My parents bought their house in Vancouver in 1961 for $15,000. Many years later, it was demolished and replaced with another house now worth millions – roughly 150 times as much.
At the same time, my father was making about $6,000 per year, a middle-class income for those times. If his management position still existed, it certainly wouldn’t have a salary 150 times as much. That would be $900,000.
Inflation has been a fact of life since the age of exploration. It is part of Adam Smith’s famous treatise on capitalism. He rationalized it as a necessity in order to ensure investment occurred. After all, without a return on investment provided by profit, what was the point of investing?
This is fundamental to capitalism. Money needs to make money. And inflation is the by-product. Prices go up as companies have to cover their costs.
Since 1960, inflation in Canada has averaged 3.8 percent per year. Prices have increased 886 percent since then because of the mathematics of compound interest. That is, an item costing $100 in 1960 would now cost $986.
Some prices, for example that of milk, have roughly tracked with those inflation numbers. When I was a kid, milk was 35 cents for a 3-quart carton, which would translate now to $4.77 for a 4-litre jug – the price milk was selling for last year.
Other things, such as house prices, have gone through the roof.
And wages have not kept up. My father’s single job provided our family with a middle-class income by working just 50 weeks per year. Now, families typically need two people working 50 weeks per year, or more, in order to have a middle-class income.
Is it any wonder we are all stressed? That we feel we are not getting ahead?
Is this something the Liberals did? No. Inflation has been a constant under both Conservative and Liberal governments. Indeed, inflation has been a constant in the market economy around the world.
This is why I find Pierre Poilievre’s claim that he will solve the housing crisis and bring inflation under control ludicrous. And inflation has nothing to do with Justin Trudeau. It is a fundamental component of our capitalist economic system. But maybe Poilievre really wants to do away with capitalism.
Todd Whitcombe is a chemistry professor at the University of Northern B.C.