Profit driven policies results in recessions that enlarges class inequality---socialist transition is the only way to counter inflation

Workers don’t set prices, the bosses do. And they do so on the basis of maintaining the greatest possible profit margins. If workers’ wages go up but prices stay the same, this would simply mean that a greater share of profits went to workers rather than capitalists. System-wide, workers’ share of the economic pie (i.e., the “national income”) would increase. Falling unemployment, rising wages and increased social spending does not have to automatically translate into inflation of prices if we allow bosses’ profit margins and their share of the national income to decrease.

Even the dire rates of inflation in the 1970s, in the context of a strong labor movement “hurt capital more than it did workers, while neoliberal repression of workers’ power has kept inflation low from the 1980s onward,” sociologists Ho-fung Hung and Daniel Thompson have . The question of inflation is therefore a matter of class conflict over who gains at whose expense.

This is not to say that inflationary pulls aren’t a problem; if prices of common goods rise much faster than wages, or if the spikes in inflation are so high that businesses aren’t able to operate smoothly and fall into bankruptcy, laying off workers, this could have dire consequences. But the cures that are typically on hand are worse than the disease. Thus, in response to the crisis in the 1970s, the US ruling class, led by President Ronald Reagan and Fed chair Paul Volcker (though begun by President Jimmy Carter), was willing to induce a severe recession in order to stop inflation. The ensuing decades of neoliberalism created astronomical levels of class inequality.

But there are other tools to stop inflation, which do so in favor of workers.  have been used in wartime throughout US history, most significantly by President Franklin Delano Roosevelt’s administration. As political scientist Todd Tucker recently pointed out, FDR employed 160,000 federal employees in the Office of Price Administration to control prices “on goods from scrap steel to shoes to milk.” Even  briefly implemented price controls.

Immediate reforms in the form of rent control, expanding Medicare, and allowing the government to negotiate lower drug prices are a good start to such policies, along with capping CEO pay and taxing the rich. Other reforms like investment into public housing and public education also indirectly cap prices.

Ultimately, a left economic agenda must push back against the inflation panic to maintain demands for higher wages and increased social spending, while guarding against real inflation through price controls and policies that protect working people’s pockets.