Upstream - A Left Answer to Inflation with Hadas Thier

Episode Date: November 8, 2022

Far from being some kind of transcendent economic phenomenon originating from higher realms of monetary physics that are indecipherable to us mere proletarian mortals, the economy is actually pretty straightforward and easy to understand — it’s mostly just politics. And that’s still true when it comes to purposefully mystified topics like inflation — particularly to how policymakers respond to inflation — it’s all just politics. Decisions made by those in power.  But the thing is right now the decisions about how to respond to inflation are being made by a class of people whose job it is, under capitalism, to make sure that the economy works for just one small group of people: capitalists. There is, of course, an alternative — and that alternative is one that would look a lot better for the vast majority of us.  In this Conversation we take a deep dive into inflation: what it is, what’s driving it, what’s wrong with the current response to it, and what a left response to inflation would look like.  Hadas Thier is a writer, journalist, and activist based in Brooklyn, New York. We had her on the show earlier this year to talk about her book, A People's Guide to Capitalism: An Introduction to Marxist Economics, and for this Conversation we’ll be talking about her latest article for In These Times, titled “A Left Answer to Inflation.” Thank you to The Limeliters for the intermission music and to Bethan Mure for the cover art. Upstream theme music was composed by Robert Raymond. Related Conversations / Further listening: Inflation with Richard Wolff and Dean Baker (In Conversation) This episode of Upstream was made possible with support from listeners like you. Upstream is a labor of love — we couldn't keep this project going without the generosity of our listeners and fans. Please consider chipping in a one-time or recurring donation at www.upstreampodcast.org/support If your organization wants to sponsor one of our upcoming documentaries, we have a number of sponsorship packages available. Find out more at upstreampodcast.org/sponsorship For more from Upstream, visit www.upstreampodcast.org and follow us on Twitter, Instagram, Facebook, and Bluesky. You can also subscribe to us on Apple Podcasts, Spotify, or wherever you listen to your favorite podcasts.  

Before we get started on this episode, if you can, please go to Apple Podcasts and rate, subscribe, and leave us a review there. You can also go to Spotify to leave us a review there too. It really helps us get in front of more eyes and into more ears. We don't have a marketing budget or anything like that for upstream, so we really do rely on listeners like you to help grow our audience and spread the word. And also, upstream is a labor of love. It's really important for us to keep our bi-weekly conversation series and quarterly documentaries free of charge and accessible to anyone who's interested.

But it all takes a lot of time and resources. If you can, if you're in a place where you can afford to do so, and if it's important for you to keep this content free and sustainable. Please consider going to upstreampodcast.org forward slash support to make a one-time or recurring monthly donation. Thank you. One of the things about certainly economics in general and also inflation in particular is that it's both purposefully mystified, which is why I think it's important to talk about in a way that you

know regular people can understand, but it's also deep politicized. And what I mean by deep politicized is that when people talk about the economy, it's like the economy quote unquote is like its own force that just exists in some kind of technical world and we need to respond to it with all these technical fixes, you know, the interest rates, other kinds of things that the Federal Reserve can do and so on. And it just, what it does is it functions to sanitize what are overtly political decisions. Decisions that in many cases, and certainly in the case with inflation, are class war positions.

You are listening to upstream. Upstream. Upstream. Upstream. A podcast of documentaries and conversations that invites you to unlearn everything you thought you knew about economics. I'm Robert Raymond. And I'm Deladuncan.

Far from being some kind of transcendent economic phenomenon originating from higher realms of monetary physics that are indecisive to us mere proletarian mortals, the economy is actually pretty straightforward and easy to understand. It's mostly just politics. And that's still true when it comes to purposefully mystified topics like inflation, particularly to how policymakers respond to inflation. It's all just politics. Decisions made by those in power.

But the thing is, right now, the decisions about how to respond to inflation are being made by a class of people whose job it is under capitalism to make sure that the economy works for just one small group of people, capitalists. There is, of course, an alternative, and that alternative is one that would look a lot better for the vast majority of us. In this conversation, we're talking inflation, what it is, what's driving it, what's wrong with the current response to it, and what a left response to inflation would look like. Hedost here is a writer, journalist, and activist. We had her on the show earlier this year to talk about her book, A People's Guide to Capitalism, an introduction to Marxist economics.

