Inflation and the Anthropocene: a reply to Adam Tooze

The dried-up bed of drought-stricken Lake Mead, Colorado, September 2023. Frederic J. Brown/AFP/Getty Images

Team Transitory/Team Permanent

A couple of months back, the indispensable Politics, Theory, Other podcast gave a whole episode over to regular guest, Adam Tooze, to answer a bunch of listeners’ questions put to him in advance. As usual, it’s well worth listening to the whole thing, which roams over Adam’s wide-ranging interests, from macroeconomics to historiography. One of the questions is about Adam’s assessment of my (and others’) position that inflation is now likely to remain on average higher and more volatile than in the past few decades. Adam is very generous about my work on neoliberalism, but less than convinced about my claims on inflation and the crisis. He offers the fall in inflation over the last 12 months or so, notably in the US and the UK, as evidence against my argument, suggesting “Team Transitory” had called it right: either the inflationary shocks of 2021-2023 were really temporary or, alternatively, the US and other countries have just witnessed the most successful application of economic policy in recent years. He then also suggests that, whilst he is keen to look for “structural” explanations for the drivers of the polycrisis, in this instance I am wide of the mark. Post-pandemic inflation was basically a temporary phenomenon.

I think he’s being deliberately flippant about the success of economic policy, but the empirical claim here is worth getting into. “Team Transitory” refers to the (solidly Keynesian) belief that the surge in prices seen across the world from the end of 2021 onwards was the by-product of some temporary dislocations arising primarily from the pandemic, and that these would rapidly fade as the shocks of the pandemic and Russia’s invasion of Ukraine faded. Typically, this was counterposed to “Team Permanent”, as laid out by Paul Krugman, “which placed the main blame for inflation on the combination of large government spending and low interest rates.” The transmission mechanisms usually suggested by Team Permanent could vary. For example, loose monetary policy (including low interest rates and plenty of Quantitative Easing) resulted in more demand for goods and services, causing an increased demand for labour that allowed workers to demand higher pay, forcing firms to put up prices that in turn would generate demands for higher pay – the so-called “wage-price spiral”. Or it could be that when