern for working people. 

Manchin is not alone – the media also premises its breathless inflation coverage on a concern for the everyday American, and people’s ability to afford the things they need. Jake Tapper, who has covered the “dire” inflation situation for weeks on his Sunday show, tells us: “Soaring inflation puts the screws to everyday Americans…[who] are seeing higher prices on everything from gas to groceries.” 

But for all of their rhetoric, the fact is that inflation hits the wealthy and creditors much harder than it hits working people and those on the lower end of the income bracket – who are overwhelmingly doing the most important work that society cannot live without. If Manchin’s or the media’s inflation concerns were really for everyday working people and the affordability of goods and services in the economy, the conversation would look much different and focus on solutions that would actually help everyday working people. Instead, the inflation discussion is used, as it always has been, to fearmonger against vital government spending that the American people need, and deserve. The reason people like Joe Manchin and Jake Tapper care about inflation, is because the wealthy care about inflation.

For example, last week Tapper grilled Brian Deese, who is Biden’s Director of the National Economic Council. In the interview, Tapper asks: “…you talk about the Build Back Better Act, which is $1.75 trillion, as a solution to this problem. But…Larry Summers, he pointed this week to the $1.9 trillion American Rescue Plan that was passed earlier this year in March. He said that’s a major reason behind the rising inflation, something he called at the time ‘the least responsible macroeconomic policy we have had in the last 40 years.’” 

Here Tapper decided to regurgitate a Summers’ talking point from March, while ignoring that a few days prior to his interview with Deese, Summers had admitted, albeit quietly, that Build Back Better (BBB), and the Bipartisan Infrastructure Bill (BIF), are not inflationary, telling Chris Cuomo: “…the two spending bills together…unlike what they [the government] did last spring, are paid for by tax increases. So I don’t think that’s an inflation problem.” Moody’s Analytics also made this point months ago in a report explaining that the bills are not inflationary. Even more grotesque, Tapper’s concern for the everyday American apparently does not stretch far enough to mention that since the passage of the American Rescue Plan, earners at the lower 40% of the income scale have seen historic salary gains that have far outstripped inflation. Incidentally, this is also a cohort who depended on the spending contained in the American Rescue Plan, that Summers deems irresponsible. Regardless of all available evidence to the contrary, the press continues to collapse any policy proposal into ‘spending’ that will further exacerbate inflation. 

The mainstream media’s coverage of inflation is bad and disingenuous because it is motivated by a specific purpose and seeks a particular policy outcome, which is austerity. Face the Nation’s Margaret Brennan joined the pile-on in her interview with Treasury Secr. Janet Yellen that focused almost entirely on inflation: “there could be a political cost to this, which is why I ask…” Brennan’s thinly veiled threat is that the media’s obsession with inflation will continue to flood the airwaves, until the administration ‘does something about it’ – though, it is quite clear what that something is as they told us time and again in their opinion BBB ‘won’t do anything.’ Several nominal leftists who do not understand the economy have gotten swept up in the barrage of rhetoric. All have lent welcome cover to the bill’s detractors who were emboldened to continually whittle it down to its current state that is a pathetic ghost of its original vision.

Cartels and Monopolies are the ones raising prices

One of the figures being cited over and over again is soaring gas prices. Mind you, the discussion has not focused on the need for investment in alternative energy. Nor, on whether the criminal fossil fuel industry should be a primary beneficiary of the bipartisan infrastructure bill. No, instead, Tapper and Brennan cite the (misleading) statistic that gasoline prices are up 50%, and nearly in the same breath use this as a pretense to question whether the government spending in BBB can be justified. 

In their panicked discourse, it has become clear that these pundits (as conduits for the corporations that employ them) are clinging to a dead economic theory called monetarism to serve as the basis for their zombie talking points. Though disproven decades ago, the myth that inflation is a function of the money supply is too convenient to be excised because it constrains political will, while justifying policies that severely diminish labor power. It therefore continues to enjoy a fruitful life after death.

Monetarism is an economic theory that says keeping inflation low is the foundation of prosperity (a purely ideological claim – more on this later). It also states that if there is inflation, it is always a function of the amount of money in circulation. So, if prices are rising, it is because there is too much money chasing too few goods. Monetarists hold that the solution therefore must be to reduce the money supply to let prices go back down. This is achieved with fiscal policy (ie, reducing government spending), or monetary policy (the Fed can hike interest rates, and/or, buy bonds). 

