WWhen the government grips a key opposition policy that has been mocking for months and that goes directly against its ideology, you know that something quite big is happening. Tory’s screaming reversal of an unexpected tax on energy companies to fund payments to “alleviate” the cost of living crisis is, in part, a typically rude attempt to change the Partygate theme. But it is also a more obvious signal: that the government has belatedly begun to fear inflation.
It’s right to be. For many voters, many of them Tory, high inflation is very frightening. Savings are shrinking. Salary increases are seldom enough. Safe investing seems impossible. State benefits are even less sufficient than usual. Luxury, small treats and even basic things become inaccessible. The whole process of personal enrichment promised by capitalism goes upside down. The stronghold of money – the basis of many of our lives – is revealed as an illusion. It is clear that money can decompose, like everything else.
High inflation makes people angry. Recently, when Britain had a perpetual period, from the early 1970s to the early 1980s, right-wing politicians, commentators and voters often described it as a disease, claiming that it was caused by trade union greed and the extravagance of Labor governments. It was considered a sign of decadence that could lead to national collapse. “Inflation is a great moral evil,” said Geoffrey Howe, Margaret Thatcher’s first strict Chancellor in 1982. “Nations that lose confidence in their currency lose confidence in themselves.”
The United Kingdom currently has the worst inflation of all the G7. Another huge increase in food and fuel prices is considered inevitable, such as an increase in the energy price cap of £ 800 this October, which was predicted by energy regulator Ofgem this week. “It’s hard to overestimate the scale of the coming cost of living crisis,” the Resolution Foundation warned in March. The usually sober thinktank predicted “the highest inflation in 40 years and the worst decline in income in history.”
This shock is beginning to be felt in a country that is much more uneven than in the 1970s and has many more vulnerable people. In 1975, about 13% of the UK population lived in relative poverty. This figure is now about 22% – and our population is a fifth larger.
Unlike in the 1970s, average wages have been stagnant or declining for more than a decade. The climate crisis and commodity speculators are increasingly raising food prices. And the state’s ability to respond to the social crisis has been weakened by 12 years of austerity measures. High inflation may be known to the older British, but its return could lead to a fragile and divided country in uncharted territory.
What could be the policy of our new age of inflation? The fact that the new government’s cost-of-living plan is the third in four months suggests that panic and improvisation will be a conservative response. The latest measures are generous – up to £ 1,200 will go to the poorest households – but they may not be generous enough. This year’s increase in the energy price cap is likely to be £ 1,500. And the price of energy is not the only thing that is rising. Many forecasters also do not expect a rapid decline in inflation. We should probably expect another special announcement from Rishi Sunak.
The fact that this time he had to rely so heavily on the Labor idea suggests that the Tories are running out of funds for inflation. The fact that their unexpected tax – shyly disguised as a “temporary targeted tax on energy profits” – is more ambitious than a labor tax also suggests that there may now be a bidding war between the parties over the cost of living policy.
Nevertheless, they may have trouble keeping up with the crisis. In an inflationary era, social conditions can change rapidly. At the height of German hyperinflation in the 1920s, the price of a cup of coffee sometimes doubled over the time it took to drink. There was panic shopping, hoarding and an increase in theft and prostitution. Politics became more polarized and scapegoats were identified: immigrants, inadequate politicians, for-profit companies. Much of the energy of politics has shifted from parliament to the streets, to protests, strikes and riots.
The United Kingdom is far from feverish, but it has some of the same symptoms. This week, RMT unions voted for the first national rail strike in decades, in part because employers “refused to keep workers’ wages in line with … soaring living costs.” Last week, the chief police inspector said police officers should use “discretion” when deciding whether to prosecute people who steal food.
But it is the impact of inflation on those who are used to being comfortably gone that often subverts it politically. More than austerity measures and wage declines since 2010 have threatened people with property – voters on which conservatives depend. In the inflationary 1970s, aggressive, often far-right lobby groups such as the Middle Class Association formed a campaign against “indecent” tax increases and “disproportionate suffering” that price increases imposed on business owners and professionals, and ultimately helped radicalize conservatives. celebration. Today, many middle-class people are protected from inflation to some extent by the high value of their property. But if the collapse of real incomes also causes house prices to fall, then the anger of the middle classes will return.
And the old scapegoats for inflation are less accessible. The unions are now smaller and weaker. Labor is not in government. There is greed and decadence in this country, but it focuses on Johnson’s Downing Street and its favorite corporate interests. Inflation is consuming the status quo and today’s status quo is entirely conservative.
The process is not always fast. In the 1970s, before the change of government, there were years of soaring prices. If the current crisis persists, it is conceivable that a populist, anti-inflationary party will emerge and call for much more than just energy ceilings. But our electoral system would limit his chances. Meanwhile, the disappearance of physical cash from our lives, accelerated by the pandemic, makes it easier not to think about how much our money is shrinking. As the sometimes obedient years after the financial crisis have shown, our country often responds to economic punishments less dramatically than damned forecasters imagine.
Yet in the end, he reacts. After the financial crisis came the fall of the Gordon Brown government, the riots in 2011, Korbynism and Brexit. When the cost-of-living crisis is over, it may be another country.