Inflation Is A Myth

Capitalism and the capitalist media, even education, teaches us that inflation is a fact of life. That’s not true. This is where you should be asking questions.

Labor cost. One myth we are told is that the cost of labor drives up the cost of goods and services. This raises the question of why workers need pay increases. Of course, the answer is the increasing price of goods and services, often just for basic survival. If prices did not keep increasing, workers would not need increases to their pay.

Automation. One method businesses use to decrease the cost of labor is automation and technological advances. While it comes at an initial cost for capital outlay, the entire reason companies do this is because it saves money on wages and worker benefits in the long term. Technology increases productivity, meaning each worker can make more products, serve more customers. This means the company needs fewer workers. Pay remains the same, the cost of benefits stays the same or keeps costing the worker more each year. Automation often completely eliminates jobs. Do prices go down commensurate with the decreased labor cost? No but company profits keep going up, prices keep going up and corporate profits keep going up.

Raw materials. We hear the argument that the cost of raw materials keeps increasing. Typically, this is not true. Corporate mega-farms use more machines than labor. While labor costs have increased, go back to the second paragraph of this article. Many raw materials are imported because of lower cost. Like steel. China isn’t “dumping” unwanted steel on corporations. The American corporations are buying that steel. This goes back years, when corporations began buying steel from China because they did not want to pay for the cost of American labor. Which caused the near collapse of the US Steel industry. Consumer prices never decreased but corporate profits kept increasing. Pick any raw material that is imported yet available domestically and the same rule applies.

Lawsuits. One claim is that lawsuits drive up the cost of goods and services. You would have to look more closely by specific industry and company but lawsuits account for less than 1% of the cost of business in this country, overall. Even when faced with lawsuits, the damages are minor and still make the abuses which led to the lawsuits worth the price, leaving corporations with massive profits. The worst thing that happens is that their stock price dips for a few days. Who pays the cost of the lawsuits in reality? Consumers.

Tariffs. Numerous companies have laid workers off or exported jobs while citing tariffs as a rationale. This is disingenuous at best, a complete fabrication at worst. I’ll go back to steel as an example. If the cost of imported steel increases, it does not increase for only one company, it increases for all companies that utilize imported steel. So the cost of products increases across an entire industry, like vehicles. The consumer pays the price. The corporation preserves their profit margin. While sales may decrease, that is more of a function of stagnant wages than increased cost. Consumers either cannot afford or are hesitant to pay the higher prices.

Taxpayer subsidies. The ultimate fact of the matter is that while media rages about a “free market”, we do not have a free market. We truly have no idea how much we pay in subsidies to corporations. Lots of estimates but real numbers are elusive. From milk to corn to oil to gas to soybeans and on and on. One big problem is that subsidies are not always direct. When corporations pay wages so low that employees qualify for public assistance, we foot the bill. That’s subsidizing that corporation. When a company offers free shipping but the government offers subsidies and tax deductions for that company, that’s a subsidy. When US troops provide security for poppy fields in Afghanistan or navy ships protective escorts to oil tankers, those are subsidies. The entire military industrial complex is nothing but subsidies. So are superfund sites. The purchase of vehicles and fuel by small local governments all the way up to the US military are subsidies to vehicle manufacturers and oil companies. So, we pay the subsidies, then we pay the price at the pump, in the grocery store, on our utility bills… Socialism for the rich and corporations, capitalism for the rest of us.

Real inflation control. If we even discussed real inflation controls, it would implement such mechanisms as corporate profit caps by percentage of gross income, not allowing for stock repurchases or executive bonuses. It would look like implementing a maximum income. It may include price controls without subsidies. It would include stringent penalties for consumer abuse and price gouging. It would enforce anti-trust laws and practices. It would penalize every job eliminated or reduced while maintaining or expanding production levels. It would make stock repurchases illegal.

No going back. The point to be made here is that there is no going back on inflation. Not within our current system. Yet there is no valid rationale that bread is not 25¢ a loaf. Or that gas costs as much as it does. There is no valid rationale for oil being a top export and top import.That does not increase our energy security, does not help the environment, does not control cost or inflation.

Inflation is a myth. Like I began, inflation is a myth. A story we are told and just accept as fact. We have lived our lives without really questioning why prices increase while wages do not. We recognize the need to increase wages without asking why we need to do so just for survival. Schools teach inflation, media preaches inflation, corporations profit from inflation while causing most of that inflation for their own bottom line. Politicians promise to control inflation, then offer subsidies we pay for in order to maintain the profits of the corporate structure that causes inflation, in effect rewarding those same corporations.

Stop accepting the idea that inflation is a fact of life. It’s not. It is not a consequence or complication of capitalism. It is a core feature of capitalism.