Stagflation, Corporate Power, and Price Stability in a Post-Pandemic World
Towards a New Economic Paradigm: Rethinking Policy and Distributive Conflict
This is ‘Think: Deeper’, a deep and academic look at issues facing the economy and society with the goal of advancing critical thought in the face of overly simplistic media narration.
Introduction
This piece examines the likelihood of stagflation in the contemporary economic landscape, taking into account the diminished bargaining power of workers, extreme corporate power, and the impact of neoliberal policies on inflation and price stability.
In my previous piece for ‘Think: Deeper’, “Solving for Inflation”, I argued that inflation paranoia is a defining characteritic of modern capitalism. The threat of stagflation, rather than inflation, is most likely the primary danger facing the American economy today.
Today, I offer a critical evaluation of the efficacy of government intervention and price controls in the context of historical and contemporary economic challenges, and provide a comprehensive analysis of the role of social and institutional arrangements in managing distributive conflict.
Narration, The Media, and Propaganda
“I still think the risks are very large that we either don’t get inflation down durably, or that at some point in the process, the economy tips into recession,” Summers said.
Summers does not have the facts on his side. It’s prudent to ask for facts. Another great question would be: “who’s paying this guy to say this stuff? Didn’t he retire?!” -Avery
The specter of stagflation, characterized by stagnant economic growth and rising inflation, looms large in the global economic discourse. While the high inflation rates of the 1970s may not return, due in part to the decreased organization and bargaining power of the contemporary labor force, it is crucial to examine the potential risks of stagflation in a world increasingly dominated by corporate power and neoliberal policies. This article seeks to provide an in-depth analysis of the factors contributing to the current economic climate, the role of fiscal and monetary policies in addressing these challenges, and the potential effectiveness of price controls and other economic tools in managing distributive conflict and maintaining price stability.
Jon Stewart v. Larry Summers
Before we continue, let’s take a quick look at the media landscape, as of March 18th, 2023. Rhetoric from inflation hawks like Larry Summers have come to dominate media coverage, with no perceptible pushback.
Even the New York Times, who famously ran a puff piece for a fascist, does not offer meaningful pushback against this narrative. This week, I finally saw someone attempt to argue against the Fed’s anti-inflation policies.
So, if we’re going afford “the other side” room to speak when they’re self-proclaimed neo-nazis, then certainly we should be privy to “the other side” on the topic of the American economy… right?
(You’ll be surprised at how unprepared Summers comes across in the following clip.)
I encourage you to watch the entire episode of The Problem With Jon Stewart. A comedian should not be capable of ‘dunking on’ a Harvard-educated economist. Perhaps that’s what happens when you graduate Harvard in 1982, when their economics department had detached itself from 1000s of years of monetary theory and policy.
Summers does not have the backing of financial science or academic rigor. His arguments seem to buckle in the face of even mild pushback. His arguments aren’t able to stand up to simple questions.
Summers instead argues about Apple’s market cap, and even tells Jon to go ask uneducated immigrants for their opinion. Jon is asking for Larry to back his statements up, but he’s simply unable to.
In my humble opinion, Summers is not informed by hard work and study, but by ideology, ego, and political/commercial allegiances. I do not think this is appropriate.
Larry Summers: “If you don’t address the sickness, you’re gonna have a problem down the road” [Citations needed -Av]
LS: “You could say that they shouldn’t have responded to the 2008/2009 recession by cutting interest rates —”
Jon Stewart: “YES! YOU COULD!”
LS: “Progressive weren’t saying that….” [Straight to partisan hackery. Sad. -Av]
JS: [in 2009] “They just put money [in the hands of] the bankers and say… ‘you decide!’”
JS: “This pandemic was the first time the government did the thing they’re supposed to do in a crisis.”
JS: “When you look at the stimulus payments that went out, 70% of it was being used on rent and food! If you look at the recover in the pandemic, versus the recovery in 2008, when you stimulate the economy at the demand level, jobs had plunged in the pandemic and then they shot back up.”
JS: “The recovery [from] 2008/09 was painstaking, but the stock market did great.”
JS: “Our fiscal policy and monetary policy has always been on the side of corporate easing.”
LS: “If you talk to hispanic voters, black voters — people without college degrees…” “They have a lot of questions about what’s happened!!!”
JS: “Why aren’t we attacking corporate profit in any way? That’s 30-40% of inflation.”
LS: “I don’t think it’s a tenable view that ‘all of a sudden corporations became greedy.’”
JS: “They’ve been bragging about it on their earnings calls!”
The interview continues, with Summers offering anecdotes and rhetoric, but little or no facts. Another pseudo-intellectual once said, “facts don’t care about your feelings.” Perhaps this applies here.
Summers eventually contradicts his own arguments, and it’s a sorry sight.
