Federal Reserve chair Jerome Powell is profit’s prophet and the corporate media are his cultish devotees, joining hands to sacrifice working people. In this cult, profit is sacrosanct.
When inflation hits, this is because of the conditions upon which profits are made. It’s not the fault of profit-making itself. The problem is a “labor shortage,” or “too much demand,” which forces the invisible hand to raise prices—and not a shortage of dignified work, or a surplus of people living paycheck to paycheck. Maximal profits are a given, and scarcity for ordinary people is a requirement.
This catechism means that, even if reporters in corporate media are sympathetic to working people’s struggle with the increasing costs of living, the group that inevitably needs to take a hit to curb inflation is, you guessed it, still working people.
This dynamic plays out in the media like a bait and switch, in which reporters acknowledge and sympathize with the pain of ordinary people, but prescribe them more pain as the only way out.
Such was the case when USA Today (11/2/22) ran its front-page headline, “Latest Fed Rate Hike: More Pain Coming.” The article starts by saying that inflation is at its “highest in a generation”; the online version links to another story (10/13/22) with working people rightly bemoaning the increases in their cost of living:
Michael Rossini, 57, of Randolph, Massachusetts, is shelling out an additional $55 or so a week on groceries. And filling up his pickup truck now costs $170, up from $100 before the inflation spike, even after the summer drop-off in pump prices….
“I’ve got to provide for my family,” he said. But, he said, “my quality of life has gone down…. I can’t get this time back.”
But as “More Pain Coming” makes clear, USA Today provides no option for people like Michael but the Rube Goldberg–esque conveyor belt Powell and the Federal Reserve have constructed to cull the bloated American economy.
According to the article, “consumers should expect their costs to head even higher and job losses to mount as economic growth slows” as the Fed continues to raise interest rates. The Fed’s moves will “ripple through the economy and ultimately, hit businesses and consumers and slow demand and inflation.”
That the Fed decided to use its incredible influence over the US and global economy is of course deserving of coverage. But to pay lip service to the needs of ordinary Americans, as if that’s what’s driving the Fed’s decision to burden them further, obscures the class war being waged. It’s a bait and switch that works to convince people that the scarcity they feel is an inevitable consequence of natural forces, not a political decision that need not be.
Corporate greed a ‘red herring’
Despite corporate media’s best attempts, polls show the vast majority of Americans lay blame on corporations for needlessly driving inflation (Navigator, 7/26/22). This didn’t stop NPR (11/29/22) from characterizing this view as one of “economists and politicians on the left.” NPR‘s “The Mystery of Rising Prices. Are Greedy Corporations to Blame for Inflation?” was written like a “whodunnit,” but if the protagonist detective was too inept to discover that their anonymous employer was in fact the murderer staging a cover-up.
NPR business correspondent Stacey Vanek Smith somehow came within point blank range of the “smoking price gun” of corporate price-setting, only to acquit these corporations and blame regular people in a verdict that takes the bait and switch to another level.
From pointing out that corporate profits “reached an all-time high this year” to detailing the “confessions” of corporate executives at companies like Kroger, AutoZone and Hostess, who “bragged about how much they were able to raise prices,” the author/detective seemed hot on the trail of how corporate profiteering has produced a cost of living crisis. They even acknowledge that corporations have “murdered the competition,” with the four companies that “control about 80% of the beef and poultry market” having “settled lawsuits over price-fixing just this year.”
But after laying all this out, our detective consulted an expert witness whose view is that blaming corporate greed is a “red herring.”
“Blaming inflation on greed is like blaming a plane crash on gravity,” the economist Justin Wolfers said. Once again, greed and the resulting pain and scarcity working people feel is natural. There’s nothing you or anyone else can do about it. Profits are a given.
Further, greed is good:
“The only reason we’re not all paying $800 for a pair of socks or a cheeseburger is simply due to greed in another form: competition. ‘That greed forces them to offer low prices because they’re trying to muscle out their competitor,’ says Wolfers.”
Despite having just detailed the corporate tendency to reduce such competition, as with the case of the meat industry, this is enough to lead her to her verdict.
The killer, our detective determined, is consumers:
As it turns out, consumers might be the guilty party in the inflation mystery…. “Inflation is coming from demand,” says Wolfers.
It’s your own damn fault, people! But the good news? “Prices will fall and inflation will ease.” Why? In order to make ends meet,
our collective savings has been shrinking and household debt has been on the rise…. But, until demand drops, companies will push prices up as much as they can. It’s elementary.
The only way out is through.
To ‘dent the job market’
The New York Times (11/1/22) also ran a story examining evidence that corporations are using inflation as an excuse to raise prices on consumers, but unlike our “whodunnit,” shied away from deciding on a guilty party for inflation writ large. The subhead was forthright enough:
Some companies and restaurants have continued to raise prices on consumers even after their own inflation-related costs have been covered.
The Times’ acknowledgement of corporate greed, though, didn’t affect its conviction that consumer demand must take a hit to bring prices down. In a piece assessing the Fed’s interest rate hikes, the Times (11/18/22) reported on the difficulty the continued resilience of both the labor market and consumer demand poses for the Fed, without so much as a word considering an outcome that doesn’t require kicking people out of their jobs:
Rate increases have yet to seriously dent the overall job market…. “The shocking part is, for as much as we’ve raised rates in six months, we’re really just still not seeing much in the labor market,” Christopher Waller, a Fed governor, said at a recent event….
