Workers don’t set prices, bosses do. And they do so on the basis of maintaining the greatest possible profit margins.
Up until recently, Federal Reserve Chair Jerome Powell pushed back against this kind of narrative, arguing that rising prices were a short-term and transitory problem due to supply chain shocks from the pandemic that will eventually return to normal. But now the Fed has shifted course and is preparing to institute policies to “cool off the economy” — a euphemism for shrinking the money supply in order to drive down business investment and thus scale back job growth.
Second, although it’s true that there has been a noticeable uptick in prices by 6.8 percent over the last year, this is still not very high by historical standards. The last time the United States experienced a serious inflationary crisis in the 1970s, the rate of inflation regularly hit between 11-13 percent. It’s also the case that measures of current price increases are skewed by a few sectors of the economy, most notably the energy sector.
Most importantly, the media spin has left out the elephant in the room. It is business owners who are the ones raising prices. They are currently setting record profits, so do they have to raise prices? The answer to this question ultimately reveals that inflation is a question of class politics — which class gains at whose expense — rather than technical monetary policies.Inflation is an increase in prices, generalized across the economy, i.e.
This can also lead to good old-fashioned price gouging. The oil industry, for instance, curtailed production at the height of the pandemic due to cratering demand for fuel. Now that demand is back up,, “oil companies are keeping production flat while using profits to reward shareholders.” And although wholesale prices of oil have fallen somewhat, retail gas stations are still selling gas at high prices.
This line of argument was first championed by economist Milton Friedman, who stated that a ”natural rate of unemployment” exists below which inflation begins to take off. Friedman’s “monetarist” ideas took hold after the inflationary crisis of the 1970s, and ever since have been used as a battering ram against policies in which governments actively promote full employment or better jobs for workers.
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