Inflation is always and everywhere…
The ghost of Milton Friedman and his oh-so-famous repartee of the 1960s when he said that inflation is “always and everywhere a monetary phenomenon” still haunts us today. It is true that this assertion may seem plausible. After all, the immediate consequence of inflation is a rise in prices, which are denominated in money, that tends to systematically increase price levels when the amount of money in circulation increases. So inflation is really “always and everywhere a monetary phenomenon”?
It’s not as simple as that because, in real life, inflation is divergent, despite “mainstream” economists who turn a blind eye by thinking of it and summarising it as a widespread and homogenous increase in prices. The facts are obvious though, because the price of apples can remain static while the price of cars can go up by 25% and other others can fall at the same time. This world in which inflation is supposedly uniform is in fact fantasy, because prices and wages never grow identically to one another. Why would inflation be a problem at all, in which the increase of prices is supposedly concerning, if incomes increased at the same time and in the same proportion? Wouldn’t it suffice to align wages with inflation, if the latter was simply the undifferentiated increase of prices? However, inflation is always and everywhere a differential phenomenon. But then, why are economists ignoring this deformity of inflation that, as its main characteristic, does not affect all prices – or everyone, of course – the same way.
This negationism that comes with many consequences is in fact a denial of science and a subscription of the overwhelming majority of our economists to a very starkly ideological position. Inflation effectively creates losers – but also winners. It deeply impacts certain social groups while others can simply ignore it. It legitimises the adoption of austerity that as a collateral effect brings the vulnerable to their knees. The effects of inflation are therefore the redistribution of income and the restructuring of the social order. Inflation is an unmistakeable sign of a power struggle in that it is a race to hike prices first and the most!
It’s therefore because inflation is always, everywhere and above all a political phenomenon that this fundamental idea is overlooked by the economic orthodoxy, that can only shut its eyes in the face of this perfidious transfer of wealth that defines it.