Inflation and the “Moral Economy”

Economics Inflation

            Marble Falls      The very notion of a “moral economy” or even the question of whether or not inflation is “morally wrong” caught my eye when I breezed past it flipping through an issue of The EconomistI ripped the page out on the plane and stuffed it into my bag to study at greater length.  The whole thing was another Tina Turner moment for me:  morality, what does the economy have to do with it?  Maybe a lot, under closer inspection, and this odd couple may be part of what is creating problems for President Biden, despite a strong job market and generally robust economy.

The great English historian of the working class in Britain, E. P. Thompson, seems to have coined the term “moral economy” to explain 18th century food riots.  The public felt that bakers and millers had violated the social contract requiring that prices be fair, profit be limited, and that grain be available and not held back in storage.  Thompson rued the fact that these riots were a bright line marking the transition from such a paternalistic moral economy to the market economy of modern capitalism.

Studies by a Harvard economist using surveys of Americans feelings about inflation seem to indicate that a vast amount of the US public still believes intrinsically in the moral economy, regardless of what most economists and many politicians, including Joe Biden, tell them about it.  Many progressive economists see a tight job market with almost full employment and rising real wages triggered by Biden’s fiscal stimulus and reinvigorated industrial policy as a win all around.  Many people, the surveys find, look past that picture closer to home and see rising prices that come with such an economy as threatening their security, and they aren’t happy about it.  Essentially, in the robber baron world of modern US capitalism and economic division, many, perhaps most, of Americans still cling to a core belief in a moral economy.  They don’t buy the fact that prices are rising because of economic growth, but believe employers, the rich, and the big whoops are forcing prices up, and that when they received a raise it was not because the job market triggered it, but because of their own hard work.

We could argue that this is just an economic misunderstanding, but it is really a huge political problem right now.  For me, it fills in a blank that I have argued for years that people are as driven by their “expectations” even more than their self-interest.  No matter how cynical we have all become with one issue after another, including Trump, climate, abortion, the corrupt and biased Supreme Court, and on and on, deep down, as Americans, we still expect and believe at the root that fairness should be at play. That’s the American way.  When we don’t see it, we look for somebody to blame, take responsibility, and fix it, we don’t sigh about invisible and oblique systems, saying, “it’s the economy, stupid.”

Truth to tell, I actually have to admit that I believe in the moral economy, too, despite the fact that I absolutely know better.  I also believe that Bidenomics has been the best break for the American people as a whole, perhaps in my lifetime.  Fortunately, I also think that Biden believes in the moral economy as well.  His ability to both deliver the goods in the macroeconomy and convince people about his support and ability to implement the moral economy may be the key to his reelection.