Chapter 5: Why Is There Inflation?
If prices were truly determined by real, natural factors such as the impact of weather on crops, the depletion of or discovery of new sources of a resource, or the effects of new technologies, then we would expect to see prices rise and fall in response to such factors. Yet what we see in practice in Capitalist cultures is that while prices may rise and fall with natural events, over time they inexorably rise, and do so faster than the wages of the vast majority of people.
What drives this process?
Capitalist paradigms create an environment where it is imperative to amass as much money as possible, for individuals and families, and for businesses. Capitalist societies are also structured in such a way that different sectors of the population are pitted against each other. The common adage that “one man’s loss is another man’s gain” sums up this dynamic. Under the Capitalist paradigm, employers and employees, landlords and tenants, and other sectors each survives at the expense of the other.
Employers thrive best when wages are low, they do not have to pay for health insurance or other benefits, employees work long hours, and they can charge the highest price that “the market will bear” for their goods and services. Employee pay and benefits are an expense. A Capitalist imperative is to minimize expenses and maximize profits. These goods and services are typically things that employees must access – clothes, shoes, cars, food, etc. Employees thrive best when wages are higher than the cost of living, when they have healthcare and other “benefits,” and working conditions and expectations are reasonable. When one end of the equation gains, it comes at the expense of the other end in an eternal tug-of-war that drives prices ever higher.
Because the employer is assigned a superior level of power relative to employees, the cycle most assuredly starts with the employer. The employer sets the terms and wages. The employer sets their prices of their goods and services. The strong reinforcers in Capitalist paradigms drive them to make high demands on employees, keep wages low, and charge as high a price as they can get away with for their products. Employees then find that they can’t afford the necessities of life, much less amenities, and experience negative impact on health and well-being, which drives them to strike and otherwise push for higher wages and healthier working conditions. Employers resist and fight this effort, sometimes to the point of violence and of course pressuring lawmakers to serve their interests. When employees do achieve gains, employers compensate by raising prices to preserve their profit margins. Employers then publicly blame labor costs for rising prices, portraying themselves as victims of nefarious and unreasonable employees. This cycle continues as long as the Capitalist paradigm operates. Companies who trade with one another also contribute to inflation when each tries to get the highest price while lowballing their suppliers.
Another aspect of this dynamic is manipulation of “the law of supply and demand.” Quite simply, when a producer deliberately cuts back on production to create a shortage of their products, they can get away with raising prices. This kind of manipulation has been seen countless times and is not actually illegal in Capitalist paradigms. The petroleum industry, the pharmaceutical industry and tech and toy companies marketing their “must-have” items during holiday season are all frequent expressions of this dynamic. With the level of highly-sophisticated advertising and propaganda currently in operation, companies often create demand for products and service using effective psycho-social manipulations of targeted populations who have been trained from birth to respond to such manipulations. “Built-in obsolescence,” the practice of intentionally manufacturing products to have a short useful life is yet another factor in inflation, since these deliberately-crippled products break must be replaced much more frequently than would be the case if they were manufactured at the best standards that the state of the art allows.
Inflation is often disguised. Often, prices remain the same while package size incrementally and steadily shrinks. For the most part, people do not usually notice. A-la-carte packaging drives prices up as well. Companies often unofficially raise prices across the board by dollars and then compete among themselves over pennies. Technically, no anti-monopoly laws are broken and all of the companies increase their profits and stock prices.
Inflation strongly favors mega-corporations and other massive producers. If a mom-and-pop business or freelance provider raises their prices too high, their customers go elsewhere. A huge company or companies that produce and control most or all of the supply of something, they can raise prices at will and consumers must pay their price or do without. When the products or services are necessities, such as food, clothing, medicine, etc., consumers have no choice at all. Ultimately the entire Capitalist country functions as the old “company towns” of pre-labor-movement America in which the employer required employees to live and shop in facilities owned by the employer while keeping the wages that they controlled lower than the cost of living which they also controlled, thus keeping employees in perpetual indebted servitude. On the national scale, it may superficially not appear to be the case, but in reality it is the same miniscule sector of ultra-wealthy neo-Feudal lords who among them control the corporations that control prices of almost all goods and services, who also control wages. What we see is a “company town” of unprecedented proportions, disguised in a veneer of democracy and freedom.
The legal atrocity of “corporate personhood” both insulates the neo-Feudal lords form being answerable to the people for anything they do, and ensures that an individual employee or customer who challenges or fights back against wrongdoing by a mega-corporation will meet the corporation in the courtroom in the same way as beaten and half-starved Christians met professional fighters in Roman gladiatorial games. A corporation has massive resources and a team of top-notch attorneys on retainer to defend their interests, while the employee or consumer, who is most likely living paycheck to paycheck, must struggle to afford an attorney if they can at all, and has few to no resources at their disposal.
Striking, demonstrating, boycotting, and pressuring lawmakers to limit the disparity and improve the situation of employees is only a temporary band-aid solution to what amounts to a metastatic cancer. In the long run, the influence of mega-corporations and the ultra-wealthy neo-Feudal lords who command them will always overwhelm and erode any gains made through labor and human rights activism.
