Recently, a student approached me about food price inflation, its impact on the student body, and the strategy generally adopted by the Bank of Canada to combat inflation. We were reviewing media articles in class on the prices frozen by Loblaws on their no name brand goods in conjunction with the billions that were added to the wealth of its CEO, Galen Weston Jr., especially during the pandemic. The course, which I recently introduced at MacEwan University, is titled Humanistic Economics, where I eschew fancy mathematics and lead students through critiques of standard textbook theory and introduce them to alternative perspectives on topical issues including inequality, minimum wage, and free trade. Thus, when asked about food inflation, I did not scurry to extract data on the Consumer Price Index for food prices or the average weekly earnings, both of which are easily available from Statistics Canada. Other economists have already presented such extensive information in their online articles.
My objective is also not to highlight supply chain issues, which are highlighted as factors contributing to food price inflation. Rather, I am more interested in highlighting the perspective that economic issues are too important to be ceded to the “experts”, a point made by student activists Earle, Moran, and Ward-Perkins, who wrote The Econocracy (p. 4). After all, it is not the well compensated “experts” who bear the brunt of high food prices but the working-class people. Such people appropriately termed as the “precariat” have been increasingly marginalized by globalization, technological change, automation, insecure gig economy jobs, and the weakening of unions since the days of President Reagan and Prime Minister Thatcher. Thus, it is not the cold numbers or the prescriptions of “experts” that should be given precedence in explaining food price inflation and its alleviation. Rather, we should be highlighting the stories of the precariat who can tell you first-hand about the pangs of hunger and the desperate strategies they are undertaking to cope with the higher cost of living (or rather existing).
The reason for my radical approach is that I have become viscerally disillusioned by standard textbook theory that paralyzes any initiative towards the alleviation of the concerns of the poor. Take for instance, price ceilings on medicines, the push towards the $15 minimum wage, raising the top tax rates or imposing wealth taxes, all of which address inequality by influencing the existing distribution of resources. In each such instance, standard textbook theory teaches us that such policies would introduce deadweight loss (a measure of inefficiency), distort incentives to work, and would be counterproductive to our stated goal of ensuring an affordable living standard for the precariat. However, textbook theory is stuck in the days of 18th and 19th century thinkers like Adam Smith and David Ricardo, even as the world has moved on from the simple economies based on the baker, butcher, and the brewer and towards complex economies shaped by large multi-national corporations. Moreover, despite the challenge posed by cutting edge scholars like Thomas Piketty in France, Lars Osberg in Canada, or even Blanchard and Rodrik, who assembled a constellation of 29 voices in their 2021 book Combating Inequality, to push the idea that the time of “ifs and buts” has long passed, inertia has paralyzed standard textbook theory to inaction.
Returning to the questions posed by the student, I must emphasize the work of Canadian economist Lars Osberg who wrote The Age of Increasing Inequality. He is clear that increasing interest rates to target low inflation destroyed jobs in manufacturing industries, reduced the growth in real wages, led to the recessions of the 1980s and 1990s, reduced overall growth, and instigated cuts in income transfer programs and government services including healthcare and education (p. 55-59). Thus, he explains that the wage stagnation of the middle-class arose due to the “price stability” policy of increasing interest rates. This background on the Bank of Canada policies from the 1980s and 1990s allows us to question its policies in the 2020s in the aftermath of the financial crisis and the COVID pandemic. After all, despite the increase in interest rates to combat inflation, food price inflation remains a pressing problem. No wonder, post-Keynesians are skeptical of monetary policy to achieve the twin goals of price stability and full employment and instead emphasize the predominant role for fiscal policy.
What this means is for the government of Canada to initiate drastic action to implement confiscatory taxes (ala Piketty) on the wealthy to redistribute resources to the poor (at least for those who have not completely bought Modern Monetary Theory). The initiative of the wealthy will not die out and they would rather be motivated to work more to retain their wealth ranking and maintain their level of conspicuous consumption. Moreover, instead of making arguments that the rich will vote with their feet, we should rather be asking what sort of people abandon their responsibility towards meeting the social contract. On the other hand, such redistribution would offer the precariat some respite as they starve in the cold Winter. Additionally, instead of suggesting the poor to adopt budgetary strategies like buying canned or frozen food, a lot which is replete with high levels of sugars and sodium, we should be questioning why must the citizens of one of the most advanced countries in the world have to put up with such penury.
To recapitulate, I would like my students to view economics through the lens of democratic participation in which the voices of the precariat are heeded and placed at the forefront instead of privileged “experts” that uphold the neoliberal world order and the inequitable status quo that rests on low corporate income taxes, low top tax rates, zero wealth and inheritance taxes, low minimum wage, and draconian budgetary cuts.