Who suffers?
The supposedly necessary sacrifices of the least powerful are often a cover for protection of the wealth of a few.
Dear friends: As the Federal Reserve raises interest rates, we hear concern about the “suffering” this will cause in the fight to curb inflation. But, we’re told, inflation causes suffering, so the sacrifices are necessary.
Really?
The use of interest rate hikes to slow inflation places the majority of the suffering on the same folk who struggle the most with inflation itself: workers and the poor.
Higher interest rates make it harder to buy homes - the key step in building family wealth and turning net worth positive. Higher interest rates make it harder for small businesses to take out loans to cover lean times. They are a blunt instrument.
Because the harm falls disproportionately on those with less political power, interest rate hikes are more palatable than other tools to fight inflation: price controls and windfall taxes.
But in an economy in which large corporations rake in record-setting profits, why not require them to contribute to solving the problems their price gouging has exacerbated?
Listen to the way the story of inflation is told: labor shortage puts upward pressure on wages, which triggers higher costs of goods and services. Small business owners are interviewed about how they must pass on high wages and high costs to customers.
But the vast majority of this economy is dominated by large corporations. We do not buy gas from the local station owner; we buy gas from the giant petrochemical companies. The local owner cannot control their prices. But the giant companies can.
Over and over again, these companies have chosen to protect profits, a result of a shift from stakeholder to shareholder capitalism over the last fifty or sixty years. It’s the same dynamics that followed the 2017 tax cuts. Instead of investing those savings in workers or innovation, companies used them to buy back stock, raising stock prices artificially, and making stockholders wealthy. Large corporations have zero incentive in this economy to sacrifice even a small percentage of their profits.
Be skeptical when those with power describe the suffering of others as “necessary.” The supposedly necessary sacrifices of the least powerful are often a cover for protection of the wealth of a few. And the monetization of the suffering of others is one of the worst expressions of a value-less economy we can imagine.
Let’s work together to construct an economic system that values people more than profits, real persons over abstract calculations.
As always, I am so grateful for your company on this journey.