All the Tory talk about getting inflation down seems to have confused some people who have failed to consider that high inflation may actually be Conservative government policy.
Look at the usually-excellent Simon Wren-Lewis’s latest Mainly Macro piece, in which he takes issue with left-wing opinions about his current diagnosis of the inflation problem.
He reckons the answer is for private sector wage rises to come down, probably by way of reducing economic demand which will lead to a reduction in the workforce – and, thereby, a recession. This opinion appears to be shared with the Bank of England, whose continual interest rate hikes seem to be an attempt to force the UK’s economy to go backwards.
The problem with that is simple: ordinary working- and even some middle-class people are struggling to make ends meet. Many simply can’t and are going into debt. His solution to the inflation problem will bake that inability to afford the cost of living into the UK economy.
With the Tory government lying to us that workers’ wages are the cause of high inflation and the Bank of England doing as described above, there seems to be only one logical conclusion to draw:
High inflation is a Conservative government policy. It is intended to drive the UK’s lower-paid citizens deep into poverty so you cannot afford the necessities of life.
Just roll that around your mind for a moment.
Think about the real causes of inflation: huge increases in the prices of energy and food, and huge increases in the salaries of FTSE100 executives.
The government could, in theory, neutralise these inflationary pressures through taxation – but the theory fails in practice: as Professor Wren-Lewis notes, the energy firms are multi-national corporations whose profits are received overseas, so there is nothing the government can do about them.
Looking back through history, we see that the reason overseas shareholders have been able to take control of our formerly-nationalised utility firms (energy isn’t the only subject area to have been treated this way, of course; water springs instantly to mind) is privatisation.
The answer should be re-nationalisation – but the Tory government (and also Keir Starmer’s STP – Substitute Tory Party) won’t countenance that; it is against their ideology. This indicates, again, that high inflation that drives you into poverty is a political choice. Rishi Sunak and Keir Starmer want you to starve.
In the private sector, we see that the salaries of FTSE100 executives have risen by an average of 16 per cent in the last year alone, despite the fact that there has been no real growth in production in the last 15 years since the Great Recession. The money for their pay rise has to come from somewhere and the logical source is the pay packets of employees; they are taking the rises that should go to you.
That’s if they haven’t increased the prices of their goods or services, of course. If they have then they are still taking the rises that should go to you, while also increasing prices so you can’t afford what your employer sells.
The answer – the way to stop this irresponsible upward drain of corporate funds into executive bank accounts – is to tax executive pay at a rate high enough to make this practice unviable. Again, both Rishi Sunak’s Tories and Keir Starmer’s Tories have refused to do this so – again – we must conclude that the executive wage inflation that puts us all into poverty is a political choice.
Professor Wren-Lewis rightly points out that, where employees have won wage increases intended to match inflation caused mainly by high energy prices, their employers have put prices up; this indicates that shifting the real-terms wage cut onto the profits of other firms won’t work and just generates more inflation.
Professor Wren-Lewis goes on to discuss the reason real wages in the UK have not grown in the last 15 years. As already mentioned above, besides the energy and food price hikes, it is the fact that productivity growth has been extremely weak. There have also been two large devaluations of the Pound.
The low productivity – and one of the depreciations – were caused by Brexit. This is another political policy of the Conservative government that is also supported by Keir Starmer’s STP and may therefore be seen as further proof that the party of government (and that of Opposition) intends to impoverish you as a matter of policy.
Brexit also makes causing a recession more attractive to the government and the party that wants to form a government. Neither of them want inflation to continue running rampant forever; it would eventually wipe out the gains they have made for their very rich friends, so they’ll want to bring it down.
The way to do that, according to Prof Wren-Lewis, is to reduce the demand for goods produced by most firms, as this will lead to a reduced demand for labour; firms then lay off workers, meaning more people are seeking employment, meaning in turn that jobseekers will be more likely to accept a job that pays lower wages.
Before Brexit, politicians could always rely on an influx of cheap labour from Europe. That isn’t available now, so they consider recession to be the only alternative. Remember: their future is safe.
Demand is already coming down because people simply can’t afford to buy as much as they used to, due to the real-terms wage cuts they have suffered. The Bank of England’s interest rate rises are hammering that change home.
We may therefore conclude that recession, job losses, further deprivation and misery are all policy points of the Conservative government, and of Keir Starmer’s STP.
Professor Wren-Lewis ends his piece by quoting Bertrand Russell: “Ask yourself only what are the facts, and what is the truth that the facts bear out. Never let yourself be diverted either by what you wish to believe, or by what you think would have beneficent social effects if it were believed.”
Sadly, he fails to follow his own (and Russell’s) advice.
The truth that the facts bear out is that privatisation, executive pay rises, Brexit, austerity (the other driver of the Pound’s depreciation) and interest rate rises are all intended to push the majority of UK citizens into poverty.
Other solutions besides reducing demand by causing a recession and mass unemployment are available – but the low-quality politicians with whom we have accepted that Parliament should be filled are not interested in them; their only concern is filling their own bank accounts.
Our concern must now be to put a stop to this.
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