Oops! DNB admits: inflation remains

The Dutch Central Bank (DNB) recently issued a worrying statement: inflation, previously thought to be temporary, will remain high for the foreseeable future. "Price increases are more persistent than previously expected," the DNB stated. While the news is not unexpected, it makes the uncomfortable reality of our economy painfully clear.

The DNB gives a number of reasons for this persistent inflation: high government spending, skyrocketing corporate profits and rising wages. But how much truth lies in these claims? Are these factors the real culprits, or is the story more complex?

Let's start with high government spending. On this point, it is difficult to contradict the DNB. The government has indeed spent significant amounts, including on international aid, such as on Ukraine. This spending has put heavy pressure on the government budget, which has contributed to inflationary pressures.

The second point, however, high corporate profits, is a lot more controversial. Headlines, such as the one in The Telegraph, tell us that companies are making huge profits. But a deeper dive into the numbers reveals that this is mostly true for the very largest companies. The reality for small and medium-sized enterprises (SMEs) is a lot grimmer. Many SMEs are struggling to survive in these challenging economic times, let alone make big profits. So the broad narrative of "sky-high profits" is somewhat misleading.

And then we have the claim of "rising wages. It is true that some salaries are rising, but these increases are far from universal. For the CEOs of large corporations, wages are indeed rising substantially, sometimes well above the level of inflation. But for ordinary people, this is not the case. Their wages lag behind inflation, which means they lose out in real terms. In fact, most workers in the Netherlands experience shrinking disposable income, despite claims of wage increases.

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The reality is that persistent inflation further increases economic inequality in our country. The richest companies and individuals are able to benefit from inflation, while SMEs and ordinary people suffer. It is essential that we face this reality and take concrete measures to reduce this gap. If not, we risk a widening economic gap and further disruption of our society.