And for this conversation, we'll be talking about her latest article for In These Times, titled, A Left Answer to Inflation. This is normally where I would say, here is Della in conversation with Hadass but unfortunately Della is sick with the flu and so we're breaking our every other episode rotation and I'm subbing in today. I'd like to extend my condolences to all of the Della heads out there but you're stuck with me for this one. Hi, Hadassets. Great to have you back on the show. So for folks who aren't familiar with your work or who

didn't have a chance to listen to our conversation with you earlier this year on your excellent book, a People's History of Capitalism, I'm wondering if you can just start by introducing yourself. Sure and thanks for having me back on the show. It's great to get to talk to you. I am a writer and an activist. I think those are my main credentials and you know my one of my main goals and I think that's relevant for this discussion as well is that I try to write about the economy. I write about other things too but I try to focus you to write about the economy. I write about other things too, but I try to focus writing about the economy. And in particular, writing about it in a way that people can understand that you don't have to have a background in economics, but to actually be able to chew on what's happening

in the world around us, which so much of what happens in the world is either economic or undergirded by economic issues. So I think it's important for people to be able to understand, to talk about, analyze, and so on. So that's where I'm coming from. Yeah, absolutely. Thanks so much for sharing that. And well, talking about the economy, we invited you on today to talk about your excellent

recent piece, which was published in the magazine in these times. And it's titled a left answer to inflation. And this was an incredible piece. And yeah, I felt like I was diving into like a delicious brownie or something when I was reading it like every bite. You were just hitting all of these different points that I thought were so important. And so I guess before we get into the specifics, I'm wondering if you can maybe just start by briefly outlining what you set out to do in the

piece. Sure. I definitely set out to produce a delicious brownie for everybody. I love that. I'm going to have to use that as my byline or something. Try to make economics as delicious as a brownie. But yeah, so what I tried to do is basically to unpack what's happening with inflation and where it came from, what the response is.

And in particular, because inflation is often used, and certainly over the last few decades, has been used by the right and more conservative elements to push through an agenda. Obviously, we can see it now with, you know, all of the Republicans are running on the basis of being anti-inflation, that Biden has caused inflation and so on and so forth. It has historically been used by the right to put forward a conservative agenda. And it's really important that the left has our own answer to inflation. There's something inherent about inflation that calls for conservative politics and economics. And regular people do suffer because of inflation.

And so we actually, that should be the left's terrain. We should be able to talk about how to protect working people's pockets, how to increase working people's living of standard. That should be the left that comes in with an agenda around that. So that was sort of my goal. And in particular,

one of the things about certainly economics in general and also inflation in particular, is that it's both purposefully mystified, which is why I think it's important to talk about in a way that regular people can understand, but it's also decolidicized. And what I mean by decolidicized is that when people talk about the economy, it's like the economy quote unquote is like its own force that just

exists in some kind of technical world. And we need to respond to it with all these technical fixes, you know, the interest rates, other kinds of things that the Federal Reserve can do and so on. And it just, what it does is it functions to sanitize what are overtly political decisions, decisions that in many cases, and certainly in the case with inflation, are class war positions. And so with inflation, and this is why I kind of went

about trying to write this piece, is that there is this deeply conservative narrative at play, that the response to inflation has to be to stop government spending, or to minimize government spending, to minimize any wage gains, and critically part of that is to raise unemployment, and we can talk about why that is. And more broadly, not just in terms of the response to inflation, but also lots of other political decisions that happen under the blanket of anti-inflation politics. So for instance, Biden's build back better agenda of last year became the inflation reduction act. So a very ambitious social spending program became much more whittled down and reformed under

the guise of fighting inflation and so on. Or when student loan forgiveness finally was on the agenda, all of these pieces come out talking about how if we forgive student loans that will further drive up inflation and so on and so forth, it really frames a discussion. And I think it's important for the left to have our own analysis and our own answers that recognizes that this is a political framing. There is nothing inherent about inflation that warrants these kind of responses. Yes, absolutely.