Let’s continue…
The New Gilded Age and the Weakening of Labor Power
In the present era, often referred to as the New Gilded Age, workers are less organized and possess limited capacity for significant wage resistance. This weakened labor power can be attributed to several factors, including globalization, the decline of unions, and the prevalence of precarious employment in the gig economy. Furthermore, extreme corporate power exacerbates income inequality, as the wealthy disproportionately benefit from the gains of economic growth. Consequently, workers find themselves unable to push for higher wages, resulting in stagnant wage growth and contributing to the conditions that can lead to stagflation.
Neoliberal Policies and their Impact on Economic Recovery
The neoliberal branch of the Democratic Party has played a significant role in shaping the fiscal landscape of the United States. While they begrudgingly supported the Biden administration's fiscal transfers and infrastructure plan, their resistance to progressive programs in the Build Back Better initiative has had a profound impact on the nation's economic recovery efforts. The reluctance of senators Joe Manchin and Kyrsten Sinema to pass the initiative without Republican votes has stalled, and possibly killed, the majority of progressive programs that could have stimulated demand and reduced poverty rates. Additionally, several pandemic programs that were essential for maintaining demand and alleviating poverty have either ended or are on the verge of expiring.
The Risks and Rewards of Contractionary Policy
For neoliberal progressives, the persistence of inflation justifies the risks associated with contractionary policy. They adhere to the conventional narrative of the Great Inflation and vehemently criticize the use of price controls, arguing that such measures failed in the past and are unlikely to succeed in the present. However, price controls have been effective under certain circumstances, such as during World War II when the government possessed ample authority to intervene in and regulate private sector production. It is important to note that the relatively moderate inflation experienced during the 1950s and 1960s cannot be solely attributed to price and wage controls, which were sporadically implemented.
The Role of Social and Institutional Arrangements in Price Stability
Price stability in the postwar era was largely achieved through a social accord that ensured wages increased in tandem with productivity. Social and institutional arrangements, which effectively managed distributive conflict, were instrumental in maintaining price stability. The pandemic and the resurgence of hegemonic disputes between China and the United States have prompted calls for greater control over supply chains by US corporations. However, it is unreasonable to expect the current administration to implement price controls as effectively as in the past or that such measures would significantly alleviate inflationary pressures.
Summa et Conclusio
The contemporary economic landscape, characterized by weakened labor, extreme corporate dominance, and neoliberal policies, presents a complex array of challenges for policymakers and economists seeking to avert stagflation and maintain price stability. This writing has demonstrated that the conventional wisdom surrounding anti-inflation policy is of dubious credibility, potentially lacking a solid foundation in financial science and academic rigor.
Prominent figures such as Milton Friedman and Jack Welch have exerted considerable influence on economic thought and policy, shaping the dominant narrative on inflation and price stability. However, it is essential to critically examine their assumptions and the ideological underpinnings of their arguments. The monetarist perspective championed by Friedman, which emphasizes the role of the money supply in causing inflation, may oversimplify the complex interplay of factors that contribute to inflationary pressures. Likewise, Welch's focus on shareholder value and short-term financial gains may have inadvertently contributed to the erosion of long-term economic stability and the weakening of labor power.
In light of these considerations, it is crucial for policymakers, economists, and academics to reevaluate the efficacy of conventional anti-inflation measures and explore alternative approaches to managing inflation, economic growth, and distributive conflict. This may include revisiting the role of price controls under specific circumstances, reinforcing social and institutional arrangements that promote equitable wage growth, and addressing the unchecked influence of corporate power on economic policy.
Ultimately, navigating the complexities of stagflation and price stability requires a comprehensive and nuanced understanding of the historical, social, and political factors that shape the economic landscape. By questioning the assumptions of influential figures and challenging the dominant narrative on inflation and economic policy, we can work towards developing more effective and equitable strategies for maintaining economic stability in a rapidly changing world.
In conclusion, inflation is a complex phenomenon that has multiple causes and effects. While some economists argue that inflation is transitory and will subside as supply chains recover from the pandemic, others warn that inflation could become persistent and harmful for the economy and society. One possible way to address inflation is to use price controls and taxes on billionaires. Price controls are government-imposed limits on how much private companies can charge for their goods and services. They aim to prevent excessive price increases that result from market power or supply shortages1. Taxes on billionaires are levies on the wealth or income of the richest individuals in society. They aim to reduce inequality and generate revenue for public spending2. Both policies have advantages and disadvantages. Price controls could help lower the cost of living for consumers, especially for essential goods like food, energy and health care3. However, they could also create distortions in the market, such as shortages, black markets, reduced quality or innovation1. Taxes on billionaires could help redistribute income and wealth more fairly, as well as fund social programs that benefit the majority of people2. However, they could also discourage investment, entrepreneurship or productivity, as well as encourage tax evasion or avoidance4. Therefore, these policies should be carefully designed and implemented to avoid unintended consequences. They should also be complemented by other measures that address the root causes of inflation, such as improving competition, innovation and productivity in the market; increasing bargaining power and voice for workers and consumers; and pursuing a balanced fiscal and monetary policy that supports growth without overheating the economy.
-Avery