High rates only prolong economic stagnation and the farce of big bank profits while Britons can’t feed themselves
As 2021 ended, an article in the Guardian by the economist Isabella Weber went viral. Its online spread was lubricated by heresy. Dr Weber doubted interest rate hikes would bring down inflation. Instead, she argued that post-pandemic prices were rising because corporations were exploiting bottlenecks in supply chains to charge more and scoop windfall profits. Hence, attempts to lower inflation with higher rates, which decrease real wages and reduce employment, would not work.
The problem was the pricing power of capital not workers. Dr Weber suggested using price controls, which had been successful in keeping inflation in check after the second world war. She was prescient. When Russia’s invasion of Ukraine sent energy prices spiralling in 2022, governments around the world either adopted Dr Weber’s advice or sought her help. Critics ate their words.