And I want to definitely get into all of the different ways that we could respond as leftists to inflation or what a left response would look like, first though, I want to maybe go back in time a little bit and talk about how we got to where we are now. You start the piece by highlighting the sort of good old economic debate from the 20th century of Canesianism versus sort of the Friedman school or like neoliberalism, and you situate it all around this discussion of inflation. And so I'm wondering if we can start there,

if you can talk about what this traditional sort of idea of inflation is, where it came from, how we came to this understanding of how inflation is caused, this neoliberal understanding of how it's caused, yeah, maybe just walk us through that and sort of what happened in the 70s with the Reagan air traffic controller strike, or I should say Reagan's response to the air traffic controller strike, and the vulcarshock, and all of that. Sure. So inflation itself is a kind of a simple concept in terms of its definition. It's just a rise in prices kind of generalized around the economy as opposed to just like one particular

sector or commodity or whatever. And where it gets tricky is why it comes about and how to respond to it. And there are a number of factors that can feed into inflation. Each case, you know, you really have to analyze separately what caused inflation in our current situation versus the 1970s were different factors at play, but part of what's important in unpacking this like neoliberal approach to inflation is at the end of the day, whatever the specific factors that have fed into inflation, and in this case, you know, in terms of the current situation, there's widespread agreement that supply and chain chokeholds because of the pandemic and some other things. Since then, the war with Russia and Ukraine and a couple

of other things, there's pretty widespread agreement and Ukraine and a couple of other things. There's pretty widespread agreement on both left and right that these things have helped to trigger inflation and are part of the causes of why it's stuck around. And yet, it's always workers' wages, government spending, a tight labor market, which is related to workers' wages, that seem to be the main culprits from the perspective of the right wing and from the perspective of the right wing, but really the mainstream discussion, which as the article goes through,

mainstream discussion has been framed by this kind of right wing approach. So that's where the current political biases come through is who and what is to blame for inflation and no matter how much they talk about this or that factor, when it comes down to it, when the Federal Reserve talks about why they're raising interest rates and so on, they're concerned about a quote-unquote tight labor market. And I say that in quotes not because there's no such quote unquote, tight labor market. And I say that in quotes, not because there's no such thing as a tight labor market, but it's one of those things. Again, it's like this sanitized description of something where really what they're saying

is the problem is that the unemployment levels are too low, which they don't want to say that's the problem. They would rather use a term tight labor market because you sound like a jerk when you say the problem is it unemployment is too low. So to go back to the 1970s, I began the article talking a bit about Milton Friedman because he had a lot to do with how those kind of politics were formulated, his ideas really came to dominate, went from being kind of on the fringes, to being really at the core of mainstream economic discussion and policy. And the basic idea here is that, you know, if government spending relies on, you know,

expanding the money supply, which the federal reserve can do by lowering interest rates, and that leads to too much money in the system, too much money, Chase is not enough goods. And there you have like a basic problem of the market where if there's more demand than there is supply, then prices will tend to go up alongside of that,

those same policies of government spending would tend to lead to higher employment rates and that had been the case in the kind of post-war economy in the United States that there was relatively low unemployment and the problem from infredements view and in general in terms of conservative economics is that when unemployment is quote unquote too low, then workers aren't afraid of losing their jobs or not as afraid as usual because chances are if they did lose their jobs, they could have some level of certainty that they could find another job. And so that increases their confidence to

demand higher wages. It increases their bargaining power. And that's really the main problem for capitalists when they talk about a tight labor market. When there's too low unemployment, it increases workers' bargaining power. And when that happens, if wages are higher, and I will just say the little asterisks here, and we can come back to this point later, that that's not what has triggered the current bout of inflation. But the general formula, the freedmanate formula of inflation, is that when there are higher wages, then businesses have a higher cost of producing things and they'll pass off

that higher cost to consumers by hiking prices. And that's the sort of basic formula of inflation from a conservative viewpoint. And part of why this became so important in the 1970s is that the 1970s was a very difficult time for the US economy for a number of different reasons. The sort of like golden age of the post-war economy, boom, came to an end. We can talk more about some of the details, but there were problems with the US economy. And at the same time that there was increased competition that the US was facing from other countries like in Western Europe and Japan.

