Inflation – the impetus for industrial policy (which will be ignored!)

I’ll try to keep this brief, as it’s only a partial thought. But I have found it profoundly frustrating to follow the discourse in recent weeks/months on inflation with hardly a mention of price controls! I completely appreciate that such an approach is political naive in the current environment. But then again, so was open discussion of industrial policy not too long ago, and yet its rehabilitation is slowly occurring.

Most of us are fully aware that (wage and) price controls were used extensively during wartime to prevent inflation. Of course, in the face of a crisis like a world war, public sentiment allows for such experimentation. As is my understanding, these systems did persist in economies as they emerged from their war footing, but only for a time.

Their next appearance was naturally during the turbulent decade of the 70s, which marked the violent end of the New Keynesian/neoclassical synthesis era, and quickly ushered in the Volker Shock and the neoliberal era. And while mainstream economists continue to savage this idea, what do they know? Is their solution to deal with supply-chain inflation by immiserating working class people? While price controls may be inappropriate for many goods that are seeing demand in the “post-Covid” era, surely there is a rationale for applying them to items like food. Especially considering that grocery stores (at least in North America from my readings) are experiencing super-normal profits currently. These profits could also be addressed through an excess profits tax that is then recycled back to the public.

But will marginalized members of society that have weak connections to the tax system benefit from such an approach? Would it not be more efficient (!) just to impose price controls on essential food products that are required for life?

As some commentators have put it of late, our connections to global supply chains means we are “importing inflation.” In the neoliberal era, we exported jobs and imported deflation in terms of cheap consumer goods and nonperishables like food. But now, both product market categories are wrecked. Creating a price control system and strengthening domestic production of food stuffs may sound like a fleeting idea in the face of inflation. But if the next crisis that follows is a food crisis due to climate change, the intersection of food and industrial policy (and price controls!) may become essential for life.

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