Battle vs Inflation Becoming A Class War, Harvard Analyst Claims
Central banks have started reacting to inflation. In February, the Bank of England raised its base rate for the second time in two months, and the US Federal Reserve is expected to do the same at its meeting in March, Leah Downey said in an analysis for Foreign Policy.
Photo Insert: The Bank of England raised its base rate for the second time in two months this February.
Interestingly, so has the Bank of Russia—even the threat of war can’t break the dominant contemporary central banking consensus. Alongside this shift in monetary policy, the governor of the Bank of England, Andrew Bailey, has asked workers not to push for a pay rise despite the fact that Bailey himself rakes in a rather large annual salary.
“The difference between Bailey’s own income and his request is a dissonance that many have enjoyed emphasizing, in part because it smacks of class conflict: Let the workers suffer while I sit in my castle full of gold bars. The problem with this particular site of class conflict, such as it is, is that there is no way for the working class to win. It’s a case of heads, the asset holders win, tails, the working class loses,” Downey wrote. Downey is a doctoral candidate at Harvard and a visiting academic at the Sheffield Political Economy Research Institute in UK.
Heads, in this case, would be central banks raising interest rates to head off inflation and achieve low, stable prices. This course of action is designed to support a strong private financial sector, something that many believe is good for everyone—no one wants another financial collapse a la 2008.
Higher interest rates, however, make it harder for the working class to afford mortgages and other loans, and, most important, higher rates lead to lower private investment and hiring, increasing unemployment. In general, raising rates is likely to worsen living conditions.