The problem is that monetarism – an innovation of Reagan economics – is a dead economic theory, as Reagan’s own administration was forced to announce in 1986. Its central claims have been disproven time and again, with replete examples showing that the amount of money in circulation has no predictable effect on inflation whatsoever. The reason that monetarism fails is because the theory and the economists that still subscribe to it (ie, Summers), refuse to take into account that prices are not set in a vacuum – there are other real world factors apart from the money supply that directly dictate the price of any one particular good.

In July, OPEC Plus, a group of 23 nations led by Saudi Arabia that account for 40% of the world’s crude oil production, agreed to an output increase each month by 400,000 barrels per day. This is considered a modest increase, and insufficient to meet global demand. Despite international pressure, in October OPEC Plus confirmed production would stay in line with the July agreement. Speculation in the New York Times is that OPEC plus will not increase output unless oil prices rise to above $80 for a sustained period of time. As of November 23, oil is $78 per barrel. 

While every major news outlet is repeating the figure that gas prices have doubled from a year ago, this figure is misleading. It conveniently fails to account for the nose dive that prices took during 2020 when they sank 20%, for a year average of $39/barrel. If you compare the average price in 2019 to 2021, the spike looks much less drastic, showing a 20% increase (average $56/barrel in 2019 to $67/barrel in 2021). Gas prices are going back down as we speak, and the 2021 average may end up being even lower. For some additional context, in 2018, the average was $65/barrel. All of this to say, when it comes to oil and gas, it’s not the money supply, it’s the cartel’s behavior. 

If the press or politicians were really interested in tackling unaffordable gas, and the basic ability of so many to meet their energy needs, we would be talking about investments in green energy and public transportation. Instead, the conversation on Capitol Hill and the mainstream media has been about how the administration should be wary of making any more investments in the American people.  

Nearly all of the goods that are cited as the topline inflation concerns are ones that are set by a few monopoly producers. It is well documented that both the dairy and meat industries operate as near total monopolies. To the extent price increases are a function of additional money in circulation, this is merely an indicator of the monopolists’ power to set prices – as they have done throughout the pandemic – to suck up what profit they can. Antitrust enforcement would go a lot further to promote affordability in the economy for goods that people need.

They’re Not Worried About Inflation Hurting You

Regardless, the press continues to advocate for austerity. As described above, the idea that austerity would resolve inflation is based on a disproven economic theory. However, even if it were true that taking away government spending or hiking interest rates would reduce demand and therefore get rid of inflation – it is a paltry and inhumane approach to solving the very real problems in our economy. All it will do is further reduce people’s real ability to purchase things that they need. But, that is actually the point of those policies. 

Whenever austerity has been deployed in the past, it has done little to nothing to address inflation. It has resulted in increased unemployment, decreased wages, and a lowered standard of living. Ryan Cooper points out in a great article that this was indeed the explicit purpose of the Fed’s policies under Reagan. At the time, Fed chairman Paul Volcker hiked interest rates to the highest they had been since the Civil War with the intention of breaking inflation. In the aftermath, it is unclear he did anything other than send the economy into two recessions that rivaled the Great Depression with 4 million Americans losing their jobs. But hey, creditors and the wealthy did not see their wealth diminish.

Oiling the exploitation machine, oh sorry, I meant, “supply chain” 

Absent in Tapper’s laundry list of concerns, from ‘everything’ from meat and eggs to gas, are items that have been chronically high priced and totally unaffordable for everyday Americans for decades. Items like, medical care and prescription drugs, housing, and childcare. These are some of the things that could be moderately addressed by the government’s spending in BBB (at a totally insufficient level, and looking worse by the day). Yet, Tapper hand waves those proposed solutions away, saying that they don’t solve the problem of high priced gas and groceries now. He does not consider that, if housing and childcare are more affordable, perhaps a bump in the price of groceries might not be met with such dismay. He does not consider that the current price tag on everything from our groceries to our gas to our clothes hides an unsustainable system of resource extraction and exploitation that immiserates the globe over. That is because he is focused on capital’s concern with inflation, not about affordability or sustainability, nor the health of working people and the planet. It is hard to see Tapper’s concern as anything other than a preoccupation with the ability of the extraction pipeline to continue – nothing else could really explain the narrow focus and analysis that his questions belie. 

The narrowness of their analysis, and the craven motivations behind it, is perhaps best summarized by Chuck Todd: “If we actually wanted to deal with this issue [of inflation], there are three [ways]: you can raise taxes, you can raise interest rates, you can flood the labor market, right?” 

