Another Expert Tell Us Why Inflation Is So Bad.
I never thought I would see the day when Robert Reich would become a spokesperson for the Republican Party, but it’s happening right now. What I’m referring to is the almost daily rants we are getting from Reich about how the average American is getting screwed over by a high rate of inflation which is making it impossible for Mister and Missus America from buying what they must have to put on the dinner table for themselves and the kids.
The GOP has made inflation the number issue for November because everyone pulls up at the pump all the time and nobody can remember when was the last time they paid three bucks or more for a gallon of gas.
I wouldn’t really care what Reich says about inflation or anything else except when he talks or puts something on his blog, he gets a lot of press. And the fact that Reich is a lifelong Democrat, and a diehard liberal, makes what he says about inflation even more attractive and relevant for the GOP.
How does Reich explain why inflation, as he puts it, is out of control? He says it’s because corporations are using the surge in demand following the Pandemic to pass on price increases for supplies and components to consumers rather than absorbing some of the increases and thus keeping inflation in line.
Corporations are getting away with this strategy because, according to Reich, the U.S. economy has become less competitive over the last thirty years, with two-thirds of all industries more concentrated, which makes it easier to keep prices up rather than having to worry about new competition forcing them to keep prices down.
Reich bases his argument on a detailed summary of competitive changes in the American economy which was published in the Harvard Business Review in 2018. I’m going to save my analysis of this article for another column but suffice it to say that the basic argument made in this publication and repeated by Reich is that the economy has become less competitive because the regulatory mechanisms we use for maintaining competition are no longer being used or are being used to help major players in each market segment expand their presence in the market in which they play.
Reich’s argument sounds persuasive, particularly because his audience is primarily liberals who would agree with anything he says, if it means that government will help mitigate disparities in the marketplace whenever they occur. Unfortunately, Reich’s argument about the causes of our inflationary time not only ignores a fundamental issue but as a result, gives the GOP a gift in this election season which they don’t deserve.
It turns out that not only is inflation a significant economic factor in more than half of the world’s 44 advanced national economies, what we call the OECD, but of the 38 countries which experienced a significant inflation rate in this year’s first quarter, 18 of these countries experienced inflation at rates higher than what we experienced in the United States.
This information comes from a study published by Pew in June, so it’s not as if the analysis hasn’t been out there long enough for Reich to try and figure out what it means. And what it appears to mean is that the inflation which has been a ‘ruinous’ situation for all those working-class families who are so much Reich’s concern, may still be a function of how the Pandemic shut down national economies and how national governments responded to the public health threat.
It should also be mentioned that the Harvard article which Reich uses to buttress his argument for government becoming more activist in regulating business was published when inflation was running at 3 %. The Harvard article was not occasioned by any concerns about inflation; it was yet another attempt to explain the reason why wages have allegedly stagnated since the 1970’s while profits for the biggest corporations and salaries for the senior corporate officers have continued to grow.
The whole wage ‘gap’ argument deserves its own comment, but insofar as Reich has also been a leading voice in decrying how the working class has gotten screwed by the so-called wage ‘gap,’ let me just make a quickie statement about it right here.
The way we compute average wages is to take the total amount of income, which is reported on tax returns, and divide that number by the number of in individuals who file returns. What number is used to compute the average income of every taxpayer? It’s the number on Line 15 of the 1040 form, which basically incudes every buck that came over the transom each year from salary, investments, social security, whatever came in.
What I have yet to see any of the wage-gap mavens like Piketty or Reich mention is that the 1970’s also marked the time when more and more Americans lived well past retirement which, by definition meant that the percentage of the total national income contributed by a larger and larger percentage of the population would go down.
My parents retired and moved to a condo development in Palm Beach County in 1978. The place had two golf courses, was about 5 miles from the beach and was surrounded on all three sides by swamp. Their development is now surrounded on all three sides by other developments, and I suspect that less than 5 percent of the total population of these four mini cities is receiving even a large fraction of the income they were earning when they were employed.
In order for the wage gap to even stay the same, never mind become less each year, the total amount earned by Americans in the workforce has to start off increasing by whatever amount is lost each year by the number of new people who retire, as well as the retirees who are living longer lives.
Robert Reich would do us all a big favor if he would actually start behaving like a scholar, which is what he’s paid to do at the University of California/Berkeley and stop behaving like an advocate because when it comes to advocacy, he’s just helping the GOP promote yet another bullshit narrative to keep voters from thinking about the mess left behind by Donald Trump.