Yet it would be a tragic mistake to define the neo-Feudal lords and those who enforce their power as “bad guys” and engage in a revengeful “purge.” These players are playing the game of Capitalism as designed and responding efficiently to the psycho-social reinforcers built into the paradigm. Without realizing it, we have all been playing the same game and responding to the same reinforcers and thus enabling and perpetuating the dysfunctional systems arising from the paradigm. The root of this destructive dynamic is the fact that the paradigm strongly reinforces the destructive behaviors. Basic behavioral psychology teaches us that whatever gets reinforced will always predominate. What is not reinforced will tend towards extinction. When we change the reinforcers in the socio-economic paradigm, predominant behaviors will change accordingly.
To lynch the players for being good at the game would not solve the problem and would destroy any chance of creating a compassionate, empowering, thriving society of mutually-benefiting actualized inhabitants. The solution is to shut down the game by forcefully but non-violently ceasing to play by the game’s rules, and instead to play a new “game” based on a paradigm of win-win-win-win instead of win-lose-lose-lose, based on symbiosis rather than predation and exploitation, based on the well-being of the community, its inhabitants and the environment instead of the accumulation and expansion of wealth for a small group. The current neo-Feudal lords will react badly as would any addicts losing the object of their addiction, but we must resist and contain them, not punitively but pragmatically and compassionately. They will feel like victims. We must make absolutely sure that we do not actually make them into victims. But we cannot allow them to continue to serve their addiction to wealth, opulence and power over others. We will need to approach the deposed former neo-Feudal Lords in the same way the Allies approached the defeated Axis powers at the end of World War II, rather than how we approached them at the end of World War I. Punishment and reward are much less effective modes of behavior modification than reinforcement and non-reinforcement. Capitalist societies both reinforce and forcefully reinforce the absolute need for money in order to live and function. Such societies are divided into subgroups with mutually conflicting imperatives: employers and employees, landlords and tenants, over-privileged and disenfranchised, Lords and Serfs. These sectors operate in an endless escalating tug-of-war in which each only gains at the expense of the other. When prices go up, employees need to fight for higher wages to keep up. When wages go up, employers raise prices of their goods and services to recoup the loss. Group is pitted against group, person against person when money and opportunity are intentionally scarcified as they are in all Capitalist paradigms.
Yet this inflationary escalation cycle is not symmetrical or balanced. Employees must accept prevailing wages or go without a job. Big employers, on the other, can easily replace employees from a plentiful supply. If you don’t have an income, which for all but the ultra-wealthy means having a job, then you have no way to live or even to occupy space. During a strike, a mammoth corporation can weather their loss of profit far longer than striking employees can weather going without pay. Strikers and other people engaging in agitating for wage increases and other necessary compensation are increasingly portrayed in the news as hooligans, malcontents, and “economic terrorists” in the media, which erodes and undermine public support.
Even homeownership is largely illusion. Nearly three fourths of “homeowners” are paying off mortgages because home prices are far too high to buy otherwise. The lender is the real owner until the mortgage is paid off. If the “homeowner” becomes unable to continue paying, the lender will repossess the home, even if the “homeowner” has already paid more than the actual value (principal) of the home. But the illusion keeps millions of people compliant with the Capitalist rules of behavior.
A stunning array of tactics further advantage huge corporations over employees. Hiring at part-time status, hiring temps and contractors instead of employees, outsourcing, and cutting benefits are common. Companies invest in stock buy-backs which further concentrate wealth into the hands of the neo-Feudal lords who are the large shareholders, rather than invest in employees’ salaries, benefits or working conditions. Employee pay increases are measured in pennies while large investor gains are measured in millions of dollars. The neo-Feudal lords are unaware that they are doing anything wrong – they are simply practicing “good business” according to the reinforcers of the world they function in, and such societies lionize them and hold them up as examples to be emulated. They do not see their striking resemblance to the classical Feudal lords of Medieval times.
While homes are out of reach for most people, there are a plethora of entertainments, distractions, recreational products, and symbols of apparent prosperity that are affordable. Stressed, overworked employees cope with the stress by availing themselves of these, which dissipates the emotional, mental, physical and social energy that could otherwise coalesce into a realization of the bigger pattern leading to concerted, coordinated action to challenge and dismantle the pyramidal economic power structure. Programmed from birth to be dutiful employees and consumers, people work overtime to purchase the illusion of freedom and prosperity. This serves the same function as religion did in the Medieval Feudal paradigm. It keeps people compliant indefinitely.
The neo-Feudal lords at the top of the economic pyramid are not free or immune to the damage done by the Capitalist socio-politico-economic paradigm. They are not truly free. They live in thrall to a runaway addiction to wealth, opulence, privilege and power over others. Just like the is the case with drug or gambling addicts, their lives, choices and actions are dictated by their addiction and just like other addicts, they will do dangerous, destructive acts in pursuance of their addiction, as oblivious to the harm they cause to billions of people and the environment worldwide, as an is an alcoholic to the effects of their addiction upon family and friends. They will most certainly react badly when their drug of choice is withdrawn.
There is no way to fix, tweak, regulate or modify this paradigm so that it will serve and strengthen the empowerment, happiness, well-being and thriving of individuals or of the community. It has repeatedly failed to vindicate itself after numerous attempts. It is time to scrap the paradigm as unworkable and replace it one that is workable.