Funnyman John Oliver recently offered a confused message on what’s driving rent prices sky high. This week he moved onto inflation, and his analysis was much sounder—though he still made one critical mistake.
The British-American comedian and host of HBO’s Last Week Tonight with John Oliver begins by noting everyone is pointing fingers over inflation. President Joe Biden blames Vladmir Putin. Republicans are blaming Joe Biden and his Build Back Better spending agenda. Democratic lawmakers Sheila Jackson Reid and Elizabeth Warren say it’s “corporate greed,” while other commentators have cited supply chain disruptions.
“There has been a flurry of finger-pointing,” Oliver says, “with many tending to place the blame at whatever they were already mad at.”
Some of these arguments make little sense, however, including “corporate greed.”
“It’s not like corporations only just got greedy the last two years,” Oliver says, adding that some companies may be using the inflationary environment to charge higher prices. “Most economists will tell you that’s not what caused inflation in the first place.”
He also debunked Biden’s common refrain that inflation is “Putin’s tax hike,” though Oliver rightly noted the war in Ukraine has not helped inflation, since it has increased energy demand and disrupted supply.
“When Biden said, ‘Inflation is largely the fault of Putin,’ that is clearly not true,” Oliver says. “Inflation was happening before Putin even invaded Ukraine, so that’s just not how time works.”
Not only does Oliver reject these two misguided explanations, he largely gets the basics of inflation correct.
“Too much money chasing a limited supply of goods can lead to inflation,” he says.
This is an almost verbatim quote of Milton Friedman, the Nobel Prize-winning economist who explained that “inflation is caused by too much money chasing after too few goods.” And Oliver notes that by expanding the money supply to finance massive stimulus spending, the government inadvertently created “too much money” without a corresponding increase in goods, causing inflation.
Importantly, Oliver says this wasn’t the only cause of inflation, something some of Biden’s critics have overlooked. (Government lockdowns, which crippled supply chains, also played a role, as did the war in Ukraine and government policies that hampered energy production.)
A ‘Covid-Induced Financial Crisis’?
Oliver’s segment is funny and even informative in some ways. He goes off the rails though in a few ways.
First, as noted above, Oliver admits that people did “have more cash on hand” because of the Federal Reserve’s money pumping, but he argues that this policy was necessary because it “helped us avoid a Covid-induced financial crisis.”
The financial crisis was not induced by Covid, however. The financial crisis was induced by government, which closed the economy and put millions of Americans out of work.. This is an important distinction, and one Oliver probably overlooked in large part because he supported government lockdowns and ridiculed people who opposed them. Lockdowns failed to tame the virus, an abundance of evidence shows, but the action prompted the massive stimulus spending to avoid the “Covid-induced financial crisis” Oliver cites.
This was not the only way the lockdowns caused inflation, however. The government’s pandemic response is also what caused the supply chain problems.
“If you don’t make stuff, there’s no stuff,” Elon Musk noted early in the pandemic.
Throughout the segment, Oliver points out that these supply chain issues have also exacerbated inflation. While the monetary expansion resulted in more money, the supply chain issues resulted in fewer goods and services—a perfect recipe for inflation.
But Oliver misses a simple fact: however you slice it, inflation was caused by the government, whether it’s the supply chain disruptions they caused with lockdowns or the erosion of the dollar’s purchasing power through money printing.
This matters, because Oliver seems to see the solution to inflation as … more government. Throughout his segment, he defends the Federal Reserve—”It was not like the Fed was alone in calling this wrong. Most economists thought inflation would go away on its own”—and concluded his show by advocating more government intervention to alleviate the problem. (Taxpayer-funded rental insurance. Taxes on higher-income earners to finance “refundable child tax credits.”)
‘Inflations Engineered by Governments’
I want to like John Oliver. He’s funny, has a great accent, and is not an unintelligent person.
But in his highly-entertaining and pretty informative analysis on inflation, he somehow still manages to miss the true culprit of inflation. Government—above any other single entity—is the root of our inflationary problems. Nor should this come as any surprise.
“I do not think it is an exaggeration to say history is largely a history of inflation, usually inflations engineered by governments for the gain of governments,” the Nobel Prize-winning economist F.A. Hayek once observed.
John Oliver is right that “corporate greed” and “Putin’s tax hike” are poor answers when it comes to explaining inflation. But he still can’t seem to see that the government is the root of the inflation problem, not the answer to it.
The post What John Oliver Gets Right (and Wrong) about Inflation was first published by the Foundation for Economic Education, and is republished here with permission. Please support their efforts.