Margaret Brennan also has gotten the memo. She summarizes how the mainstream media sees the problem, and its preferred solution: “…there is a skilled worker shortage in many places. I mean, are we at a place where we need to increase immigration in order to meet this challenge?” ‘Flooding the labor market’ to ‘break inflation’ is a great rhetorical way to get around what we are really talking about, which is workers and their labor, and finding a way to continue to exploit cheap labor by any means possible. ‘Easing’ immigration is a solution that Stephanie Kelton, MMT advocate, has also put forward.

Opening immigration in response to ongoing humanitarian crises is necessary, and should be done immediately. However, unless temporary workers are given full legal protections and are permitted to become legal permanent residents straightaway, ‘easing immigration’ is an unacceptable and inhumane solution to any ‘labor shortage,’ or inflation. Instead of providing these essential workers with legal protections, this will most likely mean streamlining the application process for H-2A visa workers (e.g. agricultural, and meat processing plant workers), or possibly increasing the caps on H-2B workers (e.g. nurses). We already saw this last year when DHS moved to ease the draconian requirements that attend to H-2A workers, specifically to allow meat processing plant employees to change employers, and extend their visas beyond the typical three year stay. H-2A workers are subjected to unspeakable risks and continue to suffer demeaningly low pay during COVID, all while performing the most essential jobs in our economy. DHS’ new rules did little but facilitate the worsening conditions for this already egregiously exploited workforce. The CDC’s H-2A Employer Health Equity Toolkit outlines the terrifying reality of these ‘jobs,’ and the dangerous nature of the work performed by these employees. 

In addition, there are currently tens of thousands of nonimmigrant workers in the US who have demonstrated they meet the criteria for a green card, but are not allowed to immigrate because their country’s annual number of green cards is oversubscribed. For example, for some Indian foreign nationals the wait is approximately 10 years. This keeps these individuals in perpetual state of temporary work and exploitation. 

While media pundits with no expertise predictably regurgitate the problem of a ‘labor shortage,’ those on the ground, and the actual data, tell a very different story. The truck driver shortage for example, is not new. The shortage goes back to the 80’s, and is a gift of deregulation that wreaked havoc on the labor conditions for drivers. While the problem has been exacerbated by the pandemic, the teamsters have been saying for years that the true cause of the ‘labor shortage’ is a shortage of good paying jobs with acceptable working conditions. Though this hasn’t changed, the pandemic has given us another chance to confirm that, they are right. Trucking wages rose 6.7% in April 2020 after COVID hit. At the same time, the number of truckers went up 7%. As Chuck Stiles, head of the Solid Waste and Recycling Division of the Teamsters union, points out, data from the Bureau of Labor Statistics further confirms that when trucking companies cut wages later on, employment also went down. Only 20% of the drivers at US ports are paid hourly, while the rest are paid per delivery, meaning they perform hours of unpaid work. As if that was not enough, the Biden administration’s recent deal with the port of Los Angeles walked over the few union contracts there are to make their work more dangerous and demanding than before. 

It is no secret that many US employees of major multinationals (e.g. Walmart, McDonalds) are also on public benefit programs because their employers pay them so little they remain below the poverty line. When these workers try to form a union, they are met with retaliation, intimidation, and an onslaught of harassment including forced meetings where they have to listen to why unions are like the holocaust (thank you, Howard Schultz). 

If US corporations or the US government have essential jobs that need to be performed, like unloading shipments at a port, they must guarantee dignified, good jobs for these workers. When jobs are difficult and require intensive physical or manual labor, hours (but not pay) must be severely limited to reflect that, and preserve these employees’ health. A good job is one that provides for an individual and their family’s livelihood and health, whether the person performing the job was born in the US or not. A ‘job’ does not serve its function if it leaves you in worse health with no health insurance, obscenely long hours, living in a shared barracks away from your family, indebted, forced to commute hundreds of miles, and unable to afford basic subsistence of a decent life. A dynamic documented in Emily Guendelsberger’s book, On the Clock

With underemployment consistently at 8%, the cries for easing immigration restrictions is merely an admission that capital and the government refuse to offer acceptable work conditions for the most essential jobs in our economy, jobs that are pivotal to the functioning of our society and economy.

Even more disturbingly, the calls for easing immigration to break the back of inflation have no trouble ignoring the humanitarian crises that have long demanded this same policy prescription. And they come in the wake of the Biden administration announcing a near impossible standard for Afghan refugees to apply for humanitarian parole visas

Additionally, the Biden administration not only expelled Haitian refugees under the guise of Title 42, it has also closed the border to any person who is not fully vaccinated for ‘safety’ reasons, with some exceptions including for essential workers, ie, the truckers who make the global supply chain run. In disregard to the health of these workers and those they come into contact with in the US, exceptions do not require the US companies to provide their essential workers with vaccinations. It is clear that the point of the vaccine ban is not safety or health, but discrimination in continuation of a vaccine apartheid regime. 