In theory, shoppers should be pulling back as money becomes more expensive to borrow and uncertainty about the future mounts. But so far, businesses continue to invest, and consumers are hardy.
With these inflation indicators “lagging,” the Times says the Fed is trying to “thread the needle” so as to not impose supposed unneeded costs on the economy:
So far, “it appears tighter money has not yet constrained business activity enough to seriously dent inflation,” Raphael Bostic, president of the Federal Reserve Bank of Atlanta, wrote in an essay on Tuesday. “While there are risks that our policy actions to tame inflation could induce a recession, that would be preferred to the alternative.”
How being so determined to bring inflation down that you are willing to cause a recession, a far worse outcome that would throw millions out of work, just to bring inflation down is “threading the needle” remains a mystery. That that outcome “would be preferred to the alternative” just goes to show at whose behest the Fed is operating. Rich people, of course, are never unemployed. However, their giant piles of money do lose value as inflation persists. So a recession would be preferable to them—and only them.
So even though working people are already shouldering the heaviest burden of inflation, and even though the Times (11/1/22) previously reported on how many companies are taking advantage of the situation, it doesn’t propose that those corporations should be made to shoulder more of the burden of deflationary efforts.
‘Stomach for the fight’
But where the Times sees the Fed “threading the needle,” the Economist (12/1/22) questions whether policymakers have “the stomach” to go even further. One cannot describe their take as a bait and switch, given they make no effort to appear sympathetic to the needs of ordinary people. Instead, they invoked the legacy of Carter/Reagan Fed chair Paul Volcker, whose excessive fight against the high inflation of his time led to a recession and drove unemployment to 10.8%.
The Economist stated that central bankers today should draw “three lessons” from the experience of the ’80s:
First, inflation can take a long time to come down. Second, defeating inflation requires the participation not just of central bankers, but other policymakers too. And third, it will come with huge trade-offs.
It’s the second and third lesson which give the most pause here.
The second lesson, that other policymakers must be engaged alongside central banks in order to adequately curb inflation, seems benign until you realize which policymakers and which policies the author is referring to: namely the “liberalizing reforms” of the 1980s, the austerity, deregulation and disempowerment of labor that took place under the Reagan administration.
The third lesson, about trade-offs, amounts to a call to remain firm on kicking millions of people out of their jobs:
The third lesson of the 1980s is that disinflation is painful. The world economy did not benefit from a “soft landing,” where inflation falls without provoking recession. Average unemployment across the rich world doubled in the five years after 1979….
Do policymakers today have the stomach for the fight?… Fighting inflation is hard. It requires all hands on deck, and immense courage over a long period of time. It is also, unfortunately, almost inevitable that some groups lose out, if only in the short term.
Lenin’s description of the Economist as “a journal that speaks for the British millionaires” really holds up. Asking if policymakers today have the guts to serve power is not a question requiring too much investigation. If it were, history would have turned out a lot different.
Journalists should instead be asking if policymakers have the guts to serve those who bear the brunt of inflation, who don’t set the prices, and who don’t make record profits. The answer is a resounding no.
‘For wages to come down’
Following the 2008 financial crisis, the Fed unleashed an era of cheap money for the rich, inflating shareholders earnings without prompting significant reinvestment or wage increases (Project Syndicate, 9/21/22). Unfathomable inequality has followed.
This continued uninterrupted for over a decade. But labor’s more recent moderate increase in wages is being treated as public enemy number one by the Fed and commentators.
At a September press conference, Fox Business’ Edward Lawrence asked Powell how long Americans should be prepared to feel the “economic pain” the Fed has imposed. The Fed chair responded by openly stating that it was going to take as long as was necessary to crush wages:
I mean, it really depends on how long it takes for wages, and more than that, prices to come down, for inflation to come down.
This argument that the Fed continues to make, that too much demand and a “wage price spiral” are exacerbating inflation, gets unquestioningly parroted in the media (e.g., New York Times, 12/14/22). But it ignores data showing that aggregate demand has mostly fallen below historical trends, and would not be excessive if not for supply shocks—and that, crucially, real wages are declining—as laid out in a recent Roosevelt Institute report (12/6/22).
As the report’s authors, Joseph Stieglitz and Ira Regmi, document, inflation has mostly been brought on by “supply shocks and sectoral demand shifts, not by excess aggregate demand.” This warrants a different set of policy tools than the “blunt” hand of monetary policy that would drive unemployment “unnecessarily high.”
While “restoring interest rates to normal levels” not seen since before the ’08 collapse has “distinct advantages”—because zero or negative interest rates subsidize corporate speculation—going further than that, as the Fed seems intent on doing, “will not substantially lower inflation unless they induce a major contraction in the economy, which is a cure worse than the disease.”
When corporate media appear to be sympathetic to the ordinary people that face the brunt of inflation, but only offer policy ideas that would further widen the gap between wages and inflation, and between rich and poor, they are engaging in a bait and switch that only serves the powerful.