Thursday, October 27, 2022

There's more than one way to tame inflation

ANZ bank today reported a record profit of $2.3 billion - 0.6% of our total GDP going straight into the pockets of the rich. Meanwhile, their pet economists are explicitly demanding that thousands of people be thrown out of work to limit inflation:

New Zealand’s unemployment rate needs to increase to around 4.5% to stop adding pressure to inflation, ANZ’s economists say.


“To actually beat back inflation pressures, labour demand needs to fall. Rising unemployment is not a happy prospect for workers or for the housing market. But failing to get on top of inflation would lead to an economy that struggles to perform over the long term, with inflation eroding wealth and complicating long-term decision-making. What price are we willing to pay to avoid that?

What price indeed? Maybe those economists should be asking themselves that? And if they're serious in thinking that unemployment needs to rise for the sake of their precious economy, they should be the change they want to see in the world and quit, rather than demanding other people make sacrifices for their benefit.

More generally, these demands to increase unemployment to tame inflation are effectively a demand that ordinary people, rather than the rich, pay the price of economic stability. But why should we do that? Even assuming "economic stability" is a goal worth pursuing - and I'm not sure we should - there's more than one way to do it. The most obvious is to remove excess demand at the top, by taxing the rich of their excessive gains. Since ANZ wants inflation to reduce, they'll clearly have no objection to the government taking away half of their super-profit "for economic stability". And if they're not, its clear that they're just interested in waging class warfare against the poor, as usual.