Karen, let me clear up, at least partially, the mystery as to why both the mainstream media and many in the freedom movement mistakenly blame corporations for inflation and their reactions to it such as downsizing packages. This mistaken blame also occurred in the 1970s and other inflations. The immediate reason is ignorance. Not everyone in the freedom movement has been exposed to the notion that inflation is solely a monetary phenomenon. Most probably have been exposed to a past and continuing barrage of misinformation to the effect that a company that raises prices is causing inflation. Why, this seems self-evident, does it not? The abysmal condition of economic and financial education among journalists, politicians, academicians, and the media perpetuates these false and inadequate theories.
In the 70s, a few people in academia tried to explain that inflation is everywhere and always a monetary phenomenon. Articles on this even appeared in the Wall Street Journal and mentions of it elsewhere. This educational effort petered out, even in economics textbooks. Moreover, politicians and others in high and influential places kept shouting that corporations were to blame and that price controls were necessary and would do some good.
Why do these false theories survive and continue to infect people’s minds and discourse, even those who should know better? Why are they not displaced by the true explanation? Compare the germ theory of disease. This is broadly accepted, and people wash their hands. There is no political interest involved in staying alive and not getting sick. Inflation, however, is an economic matter, and economic matters in our system are all intertwined with political interests. The politicization of economic explanations penetrates the system of grade schools, high schools, colleges, textbooks, universities, federal grants, schools of journalism, and all media. These organs then perpetuate the ignorance and false theories. As history repeats and corporations once again are being blamed for a general rise in prices that they cannot possibly have caused, the reason is that the system is the same as it was in the 70s, the incentives are the same, and they involve the politicization of economic theories. This is why Keynesianism still runs rampant despite its faults having been pointed out for decades by many critics. As health care has become politicized, we see the same thing happening, namely, false theories of health come to the fore because these serve the interests of politicized groups. As the market disappears, to be replaced by political wealth transfers, false theories necessarily arise to drown out the true ideas. The same thing happens in the ideas that are perpetuated concerning poverty, disease, war, and everything else that becomes politicized. Politicization poisons.