They were also facing higher energy costs because of an oil embargo from Arab members of OPEC, but also a militant labor movement at home, which is what is kind of critically different between the 1970s and what we see today, where the labor movement is actually quite weak, unfortunately. But at the time, there was actually a very militant labor movement that had successfully fought for higher wages among other things. And so there was really like a double goal for American capitalists. One was to tame inflation, and two was to tame the American working class.

And really the inflationary crisis of the 1970s was like a very good excuse to turn the tables and revitalize American profitability for the capitalist class. And that's where the Federal Reserve chair, Paul Volker, used what has been called the Volker Shock, just engineered and unprecedented hike and interest rates. Those high interest rates then served to slow investment down. And so a lot of businesses either close down or they ratchet down how much production they're involved in. This leads to greater unemployment. In the case of the 1970s,

it triggered a mass unemployment crisis. And that was obviously a terrible thing for working people, not a good solution to inflation because you're already hit by inflation and then on top of it, you're hit by mass unemployment, but it was a solution for the American capitalist class. And you mentioned Reagan's firing of air traffic controllers, 11,000 air traffic controllers in 1981. And that was part of the political response to make clear to both the capitalist class and more importantly to the working class that the government was going to come down on the side of big business.

So, you know, we had these huge interest rate hikes, we had mass unemployment and guess what? If you try to fight within that for holding on to some piece of the economic pie, you know, the government is gonna come out against you as well. So, it was a very deliberate attempt on both the economic and political front to discipline the working class, which had been quite confident and successful in the course of the

1970s. Awesome. Yeah, thank you so much for that and just a little glimpse into some of the workings that led us to our current sort of neoliberal hellscape, if you will, and really, really important part of the story to sort of look at because it's kind of happening again right now. And there are some differences, of course. And so I'd love to pass forward now. So what's going on now? How did we get to the current state of inflation, of higher inflation that we're seeing now, or we hear because of, as the right likes to say,

are we here because of COVID stimulus checks and government spending? What is going on now? Yeah, so that's a great question. I'll try to begin to unpack some of that. I'll start by saying, we're not at a point where we're facing a rerun of the 1970s. It doesn't mean that it may not become that, but in terms of the scale of the crisis and in terms of

so far, we're not yet at a place where we're seeing like a valkershock, but we are seeing at a place where we're seeing like a vulgar shock. But we are seeing certainly higher and faster interest rate hikes than we've seen in many decades. And, you know, we had in the 1970s Reagan in office and Pat Co., the air traffic controllers and so on. We now have Biden in office who is no, you know, radical or progressive by any stretch, but he's facing a very different political context. And so he's not like the 2022 version of Reagan. And I don't think that's likely, although we'll see how things develop in the next couple of years.

A lot of it does depend on what does happen with inflation and what happens politically on the ground in terms of the strength of the left versus the right and so on. But the other thing that's different is, and I mentioned this earlier, the causes of inflation, there were specific things at play in the 1970s in terms of objective economic conditions. And then there was subjectively the state of the labor movement in the US, in terms of objective economic conditions. And then there was subjectively kind of the state of the labor movement in the US, which was much, much stronger than the labor movement is today. And wages have not been like the,

even one of the key drivers of inflation in terms of what we're seeing today. Instead, we're seeing the aftershock, well, I shouldn't say aftershock, because the pandemic is not over, but the aftershock of the initial shock to the economy that the pandemic had, when much of the country was at home during lockdowns, a lot of industries shrink, or they remained open, but in under reduced capacity and so on. And so when the economy began to reopen and it did it in different places at different speeds,

but in general, it kind of reopened rather suddenly from zero to 100 or whatever. And the capitalist market is not a nimble thing. It can't just ratchet up production quickly. Individual businesses can't necessarily do that, but also there's much greater systemic things at play, you know, in terms of how the economy works and like shipping and shipping lines and log jams and so on and so forth. When you try to suddenly like let loose a bunch of extra supply to meet this pent-up demand. So when the economy reopened and it did so quickly, this led to a very fast ratcheting up of

