lnflation

The deadly sins whose combined action is a gravitational force that causes the rising tide of inflation

Inflation: big headlines in the newspapers. Left in the shadows are the deadly sins whose combined action is a gravitational force that causes the rising tide of inflation. These are some of their names: wealth that flaunts flamboyant consumption, tourism, tax policy with accompanying tax evasion and avoidance, and excessive bureaucratic procedures.

Wealth

The rich flaunt their purchases of goods and services whose high prices are a sign of luxury. They do not buy out of necessity, but to flaunt their social status resulting from economic success. Their demand does not react negatively to inflation. On the contrary. The higher prices, the more conspicuous consumption. This price insensitivity can outweigh any potential increase in demand elasticity among the many other, far less affluent, consumer groups. How many individuals possess an ever-increasing abundance of goods, wealth, and cash flows? Are they few, declining, yet increasingly affluent, while official statistics indicate that income inequality has been decreasing for some years? Economically, has our community already taken the shape of an elephant, with the middle class—the losers—becoming fragile, while the “trunk” of the wealthy, who earn interest, rents, dividends, and capital gains, has grown disproportionately large?

Tourism

With tourism, owners and managers of hotels, bed & breakfasts, resorts, restaurants, and transportation services are strengthening their ability to pay without altering consumption patterns. The overwhelming influx of tourists is making their demand increasingly less sensitive to price fluctuations, which they themselves have contributed to accentuating. Mass tourists and wealthy tourists are fueling inflation.

Taxation

The tax policy favoring annuitants and the self-employed (in Italy, 21-23% for real estate income, 26% for financial income, and 5-15% for self-employed workers with a VAT number, up to a maximum income of € 85,000) allows beneficiaries to more easily absorb price increases. In addition to unfair taxation, there are also undue tax savings and tax law violations resulting in tax evasion or underpayment.

Bureaucracy

The irresistible rise and burdensome nature of the bureaucrat have inflated the costs of economic activity, with significant repercussions on prices. It should be the task of a far-sighted public administration to educate and encourage its members to read its provisions, provided that the text is understandable to the general public. Foresight also means combating invasive bureaucracy, which, as Luigi Einaudi wrote in his Sunday Sermons, tends to grow “spontaneously and progressively, whether services actually grow or diminish in importance.” Mayors should distribute local tax bills accompanied by the twin numbers denoting the efficiency and effectiveness of municipal services. Otherwise, Policymakers, Public Bureaucracy, and Codebreakers will continue to rage. They form a troika resembling Diplodocus, the small-brained dinosaur with a low IQ, on the body of a giant. More rules strengthen the power of the triumvirate and create large grey areas of interpretation that encourage corruption.

Silent Virtues

To combat inflation, there are silent virtues to cultivate. Among these, a life not confined to enrichment, especially if speculative, stands out, but one that cultivates intellectual curiosity and altruism by interacting with people from all social classes.