While we are at it, one solution to address inflation would be to vaccinate the world – this would reduce the risk of the global supply chain shutting down due to COVID outbreaks. But that would cut against the powerful interests of big pharma, so it’s not so attractive. 

Their Solutions Help The Rich 

Those cheering increased immigration for the purpose of breaking inflation, while abiding the criminal expulsion of refugees, do so because they consider inflation a grave threat that must be tamed at any cost. The limited solutions presented to us have been cherry picked by those who are most deeply threatened. As Jon Schwarz points out in the Intercept, “inflation lessens the real value of debt…inflation of 6.2 percent means that the real value of that $14.5 trillion is now just $13.65 trillion in last year’s dollars. In other words, the inflation over the past year has effectively transferred $850 billion in wealth from creditors to debtors.” That is unacceptable to capital, and that’s why Tapper is not going to shut up about whether Americans can afford shit, even though he doesn’t give two. 

In October, economists J.W. Mason and Lauren Melodia published a report on inflation. They discuss the disproportionate impact inflation can have on lower-income families who experience a higher effective inflation rate due the proportion of their income that goes to childcare, rent, and health care. However, they explain that this is a much longer term problem – spanning 30 years – and the recent inflation is in fact a break from that trend: “…the biggest price increases are for things that are not basic necessities and that higher-income families typically spend more on—new cars, travel, and restaurant meals.” 

The report gives a much more holistic treatment of the problem and potential solutions that are not premised on bunk economic theories, and go beyond the narrow prescriptions based on austerity. They also point out that austerity measures that reduce government spending will slow recovery, lead to unemployment, and impede the support everyday Americans need. Their report is welcome, and the solutions they outline are much more plausible and sustainable than adherence to a vampire economy. 

Economists, journalists, and left commentators have been pointing out that the monetarist narrative pushed by the media and politicians gets inflation completely wrong. These are important attempts to counter the mainstream economic hegemony that goes largely unchallenged. Just ten short years before monetarism was announced dead, it had won its author, Milton Friedman, the 1976 Nobel prize in economics. This was also one year after he served as economic adviser to Augusto Pinochet, helping him run Chile’s economy into the ground, and stood by while the regime murdered a hundred thousand of the country’s citizens. In winning the Nobel, monetarism also concretized other pernicious fallacies that remain with us to this day, including the notion that keeping inflation low is the foundation of prosperity, and that monetary discipline should be the paramount goal of monetary policy (see the great Ha Joon Chang). These fictitious constructs are conveniently deployed to constrain government spending in certain areas, while that same government spares no expense when it comes to protecting and advancing private (ie, stolen) property and wealth. There are many examples of high inflation being an indicator of a strong economy (e.g. Brazil and Korea) (Ha Joon Chang again). Like so many white supremacist notions, despite being totally debunked, these principles continue to serve as the bedrock of ‘common knowledge’ in economics.

Despite seeing that in Chile, and then in the US, Friedman’s theories were plain wrong, monetarism has refused to die, and as the above shows, is still discussed as though it is unimpeachable fact. In 1986, the New York Times announced “Monetarism Falls from Grace” saying: “The erratic and unpredictable growth of the nation’s money supply over recent months has proved the last straw for a bedrock theory of conservative economics.” However, the myth is too convenient for capital to abandon. In 1971, the US went off the gold standard. With the money supply no longer tied to physical gold, monetarism became the main tool to justify austerity, ensuring a loose labor market (7% unemployment was the Fed’s target for decades), and that living standards for the most precarious in our society have not changed. Its success can be seen in wages that have been stagnant for US workers for 40 years. In 1986, as soon as the theory was announced dead, the vampires that be worked quickly to breathe life into its beloved and proclaimed the virtues of the theory anyway (an LA Times headline from that year reads, I kid you not: “Is Monetarism Really Dead? Its Priorities Were Reversed, but Its Common Sense Remains”).

It must be expected that pundits will continue with their zombie logic, because Friedman did not win his Nobel prize because his theories were right, he won it because monetarism – the justification for austerity and strict control of the money supply at all costs – is what allowed capital to break the Keynesian consensus and start its the repeal of the social democratic state, which we have now totally lost. We are seeing some of it come back, and fighting against the vampire myths will be an important part of that revival. 

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