demand of both goods and services, and this led to what people talk about as chokeholds in the supply chains. And when the supply doesn't match demand, then essentially what the capitalist market gives us is that buyers are pitted against each other in abitting war for goods, and that allows companies to drive up prices. So that initially kind of sparked inflation. Again, as I was saying before, I think there's widespread agreement that that was the case, but the question is why it's stuck around since then. Part of it is that there's a lot of things that do take longer amount of time to untangle, but then there's also, you know, that's been exacerbated by this neoliberal desire over the last few decades for what's called just-in-time production, which means that there's basically very little on-hand, as little as possible on-hand in storage in warehouses, so that capitalist don't have to pay extra money for storage, but that makes it very difficult to quickly ratchet up supply. Then there's Russia's invasion of Ukraine,

which contributed to high oil prices. I do think the pandemic era benefits did at least modestly fuel greater demand by putting more money in circulation, but I think that had a much smaller overall impact than some of these other factors. And even to the extent that it did have an impact, it's like, well, you also want to weigh that against the fact

that child poverty was massively reduced because of this kind of spending, the fact that literally millions of people were not plunged into poverty when mass unemployment took hold. When all these conservative economists and politicians and so on talk about how terrible these pandemic-era benefits were, they neglect to mention that actually they literally saved people's lives.

People, you know, when we had millions of people suddenly plunged into unemployment and they were able to be caught by an actually substantial social safety net, rather than going hungry, starving, becoming homeless, and so on. And then, you know, of course, companies, CEOs have taken advantage as well

of increased demand and engaged in widespread price scouting, particularly in gas, in food, some sectors in particular, but raising prices much higher than the increases in their supply costs. You're listening to an upstream conversation with Hedaz Tier. We'll be right back. Times are getting hard boys, money's getting scared. Times don't get no better boys. Gonna leave this place, take my tool of buy her hand, lead her through the town.

Say goodbye to everyone, goodbye to everyone. Had a job a year ago, had a little home. Now I've got no place to go. Guess I'll have to roam. Take my true love by her hands, lead her through the town. Say goodbye to everyone, goodbye to everyone. Every wind that blows, boys, every wind that blows, carries me to some new place. Heaven only knows, take my true love by her hand, lead her through the town. Say goodbye to everyone, goodbye to everyone.

Times are getting hard, boys. Times are getting hard boys, times are getting skid. Times don't get no better boys. On a leafless place, take my true love by hand, lead her through the town. Say goodbye to everyone. Goodbye to everyone. Take my true love by her hand. Lead her through the town. Say goodbye to everyone. Goodbye to everyone. Say goodbye to everyone. Goodbye to everyone. That was Take My True Love by the Hand by the Limelighters.

Now back to our conversation with Hadastir. So just before the break, you had begun to talk about price gouging and profits and this idea of corporate CEO sort of taking advantage of inflation to raise prices. We had Professor Richard Wolff on the show about a year ago to talk about inflation, and he really just, he spent most of the conversation actually talking about corporate profits. And in your piece, you also outlined clearly how corporate profits have soared in recent months and they're seeing their biggest growth in profits and decades and how these profits have contributed disproportionately to rising prices or inflation, I think is an important question that I

feel like most conversations around inflation don't really focus on that. Maybe a little bit more recently because it's just the price gouging, especially with gas. I mentioned the second food has gotten really, really extreme. I looked up a couple of examples. According to the New York Times PepsiCo, which owns something like 20 brands of food products raised its sales and profit forecasts for the year in large part because of consumers willingness to pay more for soda and snacks. And PepsiCo's chief financial officer actually told analysts, and I'm quoting him here, one of our goals clearly is to both gain share and grow margins.

And frankly, that's something that I think we can do. And from Colgate, Colgate Palmolev, quote, we felt it was very important to get ahead of the inflationary environment and take as much pricing as we could. And so they're just saying the quiet part out loud now, they can just get away with that. And I'm wondering, can you unpack this a little bit and explain the role that profits could be playing in driving inflation here?

And I mean, why this part of the equation is so rarely talked about? Yeah, absolutely. I mean, the man behind the curtain and like that wizard of ours way behind the mystique of the economy and so on is always a question of profitability and that's what drives capitalism. And I've heard professor Willough talk about this like he mentioned him in this discussion is he says, well, there's only one group of people that can raise prices, and that's the bosses. Workers are typically blamed for inflation, but workers obviously aren't responsible for setting prices.

