There is a spectre stalking the land. It is the spectre of middle-aged men worrying about inflation. Actually, it might be more correct to say it’s the spectre of middle-aged columnists exaggerating their worries about inflation for the sake of copy, but I think we can agree it is probably for the best for several reasons if I Don’t Go There.
Anyway, spectre number one: Peter Hitchens. “I remember inflation wrecking lives,” he recently wrote in the Mail on Sunday, “and I can see it coming back”. His column, which comes accompanied by the inevitable stock photo of the children of the Weimar Republic playing with bricks made from worthless banknotes, begins with a claim that he understands this topic in a way the government does not, and includes a pair of personal stories about the damage inflation did to real lives: the first to those of his parents; the latter to his own.
The odd thing is, both those stories aren’t really about inflation in the way we talk about it now (RPI, CPI, the looming menace of the £7 pint and so forth). Both of his horror stories are about housing costs: one is about how expensive his mortgage was in the late 1980s; the other about how his parents sold their house in 1963 when his father took a job with housing included and never managed to get back on the ladder.
These are not happy stories – the latter especially sounds faintly traumatic. But Hitchens has failed to notice it’s not inflation that bothers him but runaway house prices. And that is not something that most people in this country can’t remember. This is something with which we are all far, far too familiar.
Spectre number two, the Daily Mail’s Alex Brummer, takes a similar line, talking about the horror of somehow clambering onto the housing ladder in the late 1980s, only for an inflation-shy Treasury to hike interest rates into double figures. “No one under 40 could conceive of them,” Brummer writes, “let alone imagine what they would do to their mortgage repayments.” This sentence makes me wonder whether people over 40 can entirely conceive of the fact that a significant chunk of the under-40s have neither mortgages nor any prospect of getting them, and so probably aren’t quite so terrified of interest rate rises as you imagine them to be.
At any rate: Brummer lists a bunch of signs that prices might be rising, and a bunch of reasons to think they should be (oil prices, other supply bottlenecks, inevitably quantitative easing) and points out that the US consumer price index has more than doubled from 2 per cent to 4.2 per cent. Here in the UK, though, it has risen simply “from a negligible 0.7 per cent in March to 1.5 per cent in April”. This is still some way below the Bank of England’s 2 per cent target, mind: official government policy is that inflation should actually be higher than this. Hilariously, someone on the Mail’s graphics team has included a graph showing that it is actually still very low compared to most of the last 10 years, too, thus undermining Brummer’s argument at a stroke.
Spectre number three: the Telegraph’s Liam Halligan, who manages somehow not to mention housing at all despite literally having written a book on the subject. He too lists a bunch of economic factors which may suggest inflation is on the way – though I do wonder how many of these demand spikes reflect an economy rebounding from its pandemic-led collapse, rather than one about to bubble over.
But we’re three for three on inflation-fearing columnists complaining that the real problem here is the young just don’t understand the dangers in the way they do. “They can’t recall spiralling wage claims, industrial unrest, sharp cost of living rises and the crippling impact, on both indebted firms and households, of sharply climbing interest rates,” warns Halligan.
Some of these things do, indeed, sound horrible. But “industrial unrest” is a reminder that labour once had power that it no longer does, which is probably one reason wages in the Seventies rose rather than being wiped out by inflation. Given that the last 13 years of British economic history have made Japan’s lost decade look like a boom, some “spiralling wage claims” sound pretty good right about now.
All three of these articles take as an article of faith that the kids don’t know they’re born. It’s the older generation, those who remember the horrors of the Seventies, who know the score here. Maybe they’re right. Maybe inflation is coming, and maybe it will ruin us all.
But if you really wanted to create, under lab conditions, a group of people who might feel comfortable with a spot of inflation, you’d load them up with debt, put home ownership out of their reach or force them to take on enormous mortgages to attain it, then decline to give them a pay rise for a decade and a half. After the last decade, in which the only thing that’s grown has been house prices, a good old wage-price spiral might start to seem quite attractive.
If the young aren’t scared of inflation, perhaps it’s not just because they don’t remember the past. Perhaps it’s because 40 years of keeping inflation low and protecting the economic interests of their parents’ generation at all costs hasn’t really worked in their favour. Perhaps there is a limit to what the horrors of the 1970s can tell us about the best economic policies to pursue in 2021.