Do we really all have to be worse off?

Written SH on 2023-04-28.

In future tp . Tagged economics

Huw Pill was interviewed on Beyond Unprecedented S3 Ep4: Inflation: Not Dead Yet. You can listen or read the transcript here.

It was interesting to hear his thoughts regarding the state of inflation currently. The remark that got the most attention I think was regarding the interaction of spending power and inflation.

So somehow in the U.K., someone needs to accept that they're worse off and stop trying to maintain their real spending power by bidding up prices, whether higher wages or passing the energy costs through onto customers, or etc.
Talley, Eric L., 2023-08-01. Beyond Unprecedented S3 Ep4: Inflation: Not Dead Yet. online.

Wages failing to rise, reduces consumer power and consequently places significant pressures on business. The discourse in the UK is far from developed regarding this as a significant portion of the UK earners have limited spending power to surrender. I suspect that if required to endure a prolonged real term reduction in spending power many consumers would go from just about managing to serious finical peril. Distress caused in the way is likely to see the consolidation of assets into yet few hands further impacting the resilience of the consumer. Is the future one where people rent the house they previously owned for more than the monthly mortgage payment?

Perhaps the UK governments intervention in consumer power costs could be seen as an attempt to disguise support for consumer spending in way that does not support a general call for wage increases. If viewed in this way perhaps UK PLC can rely on the UK government continuing to pay a portion of ‘wages’ for a while?

Pill also remarked about the failure in large to anticipate and identity risk, TPEX hopes to help with this! That’s what inspired this project.

One part might be, could we have anticipated some of these shocks? And I think there is good economic research, for example, looking at supply chains that if we had understood supply chains better than we did, we could have probably understood that this was going to be a more difficult process than we anticipated.
Talley, Eric L., 2023-08-01. Beyond Unprecedented S3 Ep4: Inflation: Not Dead Yet. online.

It was interesting to hear Pill also remark that,

We may actually see headline inflation go below our 2% target over the next couple of years,
Talley, Eric L., 2023-08-01. Beyond Unprecedented S3 Ep4: Inflation: Not Dead Yet. online.

I wonder if this is a indication that the BoE or central banks in general may be willing to explore some deflation to restore buying power. While these seams outrageous as an idea if wages are not to rise to restore buying power how is useful demand to be generated especially if consumers are no longer deemed credit worthy?

Tenth Person

Perhaps the UK government will continue to offer wage support to UK PLC with direct payments to citizens through the next winter. Or if not and wage rise are not forth coming demand is likely to be significantly subdued in the short and mid term. In the longer term the debit driven economy is likely to undergo significant changes as less citizens qualify for credit, impacting consumer confidence and purchasing power.

Future Imagining

Is this the beginning of the end of capitalism as the dominate economic model? Is there anything beyond it or can it be reworked again? If capitalism is to continue then its excess must help be held in check. Can the incredibly rich really play with rockets, while others are required to shiver while climate change imperils everyone?

I'm ready to future-ready my business!

References

Talley, Eric L., Gillis, Talia B., and Pills, Huw. 2023. 'Beyond Unprecedented S3 Ep4: Inflation: Not Dead Yet'URL.

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