Corporate CEOs are responsible for doing that. And what's important, I'll say a couple of things. One, I think what's important in the big picture scheme of things, and the reason why inflation is really a site of class conflict that it's not this kind of just technical situation that needs a technical fix and what have you is that it's a question of who gets the share of profits and who bears the brunt of any rise and costs

because if you imagine a different scenario where let's say for whatever reason and we talked about some of the things that have fed into this inflationary crisis, if for whatever reason, price scouting is one of those contributing factors. But whatever the reasons are, let's say the cost of production goes up for companies, but instead of passing that off onto consumers, they just may do with slightly smaller profit margins. That, from my perspective, would be just fine. But obviously not from the perspective of the American capitalist class and from the perspective of the CEOs that make up that class. And the way that economists talk about it is, you know, what is the share of the CEOs that make up that class. And the way that economists talk about it is, you know,

what is the share of the national income going to labor versus to capital? And we're in a period in history that is rather unprecedented in terms of how high the share of the national income, that is all the things that are produced and the money that's the wealth that's created, how high the share of national income is that goes to the capitalist versus the working class, people that actually produce all of those things. We make a tiny fraction of the national income of the wealth that is produced in our society and the capitalist class wants to keep it that way. So the big picture answer here is that the whole response to inflation assumes that the rate of profit needs to stay at least as is. And in some cases, like the ones that you were mentioning, they could take advantage of it to raise the rate of profit. And we are seeing an insane level of corporate profiteering

that's been happening through the pandemic and through this inflationary crisis and taking advantage of it. I don't think it's the only or even the main driver of inflation, but it does play a big role. And I think that as you are saying, it's not one that gets discussed often because it's not a convenient narrative

given that the political class in our society is not interested in curbing profitability, they're interested in supporting profitability. So, you know, Biden has actually talked a little bit about it and given some at the very least lip service to it. But by and large, these are not the things that get talked about and certainly not in the mainstream media. So the last thing that I want to just say about that is that corporate profiteering is not new. The level of corporate profits that we're seeing right now,

some of them are hitting record level, some of them not because they have been so high even before this. This has been going on, this neoliberal offensive that we've been talking about has been going on for the last few decades. Price scourging is not new, but A, they're certainly taking advantage of this moment. And B, I think it's important to say that this is part and parcel of how a capitalist market works. And all of the kind of free market ideology about how we should just let the market rip is

exactly what leads to price gouging. That's natural and regular way for the market to work, which is that if there is greater demand than there is supply, then capitalists will take advantage of that moment to raise their prices. And that's not just because they're individually greedy, although they are, but it's because the whole purpose of the market is to facilitate this competition, right? Where each company has to get ahead of its competitors, gain greater market share, gain greater profits so that they can invest those profits into even more production

and gain even greater market share. So when the opportunity arises to raise prices, they will do it. That's how the market works. And when the reverse is true, if they have too much supply on hand for too little demand, then it forces capitalists to have to sell on the cheap because they don't want to be caught holding the bag.

They get trying to get rid of their inventory. But they also don't want to set a precedent for really cheap prices. So in some cases, they just get rid of their inventory, but they also don't want to set a precedent for really cheap prices. So in some cases, they just get rid of just dump inventory rather than sell it for cheap because they don't want to set a precedent of cheap prices. And that is, both ends of that is utterly absurd and disgusting, frankly, and leads to great misery. And that's just how the market is meant to work. So I think that's an important part of the story

to unpack and understand. Absolutely. Thank you so much for touching on all that. And okay, so in the first part of our conversation, you mentioned this idea of taming the taming of the working class. And you also touched on the federal reserve You mentioned this idea of taming, the taming of the working class. And you also touched on the Federal Reserve increasing interest rates. So to pick up on that, so just this week, the Federal Reserve announced another fourth consecutive rate hike.

Betcher Jerome Powell has actually gone on record multiple times saying that these interest rate increases will not reduce the cost of food or gas and that they'll likely induce a recession. And so I'm wondering if you can walk us through briefly what is going on here, why the Fed is doing this and we've definitely touched on this already, but maybe just in this context, like how can this be seen as a form of class war waged upon workers at sort of a way to discipline labor?

