Tilak Doshi: Green inflation and the end of capitalism: Lenin’s thesis being tested
Forbes, 29 April 2023
“By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method, they not only confiscate, but they confiscate arbitrarily…. Lenin was certainly right; there is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction…”
In an interview on Wednesday, the Bank of England’s chief economist Huw Pill said “[People] need to accept that they’re worse off and stop trying to maintain their real spending power by bidding up prices, whether [through] higher wages or passing the energy costs through onto customers.” Demands for higher pay were only “generating inflation” as a result, he said. Inflation at 10.1 percent was five times higher than the Bank of England’s 2 percent target in March.
At this point, one might ask, why didn’t the great economists of past generations think of Mr. Pill’s ‘tough love’ remedy: stop higher wage claims you working class folks, and as for you businessmen, stop passing on increased costs. Stop “generating inflation”. Alas, the BOE’s chief economist got one thing wrong. Workers clamoring for higher wages to keep up with higher costs of living and businessmen trying to pass on higher costs to their customers to keep their businesses running certainly accelerate inflation, but they aren’t “generating” it.
The late Nobel laureate Milton Friedman would have agreed: “Consumers don’t produce it. Producers don’t produce it. The trade unions don’t produce it. Foreign sheikhs don’t produce it. Oil imports don’t produce it. What produces it is too much government spending and too much government creation of money, and nothing else.”
A quote attributed to Vladimir Lenin states that “The best way to destroy the capitalist system [is] to debauch the currency.” The quote was popularized in an essay on inflation by John Maynard Keynes, the influential British economist who played a key advisory role in the post-War Bretton Woods talks. Keynes wrote:
“By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method, they not only confiscate, but they confiscate arbitrarily…. Lenin was certainly right; there is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction…”
Today’s wielders of Lenin’s weapon of currency debauchment come from ruling parties, across the ideological spectrum, in modern Western liberal democracies. The tragic flaw in Keynesian-inspired macroeconomics was the presumption that economic policy was conducted by a small group of wise and enlightened technocrats who acted selflessly for the public interest. The more plausible premise in liberal democracies is that governments formulate policies to win elections, rather than win elections to promote societal well-being. The norm that public budgets should be in balance, if not in surplus for a “rainy day”, and that deficits were to be tolerated only in exceptional circumstances such as war or depression is practiced only in the breach.
