In recent months we have known in Euskal Herria and in all Western countries the highest general price hike that has not been known in the last thirty years. Low inflation rates have long been behind and prices have taken a strong upward trend. For example, between April and this year the Consumer Price Index has increased by 8.7% in Navarre and 7.8% in the Autonomous Community of the Basque Country, beating all brands.

The traditional liberal approach to inflation diagnosis places emphasis on the expansive monetary policy used by most Western governments and the European Central Bank to address the pandemic. From this point of view, the extension of the quantity available means an increase in the prices of goods and services. And that is why it would be necessary to limit the amount of money and increase interest rates to cope with this price hike. It can therefore be expected that the era of moderate interest rates of recent times is about to end, as there has been a change of trend in the United States and it is expected to materialise in the European Union in the short term.

In any case, the price increases for 2021 and 2022 come from the offer. For example, world oil prices broke out last spring. On the other hand, since last summer there have been strong increases in other energy raw materials. And with the economic explosion following the end of the pandemic, the value chains of semiconductors and other intermediate goods indispensable for the industry overflowed. Consequently, prices for these inputs have also increased considerably. This year, the invasion of Ukraine and the economic measures taken against Russia have further aggravated food and energy prices. Adding to these specific factors is the unjustified increase in the performance margin of large companies. These are the main causes of current inflation.

Therefore, expansive monetary policy and wage behaviour must not be observed in order to understand general price increases. Therefore, raising interest rates or limiting wage increases, beyond being socially unjust, are not effective measures to limit the growth of current prices. If the Central Bank raises official interest rates, it will increase investment and loan credits and thus curb sales, economic activity and employment. This would entail a new recession that would not interrupt the upward trend in prices.

Another strategy to combat inflation is the limitation of wages. As I have said, this measure would not only be retrograde but irrelevant to dominating price growth. On the one hand, wages are not behind the overall growth of current prices. According to Eurostat, in the Spanish State over the past 21 years the weight of wages in national income has fallen by 3.5 percent, the profit from yields and capital incomes. And in 2021, when prices increased, it was worse, as the purchasing power of employees decreased by 2.2%. On the other hand, the upward trend in the price/wage difference does not correspond to the current situation. At this time, the excess profits of large companies and oligopolies and non-labour costs, such as energy, are stimulating prices.

Instead of these unjust and sterile measures, the fight against inflation should have an impact on supply and structural principles, extending the framework of social and ecological justice.