Yeah, absolutely. I mean, at very best, like the best case scenario, the Fed's actions of raising interest rates and people have talked about this. It's like a very blunt instrument in a best case scenario if we give them the benefit of the doubt. Like you said and like Jerome Powell himself said, you know, raising interest rates is not going to reduce prices. In some cases it will increase, for instance, anyone obviously who wants to try to buy a home now mortgage rates are a lot higher and that has places, buying homes way out of reach for working people.

It also indirectly then impacts the price of rent as well because people who are priced out of being able to buy a home are then in the rental market and so that drives demand for rentals, which means landlords can get away with charging more there as well. There's a lot of different examples where you can see that raising interest rates not only doesn't help but actually hurts in terms of actual prices. What the Federal Reserve is trying to do despite the dubious effectiveness of raising interest rates is that they see this as really either a long-term or a best-case scenario, a medium-term having an effect of lowering prices, and it will take a long time for this to actually happen, but lowering prices because you've lowered demand for goods.

Now, if you think about what that means, you lower demand for goods because people can't afford goods. It's one thing to say, you're going to lower demand for luxury goods or even for things like cars, which actually are in necessity, unfortunately, for most people in this country because of our horrible lack of public transportation in most cities. But what does it mean to lower demand for food? You know, that just means that less people can afford food or can afford quality food and have to resort to eating junk food and so on.

It's a way of lowering demand and the way that that happens through raising interest rates and yeah, we did touch on this earlier is the idea is that when you raise interest rates, you make it harder for capitalists to invest. You also make it harder for capitalists to invest. You also make it harder for working people to take on debt through credit cards or buy a house with mortgage and so on. But in the bigger picture, right, its companies rely on a lot of debt in order to operate. That's how the system works. And so when you make credit more expensive because you raise the interest rates on that debt, it means that capitalists invest less. In some

cases, they close down production. They certainly don't expand production. And this leads to layoffs, which then in turn also lowers demand because less people are employed, unless people can buy things, and then it also lowers wages indirectly because when unemployment is higher, then workers are more scared on the job to make demands. And so that has the impact of taming workers and reducing their bargaining power. So, you know, that's the kind of,

like, big picture of what they're aiming to do. Sometimes they say it clearly and out loud, sometimes they do it beneath, you know, this avail of kind of sanitized technical terms, but that's the intent. So, yes, it seems very much like the Federal Reserve is sort of running interference, right, for the capitalist class here, and it just feels so on the nose. Like, we're going to have to cause pain to workers if we're going to keep shoveling profits into the troughs of our capitalist overlords kind of thing. And it's just like, is the economy here for the people or are the people here to serve the economy, right?

And it's very clear what they think of that. And one really classic quote that you write about in your piece that I just wanna read here is, you say Karl Marx argued that capitalism depends on unemployment, the famous reserve army of labor, as he calls it, to keep workers desperate enough to agree to whatever work they get. Unemployment, in other words, plays a critical role in capitalism, preventing wage growth

from threatening profitability. And I think that just says it all. And I have a bunch of excerpts from your piece that I will not read back to you because you wrote them. And anybody who wants to get into the piece further definitely go and check it out in these times.com. But for now, I want to shift the conversation. So the title of your conversation is a left response. And so we've been talking about broadly the right. I mean the title of your conversation is a left response. And so, we've been talking about broadly the right. I mean, I think that it's pretty safe to say that economically speaking, both parties in this country are to the right on the political

spectrum. But yeah, I mean, so right now we've got it backwards, right? We're prioritizing profits. And what would you say could be a just and equitable left response to inflation? Yeah, absolutely. I think that's really important. And I think that's the piece that the left needs to, in particular, be able to get better. It's talking about, to flush out our own ideas about it.

