The Inflation Inkblot

With the release of quarterly figures highlighting New Zealand’s domestic version of the global cost of living crisis, a more overtly politicised tone has begun to dominate local news coverage of inflation. Confusing, obfuscatory and superficial partisan claims are taking over after several months of more sober economic observations and criticisms of government policy. 

What’s interesting about this situation is the timing. Despite huge jumps in the consumer price index being clear in the data throughout 2021, warnings about general price increases from observers across the political and economic spectrum were footnoted but rarely honed in on by political activists and the commentariat. This may have reflected a ‘wait and see’ impulse in a climate of uncertainty with raging international debates on whether rising inflation in 2021 was transitory or permanent. 

You could be forgiven for wondering why we’re supposed to care now, given the obviousness that so many people’s struggles with cost of living long predate the recent spike in oil prices and the war in Ukraine. We all know the deep underlying issues of poverty and inequality predate the pandemic itself. Such a specific fixation on inflation wasn’t prevailing in commentary and reporting until much more recently when the consumer price index reached a level deemed to be uncontained by the technocratic apparatus. (“How do we get prices back under control?” pleaded Nicola Willis, National’s finance spokesperson.) 

Stories on the housing market, mortgages and monetary policy have long been framed as a standalone bundle of topics, with ‘cost of living’ stories in 2021 being largely separate and frequently connected to criticism of the supermarket duopoly. Let’s not forget questions asked at the time about media representation of economists and horse race coverage of house prices. 

Contrasting against ever-present deficit-framing and formulaic short-term fixations, many reporters are doing a good job of presenting the perspectives of those directly affected. Food and shelter are basic elements of survival, a ground truth that is easily lost when technocratic debates and aggregated statistics dominate. Unfortunately, without joining the dots between lived experience and the ideologies that shape policies, the stories of people struggling risk standing as isolated chronicles of disempowerment in the face of impassive economic forces with no alternatives. 

Prominent political reporters caused a lot of social media controversy during the 2020 lockdowns by promoting trivial claims about speaking truth to power. What these claims always ignore is how the business model of the contemporary media filters examinations of power into a focus on accountability of individuals swapping seats—whether by election or appointment— while ignoring or taking a purely descriptive just-so view of the underlying discursive and institutional frameworks which form the power structures of our society. 

From this filtered perspective, we can hold Adrian Orr and the Reserve Bank accountable for actions and inactions in 2020 and 2021; for failing to predict the consequences of money printing in 2020; for missing the impacts on house prices; for lacking ‘credibility’ on inflation targets. We can hold Grant Robertson, Jacinda Ardern and the Labour Government accountable for their hands-on-hands-off approach to coordinating with the Reserve Bank over LVRs; for avoiding and deflecting attention from significant tax and welfare system reforms; for presiding over a huge transfer of wealth to pre-existing property owners fuelling huge Australian bank profits, and so forth. 

Obscured from view are deeper questions about the politics of central bank independence and the role of monetary policy as a opaque method of technocratic central planning. Perhaps focusing more on measuring and modelling the dynamics of diverging price relationships and trying to better understand coupling and causality across different market indexes—such as rents, groceries, construction materials—makes a lot more practical sense than a highly abstracted focus on a single inflation target. How would we know? What are the useful things we can glean from looking at inflation as a general measure? What justifies it as a target for central bank policy? Is it purely made to serve monetarism? Why does the Reserve Bank exist in its inflation-targeting form? How should we interpret the widespread lack of open access data and knowledge around the extent of corporate profits and rent-seeking as a contributor to rising inflation? (Here’s one account suggesting monopoly profit drives 60% of inflation increases in the US.) 

When journalists take the time to carefully look at inflation from the broader perspective of asking critical questions about economics, they can produce work that enhances public understanding even when more fundamental questions about power and political economy are left unanswered. The reactive feedback loop of most political coverage leaves little opportunity for such clarity being extended to fact-checking and contextualising statements by political leaders and business-as-usual advocates whose use of statistics and theories is often motivated reasoning rather than descriptive of reality.

Promoting a narrow range of economic orthodoxies—often by those who are literally paid to think and write by banks and large corporates—normalises the concordance of liberal and right wing ideas about embedding financialisation at the core of our society. This further contributes to naturalising the political role of the central bank, shifting focus away from the basic question of who pays for inflation: workers or capital owners? 

When presented as just-so through the consumer price index, inflation becomes a Rorschach blot for political actors to project their existing agendas onto. The empty signifier of the weighted average provides a broad space for opportunistic attention grabs that regurgitate status-quo ideas rather than explain or generate anything new. 

