Inflation as income redistribution and a political tool

Eurostat released its provisional ostentation figures for the eurozone past Thursday – and the tidings were not bully astatine all. Average ostentation appears to person risen from 2.6% successful March to 3% successful April, fueled by the fallout from the US-Israeli war connected Iran. But things were adjacent worse for Greece: Eurostat estimates that ostentation changeable up to 4.6% successful April from 3.4% successful March. To overgarment a wide picture: The lowest ostentation rates were recorded successful Finland (2.3%), Malta (2.4%), the Netherlands and France (2.5%). Greece was among the 5 European countries with the highest ostentation – with our neighbour Bulgaria successful archetypal spot astatine 6.2%. What is the crushed for this large divergence? What is wrong with it?

A look astatine the authoritative information allows us to spot what is truly happening and why: In the five-year play betwixt 2020 and 2025, wages per worker accrued successful existent terms by 16.7%. In the aforesaid period, labour productivity (also calculated successful changeless prices) accrued by 7.8%. The quality betwixt these two variables would warrant an mean summation successful prices of 8.9%.

The Consumer Price Index accrued by 20.9% successful 5 years owed to the summation successful profits. In different words, we person nett inflation

The Consumer Price Index, however, accrued by 20.9%. What is the crushed for the quality of the further 12 percent points? The reply that emerges – not from some analyzable reasoning, but from the authoritative figures themselves – is straightforward: It comes down to an summation successful profits. In different words, we person nett inflation.

It seems terms increases successful earthy materials and vigor are being seen arsenic an accidental to grow implicit wide and nett margins. This is mostly owed to what reputable economical probe organizations, including the Foundation for Economic and Industrial Research (IOBE), qualify arsenic the inherent occupation of our interior marketplace – weak contention – or, successful different words, the dominance of cartels successful larger parts of the interior market. In erstwhile years, this improvement had been observed and criticized by the Bank of Greece.

Inflation is neither a earthy nor a neutral phenomenon. On the 1 hand, it helps nutrient fiscal surpluses thanks to inflationary revenues from precocious value-added tax rates and from the non-indexation of the tax scale, giving the authorities an opening to administer some benefits.

On the different hand, it emerges arsenic the main mechanics for redistributing income astatine the disbursal of wage labour and successful favour of profits. Therefore, what would person seemed intolerable under mean circumstances has go imaginable – and, successful such a abbreviated time, without adjacent wide reactions: Income from profits successful 2019 was €21.3 cardinal supra income from work, and successful 2024 this spread reached €36.1 billion, meaning the quality grew 69.5% to the detriment of labor.

Around herein lies the reply to the question of why the authorities insists connected doing thing to code precocious prices: Because it benefits some people.