There's actually a great bill right now that representative Bowman has put out the basically calls for price controls. I think that kind of thing needs to be put more front and center of a left agenda and needs to be developed further. But I think the key thing is to go back to the big picture, right, is as inflation is a site of class conflict, if there is a cost in the rise of production, which there is, who is going to pay for that and who is going

to benefit from that. And the starting point for us has to be that actually we can curb the boss's profits while protecting working people's pockets. And so any solution we come up with has to fit under that framework. So some very basic ideas, obviously higher taxes, particularly on the ultra wealthy corporate taxes as well. Those things would reduce the government deficit, reduce inequality, and also be able to fund greater social spending to protect working people during an economic crisis. And so, you know, if there was a criticism, for instance, of some of the pandemic era

benefits, the extent to which they have fed into inflation, and again, I think this is overplayed in mainstream discussion, I think they fed into it in a much smaller percentage than some of these other factors, but to the extent to which they did, that could be fixed by funding those kind of spending through taxes on the rich and corporate taxes, etc. rather than funding it through deficit spending, for instance. But the other aspect of it, I think, is different forms of price controls. Part of it is, like I was saying, with something like Bowman's Bill, which tries to tackle setting up this task force, basically, that would find out where the specific places

in the economy, where prices are out of control, where price gouging is taking place, et cetera. How do we put caps on prices in particular, sectors, and so on and so forth. There's also political social policies that are types of price controls in New York City where I live There's one of the few places where we have some level of

regulation on rents. It's watered down from where it used to be But there is a history both in the city and also nationally of rent controls That was part of FDR's Price Controls Act in 1942. Rent controls would go a huge way towards fighting inflation. Housing is one of the key aspects driving inflation and of course it would protect working people's pockets. There's also other forms of price controls, things like expanding Medicare and giving Medicare the power to negotiate prices for medicine. That's a way of helping to regulate prices around medicine.

Is that simple fact of allowing Medicare to negotiate those prices and then to expand Medicare? And then that then creates as well a greater social safety net to catch people who are suffering from both the effects of inflation and the effects of fighting inflation, quote-unquote, through higher interest rates and so on. So there's a couple of other things that I'll mention, but just to take one step back real quick is one of the ways to think about inflation is that it's not just looking at inflation in terms of the percentage at which prices have risen. It's to compare the rate of inflation with the rate at which wages are

or aren't going up because if we have a high rate of inflation, but also a high rate of wages going up, then obviously those higher wages mitigate the effects of inflation. It's still not healthy for the economy for inflation to go way up. But I think that the important point there is to say that the question is how much spending power do we have? And so if wages don't keep up with inflation, then that's where our spending power gets hurt. And so even these last few decades where we've had relatively very low inflation,

we've had even lower wages rising. And so our relative spending power has still gone down over the last few decades, despite a low level of inflation up until recently. So that's why it matters that we're actually fighting for some of these political policies, but also that we continue to fight on the kind of shop floor where we work, that we fight for greater wages, that we support the labor movement, other people, unionizing that we support this sort of like newer wave

of low wage workforce unionization, like we're seeing at Starbucks and things like that. So that's I think the other component of it. And then the last thing, you know, I would say too, is that, and I go into more detail on all of these things and the article that you mentioned in these times, but the other component of it too is, for the government to have a more interventionist role in the supply side of this economic inflationary crisis, that the government could help to

support investment in the production of targeted goods. They did that briefly around baby formula, but there are other places where the government could play a greater role in that and help to untie some of the supply side tangles. That tends to have a more longer term impact, but I think that should be part of the equation. And all of these things in total are about putting forward both a way to support and protect working people's pockets versus the profits of the rich, but also as a way to fight for a more democratic role for the government in economic planning and economic decision-making that rather than this kind of like, Las hay fair, let the free market rip,

let the federal reserve take care of interest rates, that the government, the federal government should play a greater role in actual intervention into prices, into supply and production, into social safety net, and that that's the arena on which I think the left needs to set itself. You've been listening to an upstream conversation with Hadass Tier, author of a left answer to inflation. It's time to forsake the Chicago School of Economics,

published in the magazine in these times. As I mentioned earlier, we interviewed Hadass earlier this year in January on her book, A People's Guide to Capitalism. If you enjoyed this conversation and you want to learn more about the nuts and bolts of how capitalism works from a leftist perspective and what alternatives could look like, we highly recommend checking out that book and also listening to that interview from January. Thank you to the limelighters for the intermission music in this episode and to Beth and Mir for the cover art.

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