Christopher Luxon can drop a bingo card strikethrough about government finances being like a household budget, then accuse the government of being “addicted to spending”. Grant Robertson can make glib remarks about “being in a strong position,” point to the previous success of Covid performance and boast about New Zealand getting a pat on the head from the IMF. David Seymour can bellow about tax cuts, tweaking the deficit bean-counting trope that arouses the most vicious cohort of New Zealand’s rentier class. James Shaw can present tidy economic arguments for the immediate introduction of rent controls without confronting the clusterfuck of how deeply finance and real estate are embedded in our political economy. Bank economists can blithely repeat textbook hypotheticals. Eric Crampton from the New Zealand Initiative can chide the Reserve Bank for lacking macroeconomic expertise and being distracted from its inflation targeting responsibility by an obsession with Māoritanga and climate change, then use the opportunity to call for deregulation in the construction sector. 

It is notable that only one of the politicians here is offering a concrete proposal to help those who are struggling, but regardless of who might be right or wrong, the point is that so much of this recent inflation coverage is entirely predictable and habitual, based on existing reputations, communication styles and public agendas. Full marks for message discipline, but the cumulative effect is a confusing morass of adversarial claims that seem only incidentally related to addressing the dangerous lack of resiliency and slack in the systems we rely on to support our lives day to day. 

A critical frame of reference that explains these disputes by showing how the idea of inflation works as a normative construction rather than being a neutral observation of the economy is not something we can realistically expect from most political coverage, given the strength of forces driving presentation of politics as entertainment and narrative conflict rather than a contest of ideas. Regardless of how futile it might seem, we must still try to hold media accountable for this limited perspective and lack of balance and seek out ways to change it. 

One hopeful sign is growing awareness around the world that the phenomenon of price increases is far more sophisticated and path-dependent than the familiar orthodoxies of wage-price spirals and short-run interventions to facilitate long-run equilibrium. The clean apolitical model of the central bank applying policies as a ‘reaction function’ is wildly discrepant with the observed reality of the history of central bank inflation targeting as a means of controlling labour and policy actions ripping up the rulebook after 2008. Vast numbers of young people today have grown up in an era of low worker bargaining power, low unemployment, low interest rates and low inflation. They are now directly experiencing the cost of living crisis through the hellscape of housing markets, pandemic disruptions, supply chain breakdowns and extreme weather events. It’s hard to imagine younger generations will accept traditional arguments about tightening the money supply in the same way that monetarism was socially legitimised in the 1980s and 1990s. 

New Zealand’s technocratic and political establishment has been slow to respond and adapt to this changing awareness. Grant Robertson is correct to assert that global energy and supply chain chaos is having a profound impact on the New Zealand economy but directly acknowledging forces beyond monetarism driving inflation is a breach of orthodoxy which opens up space for right wing austerity clichés and accusations of ‘blaming overseas’. The commitment of Robertson and his colleagues to central bank ideology as common sense limits their ability to present arguments about climate change adaptation and infrastructure development in a way that strengthens public confidence in New Zealand being genuinely capable of ‘building back better’. Recent intimations of debt targets in the context of the 2022 budget reveals a worrying lack of situational awareness about the urgency of the infrastructure and housing crisis and the increasing risks of our totalising economic dependency on cars, roads and fossil fuel imports. 

When economic explanations and policy interventions are filtered according to what is commensurable with the ideals of the 1980s and 1990s, it degrades public discourse and policy imagination. Amazing transformative visions exist all over Aotearoa for responding to the crises and challenges we face, yet our entrenched administrative culture seems to see pathways towards adaptation and change as less sensible to follow than endless sprawling cul-de-sacs that promise a ‘return to normal’, no matter how unrealistic, damaging and futile this might be long term. David Graeber’s epitaph for neoliberalism comes to mind here:

“Given a choice between a course of action that will make capitalism seem like the only possible economic system, and one that will make capitalism actually be a more viable long-term economic system, neoliberalism has meant always choosing the former.” 

So much recent inflation discourse has taken the form of demanding the government do something. But the limits of what can be done with yesterday’s orthodoxy appear stark. It remains to be seen whether the current stalemate of monetary policy leads to a legitimacy crisis for central bank ideology. What we do know is that the ongoing political attachment to pursuing surface restructuring of hierarchies and light regulation of monopolies rather than deep systemic reform puts National and Labour increasingly out of pace with the onrush of crises affecting social and economic stability. 

It’s easy to say that the left needs to look beyond stormchasing parliamentary politics and media cycles and return to the basic principles of mass community organising but this will continue to lack impetus until visions of transformation, theories and practical proposals cohere around what we are organising for. That neoliberalism is currently collapsing under the weight of its own failures and contradictions does not mean reform is inevitable. Alternatives like militarism, oligopoly and fascism present abiding paths of least resistance for capitalist transition. 

The urgent need for deeper systems transformation as part of a broader international left movement that provides a durable long term alternative to liberalism and right wing senescence should not deter us from shorter term engagements promoting stronger policy ideas and future visions that might be helpful even if not explicitly anti-capitalist. Part of this involves challenging the right at their own game, keeping up a constant pressure on media and political parties to present questions and proposals that are grounded in reality rather than mythology. There are always alternatives.

Mark Rickerby is a writer, designer and programmer in Ōtautahi–Christchurch.