In recent years, inflation has been considerably higher in the UK than in comparable countries like France, Germany and the US. Why?

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Persistent high inflation rates have always been a symptom of structural problems in an economy and have little to do with external factors. Every year, the amount of money in circulation grows faster than the level of economic activity. Supply always matches demand in a market economy, so growth differences between the two will inevitably lead to price increases. “Cost of living crisis” is a dramatic term for this dynamic running away.

Unfortunately, runaway prices are not just a symptom but also the cause of many economic ills. A market economy is fuelled by the selfish but socially beneficial desire of people to become rich – improving their own outcome by offering something others want to buy. If the system works, then some people will become rich, and that is not a bug but a feature! In a cost-of-living crisis, however, becoming rich is very difficult.

You may offer a great service or product that people normally would like to buy. Yet, there is little demand because people must first cover their more pressing expenses like bills, mortgages etc., and have no money left to spend on non-essentials. Consequently, you decide not to start your business and apply for government support instead, further worsening the imbalance between the money in circulation and real economic activity that keeps us alive, and reinforcing the cost-of-living crisis.

The prospect of working 40 hours a week under pressure, often being concerned with things that are not inherently enjoyable is hardly attractive. Yet, the right amount of money is enough to overcome natural aversions against work, and if it really pays well, encourages people to proactively build their careers, trading ever increasing amounts of work for even more increasing amounts of money.

Unfortunately, in the private sector, where actual value is created, salary increases are being suppressed by inflation. Even worse, with high inflation comes a lame economy that simply may not offer other functions and roles. So, instead of making a career, many potential high performers will stay in their inadequate roles. New arrivals to the labour market will search for public sector jobs or, even worse, tap into the ever-increasing resources allocated to the welfare state. The divide between money and real economic activity will worsen further.

However, a purely technical view on the lack of career opportunities obscures the massive human frustration and outright hardship associated with it. Switching jobs becomes more difficult. For many, this means their boss treats them poorly, their input is not valued appropriately, and they are not paid well. They are frustrated but have nowhere to go.

If there are no ambitions and no career, there are no dreams and no visions. Instead of punishing ambition and success, the UK government must cherish these drivers of human flourishing. The stakes are high, and there is not much time left.

Florian Biermann is a senior lecturer in economics at Nottingham Business School.

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