The Inflationary Cycle We've Got Is Not Driven By Wages - But By Excess Profits

30th July 2022

Richard Murphy runs the blog Tax Research and his latest article blows up some myths. He is well qualified to do so.

Tories are arguing that wages must not rise as strongly as prices or we will get an inflationary spiral. But that's ridiculous. All price increases add to the income of the companies charging them. What the Tories are saying is business should profit, not workers. A thread......

As a simple, straightforward, fact of life money does not disappear into black holes. When one person spends it another one gets it. That's just the way it is. It is, however, astonishing how many economists and politicians do not recognise this fact.

The reaction to inflationary price increases - which are now happening on everything from energy costs to margarine - is an indication of this lack of understanding, especially on politicians' part. What they seem quite unable to understand is that someone gains from these.

This should not be very hard to work out. Let me play a game of ‘just suppose', as economists do. Just suppose there is a company that charged £100 for its product. The split of that £100 was £40 for bought-in products for resale, £40 to the company’s employees and £20 to profit.

Read the full blog item HERE
It is amazingly simple - even politicians could understand it.