"Inflation is a policy"

Phumlani Majozi writes on why we should blame govt bureaucrats for skyrocketing prices

As inflation continues to rise in various regions around the world, becoming a crisis, I am reminded of numerous economists who studied and, or, opined on inflation both in the 20th and 21st century. 

These economists, from Milton Friedman to Friedrich Hayek, to Ludwig von Mises, and the living Thomas Sowell who will turn 92 on the 30th of next month, all advised us to blame government bureaucrats for inflations.

Von Mises once astutely said, “The most important thing to remember is that inflation is not an act of God, that inflation is not a catastrophe of the elements or a disease that comes like a plague. Inflation is a policy.”

With all that has unfolded on inflation over the past months, von Mises’ remarks were precise. Sustained inflation is a consequence of reckless bureaucratic, political decision-making.

Here’s why we must blame politicians for this skyrocketing inflation that is impoverishing us.

The first disastrous political decisions were the lockdowns that swept across countries around the world in response to the COVID19 pandemic. The lockdowns were unnecessary – and I have been critical of them since May 2020. Many wrong decisions were made during the pandemic. Even Bill Gates, America’s billionaire, now admits.

Then, government bureaucrats followed on by printing money and flooding it into the economies.

Central bankers, responsible for monetary policy printed the money. An increase in money supply, in the absence of an increase in goods and services in the economy, is a recipe for inflation. That is economics 101. 

It was obvious that suppressing productivity with lockdowns, and then flooding the economies with money, would have disastrous inflationary consequences. That certainly is not rocket science, it’s the basics of undergraduate economics.

At this time, the inflation outlook is gloomy, at least according to the recent International Monetary Fund (IMF) data as shown on the chart below. According to a report by Reuters recently, “Moody’s expects South Africa’s inflation to hit 8% in 2022”. Sad.

The other reason we must blame politicians for this inflation is the Ukraine-Russia war that broke out in February this year. The war disrupted oil supply and pushed up oil prices. Food prices skyrocketed. The cost of production shot up, resulting in this inflation.

Who instigated this war? Politicians. Who started this war? Politicians. The war was a result of reckless political, bureaucratic decision-making. It is crucial that we remember this fact as voters across democracies.

Henry Hazlitt was a popular American economics journalist and author in the 20th century. He once said that inflation is bad for economic growth.

Inflation shrinks people’s cash and savings, slows down wealth creation. The greatest harm is on the poor, who, even before this skyrocketing inflation were already struggling to make ends meet.

The poverty we repeatedly complain about is exacerbated by this inflation. With rational, well-measured policy response to the COVID19 pandemic, US-Russia geopolitical tensions, the poor would have been spared the misery.

Isn’t it interesting that this irrationality on COVID19 persists to this day, as China has implemented very strict lockdowns in response to increased COVID19 infections? The irrational Chinese lockdowns will not only harm China’s economy, but the global economy too. In fact, it is human rights abuse by the Chinese Communist Party.

Do not think for a second that lockdowns would not return in South Africa, they would. Because we are led by politicians who ignore science and choose to do their own thing.

In his address to the nation on Freedom Day last month, President Cyril Ramaphosa basically threatened South Africans with lockdowns. Saying that we could also experience lockdowns like China if we do not vaccinate at a faster rate. Can you believe it? Maddening.

We complain a lot about poverty, and we should, because poverty is bad for society. However, people make a mistake by blaming markets and the rich for poverty and inequality, when in fact they should be blaming government officials. 

As this skyrocketing inflation becomes a crisis, impoverishing us all, don’t forget that reckless decision-making by politicians got us here. 

The question is: when the next elections come in your democratic countries, are you all going to vote for the same clowns who got us to this inflation?

 Phumlani M. Majozi is a senior fellow at African Liberty. His website is phumlanimajozi.com. Follow him on Twitter: @PhumlaniMMajozi.