Inflationsmanipulation

Those who refuel these days or, worse, have to replenish their fuel oil supply for the winter, have to dig deeper than ever into their pockets. On average, heating oil currently costs more than 90 cents per litre – more than twice as much as a year earlier. Now there are voices that blame climate policy in particular for this price increase. But this is not particularly convincing. It is true that the energy tax (aka CO2 levy) introduced this year has raised the price. However, this is "only" 7.9 cents per liter. If you fill your heating tank with 3,000 liters today, you will pay an average of around 2,700 euros and thus around 1,400 euros more than the year before. For the energy tax, however, there are "only" 237 euros additional costs.

Where does the rest go? This is comparatively easy. A year ago, crude oil cost about $40 per barrel on world markets, today it is twice as expensive at around $85. And the current heating oil prices are also no historical exception, but were at a very similar level in 2013 and 2014, even without an energy tax. At that time, the price of crude oil was consistently above the $ 100 mark. What makes the current record prices special is not their level, but above all their increase compared to the previous year, when raw material and energy prices were low due to the global corona measures crisis. And what applies to heating oil also applies to fuels, gas and even electricity in a weakened form because of the higher tax rate and the lower share of the raw material share in the consumer price. Instead of "the return of inflation", it should be more like "the return of high energy prices".

However, it is not only energy prices that have increased significantly compared to last year. Food prices – especially vegetables - and numerous other goods prices have also risen sharply within one year. The reasons for this are manifold and often have to do with the corona measures. This is about disrupted supply chains and a shortage of workers, who were released during the measures last year and can now not be filled again so quickly. It is difficult to predict how these prices will develop in the future. They could go back when the underlying problems have been addressed. But they could also stay on the level. However, it is very unlikely that they will rise steadily to this extent. However, if other factors are left out, a permanent "inflation" would presuppose a permanent rise in these prices.

Both rising energy prices on the commodity markets and price increases are regarded as external effects in the economy. This is important when talking about inflation. Such externalities are usually temporary, but may well trigger higher inflation. However, further effects must occur. In the 1970s, for example, it was the oil crisis that initiated a period of higher inflation. Because energy prices rose sharply, the then strong unions saw their chance to demand – and get through - wage settlements that were still above price increases. This then triggered a so-called wage-price-wage spiral. The higher wages drove up prices and the unions took advantage of the price increases to push through high wage increases again. This would not have been a problem at all if the Bundesbank had not come up with the crazy idea of recapturing inflation via interest rate increases and thus triggering a serious economic crisis.

It is precisely this wage-price-wage spiral that is also at stake between the lines in the current "inflation debate". Of course, the neoliberal editorialists and monetarist economists also know that externalities do not trigger permanent inflation. However, they also know that today's price increases among workers are fueling the desire for long overdue wage increases. And this – come what may - is to be prevented. Already there is talk of "excessively high" wage increases (quote IfW boss Gabriel Felbermayr) and the FAZ notes: "How bad it gets with inflation now also depends on the unions".

Could "excessively high" wage increases lead to a new wage-price-wage spiral? At least in theory, that may be so. In practice, however, it looks completely different. The last two decades have been characterized by a negative wage-price-wage spiral, in which the trades did not lead to any significant increases in real wages and prices did not even rise within the target corridor set by the ECB. The fact that this is now changing diametrically and that the now weak unions can permanently enforce agreements that are far above the price increase is about as unlikely as the idea that Friedrich Merz is enthusiastic about wealth taxation. So we should not waste any thought on that - and thus on the inflation specter. Because this debate distracts from important issues related to price increases.

Because people who are not financially on the sunny side of life, it does not matter what caused price increases. If the worker in the countryside can no longer afford to fill the tank or families can no longer have their fuel oil tank filled, this is a social problem. But politics is deaf to such problems. The social question no longer matters. They only want to save the climate and change the consumption behaviour of the citizens via the price. Of course, it is right and important to reduce greenhouse gas emissions, but this must be done within a reasonable social framework. That was not the case in the past and probably will not be the case in the future.

We should therefore not worry about "inflation", but ask how the state can help to ensure that the existing price increases, especially for energy and food, can also be borne by people who cannot afford it at the moment. And we should resist running after the manipulative prophecies of doom of the "inflation warners" in the all-too-understandable resentment of these price increases. Because "less money" has never been the right answer to "higher prices". The unions should take this to heart.