Class War Is at the Heart of the Bank of Canada’s Incoherent Rate Hikes
The Bank of Canada’s incoherent stance on inflation and interest rates underscores the class conflict at play in shaping its decisions. As with previous hikes, the bank’s new rate increase will have terrible repercussions for workers.
Tiff Macklem, governor of the Bank of Canada, right, and Carolyn Rogers, senior deputy governor of the Bank of Canada, during a news conference in Ottawa, Ontario, Canada, on April 12, 2023. (David Kawai / Bloomberg via Getty Images)
On Wednesday, the Bank of Canada raised its interest rate a quarter point to 4.75 percent. That’s the highest central bank rate since 2001. There’s already chatter that there may be more rate hikes to come.
Observers, pundits, bankers, and some economists use the word “stubborn” to describe the economy and inflation. That’s to say that rate hikes have failed to curb inflation — or to drive employment down. Last February, the Breach cast the Bank of Canada’s rate hikes as class war. “Their goal is to put a chill on borrowing and spending,” it wrote of the bank, noting that the strategy “will throw people out of jobs and make workers insecure enough to stop asking for raises — even if it plunges the country into a recession.” It argued that the bank was focused on blaming workers. As indeed the bank was. So were pundits, bank economists, and right-wing politicians. According to the yarn they spun, because higher labor costs drive up prices, it is workers’ share of the economic pie that is the problem. And, of course, on this view, government spending was making things worse.
Canada’s Incoherent Rate Hikes
Outlets like the Breach and progressive economists were among the first to blame corporate profits and “greedflation” for playing an outsized role in inflation, the affordability crisis, and the immiseration of nearly everyone. As the Centre for Future Work found, corporate profits in a handful of sectors were the primary driver of inflation in Canada. In 2021, economist James Galbraith, writing of the US case, rejected the idea that interest rate hikes would solve inflation, pointing out that supply chain constraints, military spending, and energy costs — particularly that of oil — were driving prices up. By spring of this year, even the Wall Street Journal had to admit that corporations were increasing prices higher than their rising costs, driving up inflation. In short, workers and everyday consumers were bearing the brunt of the central bank’s anti-inflation strategy while rich folks and corporations made off like bandits.
Sorry, but this article is available to active subscribers only. Please log in or become a subscriber.