A hot topic in 2021 that will likely persist through this year: inflation.
Inflation is tied to what’s known as the consumer price index (CPI), a measurement that examines the weighted average of prices of a basket of consumer goods and services.
Right-wing economists would have you believe the federal government is printing an unlimited amount of money, and the only solution is to raise interest rates.
But D.T. Cochrane, policy researcher at Canadians for Tax Fairness, calls these talking points propaganda, adding that the current rate of inflation is “of little concern.”
“Given the size of the disruptions to the global economy, it’s almost miraculous that inflation is as low as it is,” Cochrane said. He believes the conversation around inflation needs to move to a more specific level, looking at what prices of what goods are increasing and how that is affecting specific people.
Cochrane calls Erin O’Toole’s Conservative Party’s fear-mongering about the federal debt ceiling “completely divorced from how our monetary and fiscal systems actually function.”
The truth is what drives inflation is not always directly in control of the government of the day, rather, it’s largely tied to the global economy.
In a Dec. 16 article for The Monitor, senior economist for the Canadian Centre for Policy Alternatives (CCPA) David Macdonald pinned down the main causes of the country’s high inflation rates.
“Driving these big price increases are high international oil prices, out of control speculation in real estate, a microchip shortage for new cars, and the price of animal feed combined with corporate concentration of meat processing capacity,” he wrote, noting that 85 per cent of goods and services included in the CPI are not controlled by government.
That said, Macdonald believes the federal government can take meaningful action to return inflation to a modest number through stronger workplace standards, providing universal pharma care and dental care, rent control and subsidizing tuition fees.
Jim Stanford, an economist and director of the Centre for Future Work, agrees.
Stanford says while inflation is higher than it has been for the last couple of decades, the situation is far from out of control.
Stanford pointed out the false assumption that workers are better off when inflation is lower, because with high inflation comes higher prices for goods. Workers also lose purchasing power when inflation is low.
Stanford noted that neoliberal policy puts a strong emphasis on reducing inflation, not because they care about workers, but to protect the value of financial wealth.
“In the course of that, they created economic conditions that made it impossible for workers to find good work and negotiate good wage increases,” Stanford said.
According to Stanford, inflation redistributes wealth to those with debt, eroding the real value of debt while simultaneously reducing the real value of wealth.
“The people who are the most concerned about inflation, ultimately, are those with large stocks of financial wealth, who hate to see their value eroded by a five per cent inflation rate,” Stanford said, noting that for the wealthy, inflation is like a wealth tax.
It’s not that inflation itself is good for workers, Stanford explained, but that it can lead to more job creation and government spending.
Disruptions in global supply chains, as well as widespread lockdowns, resulted in people buying more goods rather than services.
“Most of the inflation we’re seeing is coming from goods… People can’t travel and they can’t go out and eat in restaurants, they’re spending their money on other things like products to have around the house,” Stanford said.
David Bush, a writer with Spring Magazine and organizer with Justice for Workers, says unionizing is one approach workers can take to combat the affordability issues of inflation, by tying inflation to wage increases in their collective agreements.
“The minimum wage floor needs to get pushed up,” Bush said. “All workers also need to have corresponding increases to cover the cost of living.”
To Bush, the issue of inflation speaks to a broader class approach to fighting for higher labour standards.
“Going through this whole pandemic, we know that lots of workers were really struggling, and there were some government supports and things like that,” Bush said. “But at the end of the day, we saw people with fabulous wealth – riches — get even richer. And those who did not have that were treading water at best.”
Cochrane calls it a miracle that inflation didn’t spike further when we consider the dislocation of the global economy caused by the pandemic.
He noted the cost of baby food has skyrocketed since the pandemic, creating an affordability issue for new parents, who typically are strapped for cash after a pregnancy.
“There’s no denying that people are getting some sticker shock when they go to the grocery store on certain items. Part of that, however, is the fact that prices have been remarkably unbelievably stable, at a very low level of price increase for several decades,” he said.
Cochrane believes mainstream economists who adhere to the law of supply and demand are part of the problem, adding that “[supply and demand] have nothing to do with the reality of how prices are actually determined.”