The Bank of England has only one solution to rising inflation – make workers pay

theguardian.com:

The consensus that has prevailed for the past 40 years told us that monetary policy must be depoliticised, so that central banks can independently pursue the goal of price stability in the economy without catering to politicians, private finance or corporations. Andrew Bailey, the governor of the Bank of England, threw that impression aside last week when he suggested that workers should not demand higher wages in order to contain the inflationary pressures confronting the British economy in 2022.

“I’m not saying nobody gets a pay rise” he said. But “we do need to see restraint in pay bargaining, otherwise it will get out of control”.

When central banks call for workers to yet again shoulder the pain, their role as guardians of the distributional status quo – the struggle over the distribution of national income between labour and capital – becomes clear for everyone to see. It is a misjudged call, tearing off the veil of carefully curated neutrality, and showing whose interests the Bank really protects.

Bailey’s reasoning is clear. The 1970s left central banks scared of the prospect of wage-price spirals, when powerful unions obtained worker pay rises that kept pace with higher living costs, and in turn companies transferred those higher labour costs into higher prices, triggering renewed wage demands.

Covid-related labour shortages, global supply bottlenecks and renewed appetite for striking threaten to reignite these cycles. But Bailey did not explain that wage-price spirals only occur if firms dump wage increases into prices, instead of simply reducing their profits. It was not, he implied, up to capital to moderate profit expectations to address inflation. Rather, workers must take (another) one for capital.

Yet the Bank