Back to 1984. It is the year that George Orwel chooses for his dystopian masterpiece, the year in which Apple launches its first Macintosh and the year of Enrico Berlinguer’s death. The amarcord can end here, because the return to the past takes place due to a primacy that is difficult to manage, the race of inflation. The consumer price index is close to 12%, 11.9%, today as then. Istat explains why it has come to this point. It is mostly energy goods that explain “the extraordinary acceleration of inflation in October 2022”, with food prices continuing to accelerate, in a context of inflationary tensions that cross almost all product sectors; only the recreational, cultural and personal care services are holding back. The record numbers help describe a totally exceptional context. It is necessary to go back to June 1983 (when they recorded a trend variation of + 13.0%) to find an increase in the prices of the ‘shopping cart’, on an annual basis, higher than that of October 2022 and in March 1984 for a trend of general index equal to + 11.9%. There is another data, again provided by Istat, which combined with that of inflation helps to explain why the increase in prices is thinking much more today than in 1984. In the on average for the first nine months of the year, the gap between the dynamics of prices and that of contractual wages is 6.6 percentage points. It means that prices are growing at a record speed and that, at the same time, salaries are growing little or nothing. When we say that we do not want to trigger a price-wage spiral, or an increase in wages following that of inflation, we resort to a theorem dear to economic orthodoxy. But that there is an obvious problem of wages that are too low in relation to prices is equally clear. Also remembering what happened, again in 1984. With the Valentine’s decree, the Craxi government decided to cut the escalator by 3 percentage points, confirmed by the no to the abrogative referendum. The automatic mechanism for adjusting wages to prices will be definitively abolished in 1992. If in 1984 the problem was wages deemed too high, today it is the ECB that argues that the main problem is wages and the labor market. A substantial difference to keep in mind even when it comes to inflation. (by Fabio Insenga)
