Distributional effects an important issue for moral philosophy
How should society manage inflation? There are no simple answers to this question, but from a practical philosophy point of view, it is primarily the question of justice that should be addressed says Joakim Sandberg, Professor of Philosophy. Who is affected and who must bear the burden?
“At present, it is the poorest people, those living very close to the bone, who are being hit the hardest. Particularly since food prices have risen the most,” says Joakim Sandberg, Professor of Practical Philosophy at the University of Gothenburg, and Professor of Economics and Finance from a Humanist Perspective at the University of Groningen in the Netherlands.
“For example, to demand that the Swedish Trade Union Confederation and wage earners take responsibility by lowering their wage demands, because higher wages cause an inflationary spiral, shows that it is people living with the smallest of margins who are expected to bear the moral burden of inflation,” says Joakim Sandberg.
“From a moral perspective, it is debatable how this burden should be distributed. Is it reasonable for those who are the worst off to bear the greatest burden?”
How should the responsibility be distributed?
Whose responsibility is it, for example, to ensure that a family with young children can afford food when inflation leads to skyrocketing prices? Is it the responsibility of politicians to create laws and regulations to inhibit price increases? Do merchants have a moral responsibility to refrain from raising their prices even if this results in lower profit margins for them? Or perhaps it is the individual who bears the responsibility and ought to have ensured that they have a buffer for tougher times?
With regard to inflation, in fact the really thorny philosophical question is striking the balance in who bears responsibility.
“I think most people would agree that something needs to be done, but there are differing opinions on exactly what. Many political parties are in agreement that this is a common challenge and a common crisis. Economists are thus also talking about the distributional effects – how should the burden to solve the problem be distributed?
And of course, there are many different ideas about how the justice issue should be addressed.
“For example, there are those who have taken the opportunity to call for a radical transformation of our financial system. Others are in favour of a rationing economy for the sake of the environment.”
Joakim Sandberg takes the recent electricity subsidy pay-out as an example of how politicians can attempt to distribute the burden.
“However, that subsidy was based solely on electricity consumption, while it could be argued that high electricity prices are a good incentive to reduce electricity consumption. It is also questionable from a justice perspective that those who have consumed the most get the most money. For example, it would have been possible to increase the housing supplement or a similar benefit instead to ensure that the support went to those who had been hit hardest.”
Ethics and morality
Who should bear the rising costs is also a question of business ethics.
“Some businesses don’t seem to want to take any responsibility and instead pass it on to their customers – with some even increasing their minimum profit requirements. It is conceivable that they should bear a small part of the burden, that we could share the responsibility. I also believe that thinking proportionally is the culprit. If businesses are going to make the same percentage profit on their purchase prices, they increase their prices even more, resulting in even greater profits to them while their products become even more expensive for the poor. A problem arises when the market becomes oligopolistic, with only a few supermarket giants competing. They capitalise on a non-functioning market,” says Joakim Sandberg.
He also mentions an area where Sweden has not done enough in his opinion. The European Commission has proposed a temporary tax on excess profits for some energy companies so that the money can be used for welfare. A temporary Solidarity Contribution in the fossil fuel sectors is to be based on excess profits that do not correspond to any regular profit that the companies could have anticipated making under normal circumstances.
“The EU has said that this Contribution is something Member States should introduce, but Sweden has made very slow progress on this, consequently missing out on a huge amount of money for welfare which is instead going into the pockets of the energy companies.”
Text: Johanna Hillgren
