What are the most interesting or radical actions governments are taking to improve affordability in an increasingly volatile world? Jack in Ireland
IW: Mexico’s government has an agreement with grocery companies to fix the price of a basket of essential foods. President Claudia Sheinbaum is making clear that it is her responsibility to negotiate on behalf of ordinary people and make essentials affordable. This is the opposite of neoliberalism, which tells people that democracy is the greatest system, yet that elected officials can do little to meet their basic material needs. Mexico has also capped energy prices, guaranteed small-scale farmers minimum prices for staples to encourage domestic production, and built emergency buffer stocks.
Spain capped the price of gas for power generation, which effectively contained the 2022 energy shock, offered free commuter and regional rail passes while the crisis lasted, and established public scrutiny of corporate profits.
At the municipal level, Vienna stands out: around half of its residents live in municipal or subsidised housing. Istanbul has pioneered people’s canteens that offer nutritious meals at an affordable price point. And New York City has put affordability policies such as rent freezes, investment in housing stock and public supermarkets back on the international agenda.
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How should these midterm results shape Democratic economic policies? Should they be cautious or bold? Jessica in Brighton, UK
The Democrats won votes on affordability, and now they must have the courage to deliver real change. A dignified life for all must be the north star and that requires a fundamental overhaul of the economic playbook. Last time the Democrats enjoyed an electoral wave was in 2008, and under Obama they then leaned into neoliberalism. Bidenomics got stuck in a halfway house.
This time, the economy needs to be rebuilt starting from the essentials – energy, food, housing, communication, transport, all forms of care – with investments that create meaningful and decent jobs. Short term measures such as price policies can buy time and build power to regain public control over the essentials on which our lives and industries depend. We must then change how we provide them so that provision is compatible with planetary boundaries while constraining corporate power.
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Why do governments use interest rates to control inflation? It seems unfair and clumsy. Simon in Perth, Australia and James in Leeds, UK
We often say interest rate hikes cool down the labour market – it sounds nice, like a fresh breeze. But simply put, the goal of rate hikes is to curb inflation by increasing unemployment and weakening workers’ ability to demand high wages. Higher rates also raise the cost of investments, for example in renewable energy that would make our economies less vulnerable to future shocks, and they increase mortgage costs, deepening the housing affordability crisis. This causes considerable harm, potentially pushing people towards the far right.
That is why I argue for surgical, sectoral stabilisation policies for essentials that buy time for structural measures. Rate hikes remain the standard response, whatever the nature of inflation, because central banks are in charge of monetary stability and have only one instrument at their disposal. We need a new approach in which governments fight inflation too, and central banks take on new tasks such as monitoring profit margins and issuing early warnings about rising prices of essentials that can unleash inflation.
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Why do economists accept 2 to 3% inflation as OK but not 0%? Wouldn’t consumers be better off if prices went down rather than up? Rich in Michigan, USA
The 2% target is an arbitrary rule of thumb for central banks, established relatively recently. But the idea that a little inflation supports steady growth is old. If purchasing power slowly declines, there is an incentive to invest or spend rather than hoard cash in your mattress. Moderate inflation also makes debt servicing easier, both for private borrowers and governments.
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Why are we obsessed with economic ‘growth’? It seems to drive self-destructive behaviour. Richard in Hampshire, UK and Tim in Lewes, UK
This is a live debate, especially in the context of climate change. Capitalist economies are predicated on growth because capital always strives for greater profits, but growth does not automatically guarantee a dignified life. What I am arguing for is to replace this growth imperative with an affordability and full- employment imperative: essentials should be removed from profit fundamentalism and organised to ensure affordable provisioning for all, and the government should be responsible for guaranteeing decent and meaningful jobs.
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I support a vigorous tax on wealth. Something like a 100% tax on all wealth over $1bn. Do you agree? Bill in Virginia, USA
Roosevelt warned that “the liberty of a democracy is not safe if private power grows stronger than the democratic state itself: That, in its essence, is fascism-ownership of government by an individual, by a group, or by any other controlling private power.” This was a key lesson from the consolidation of the Nazis’ power. Taxing the ultra-rich to limit extreme wealth concentration is key to anti-fascist economics. A 100% tax on wealth over $1bn might, however, not be the best design. A progressive tax that limits wealth accumulation starting at somewhat lower levels would make it harder to amass a billion dollars to begin with.
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What will happen if the AI bubble bursts? Fiona in Edinburgh, UK
The immediate impact would probably be a stock market crash and a financial crisis. But such a crisis would also present an opportunity to turn things around. Governments should not bail out the companies but socialise them and turn them into democratically controlled utilities.
AI has cannibalised humanity’s knowledge and automated it to make profits for a handful of companies that openly state their business could lead to human extinction; it should serve the common good instead. As it creeps into our work and we increasingly rely on it in our daily lives, we will have to take public control of AI while also creating space for knowledge creation and creativity that are not competing with AI services. Otherwise, exercising the mind will become a privilege of the wealthy few.
Some questions have been condensed for clarity.
Protesters march for affordable energy in Maryland, US. Photograph: Jemal Countess/Getty Images for Progressive Maryland
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