“It’s profiteering not wage rises, that has led to greedflation” (Larry Elliott The Guardian 20/04/23).
Our grocery bills are rising at the fastest rate since 1977. Global food commodity prices are dropping and so are global energy prices so why are junior doctors and nurses being told they are inflating prices? What has been found by the IMF (International Monetary Fund, and European Central Bank), is that companies have used the crisis initiated by Putin to drive up prices and boost profits. There is a non-technical term for what is happening and this is GREEDFLATION.
Ministers decided the narrative is “Your demands fuel inflation and make it more persistent”, words now being echoed by the Governor of the Bank of England. Untrue, as wages are lagging well below price increases. IMF Chief Economist quoted as follows: “Nominal wage inflation lags far behind price inflation, which implies a steep and unprecedented decline in real wages”. The flip side of steeply rising prices and only modestly rising higher wages has resulted in profit margins surging and pushed prices and profits through the roof.
A report by the union Unite in March blamed systematic profiteering across the economy for fuelling the cost of living crisis. The European Central Bank showed that in 2022 alone, profits contributed to two thirds of the inflation rise. But the UK government is not interested in greedflation and the Governor of the Bank of England has called for wage restraint but not price restraint. Greedflation will become a policy issue, and the question will be asked, “Why should workers take real pay cuts and told to make sacrifices, when companies including banks do not show restraint?”
Government must tell the truth and not blame nurses, teachers, junior doctors and civil servants for greed——that belongs elsewhere in the economy. Good Leadership is about long-term strategy and recognising the importance of thinking through long term consequences, not just for allies but the rest of us too.
I was reminded recently of the long-term damage to the UK social fabric by previous policies of the UK government, under Mrs Thatcher.