Consumer anger over high prices and the political fallout: How post-pandemic inflation continues to shape global politics

Although we are moving away from the peak of post-Covid inflation, high consumer prices remain a significant problem for governments in developed economies. Even as inflation rates stabilize near pre-pandemic levels, the economic impact of recent years continues to weigh heavily politically, with consumer discontent over high living costs influencing elections and public sentiment globally. This anger has become a force to be reckoned with, tipping the balance of elections and creating a difficult environment for rulers.

The Persistent Effects of Inflation on Politics

Although central banks have largely succeeded in curbing inflation, the effect of steep price increases for necessities such as food, energy and housing has left a lasting impression on voters. According to Robert Ford, professor of political science at the University of Manchester, "Inflation only really ends for voters when they get used to the new price levels." And this process is a slow one. People remember the previous, lower prices, which leads to a psychological gap in accepting the new norm.

This discontent is evident in recent elections in advanced economies. For example, dissatisfaction with the economy was a key factor in the recent US election, contributing to the defeat of Vice President Kamala Harris by Donald Trump. Governments in power in Britain, Japan and other countries have also faced backlash as inflation and the high cost of living remain top issues for voters.

Survey Data Reflects Dissatisfaction with the Economy

Polling data shows how the economic challenges left by inflation are affecting the political landscape in upcoming elections, particularly in Germany and Canada. In Germany, where an early election is being prepared, parties with anti-establishment platforms, both left and right, are gaining ground. With nearly half of respondents worried they won't be able to maintain their current lifestyle, support for extremist parties such as the Alternative for Germany (AfD) and the Sahra Wagenknecht Alliance (BSW) is reaching unprecedented levels.

Similarly, in Canada, opposition leader Pierre Poilievre has exploited the cost-of-living crisis by criticizing Prime Minister Justin Trudeau and using economic hardship as evidence of government failure. Although inflation in Canada has fallen to around 1.6%, the high cost of living remains the top priority for Canadians, with only one in five anticipating an improvement in their financial situation in the coming year.

A Global Problem: How Economies Cope with the Troubles

In OECD countries, inflation rates are finally approaching the central banks' 2% target, with average prices in September 2024 around 30% higher than in December 2019. Despite this moderation, real wages in some economies are only now crossing levels pre-pandemic, and consumer confidence remains below pre-pandemic norms.

In Britain, although inflation has fallen to its lowest level in three years, the cost of living crisis continues to dominate the national agenda. Polls indicate that 90% of Britons still see this crisis as the country's most pressing problem. Rachel Reeves, the Labor chancellor, has publicly acknowledged the scale of the problem and the challenge it poses to households. Real wages may be rising, but high prices for basic goods mean the cost-of-living crisis is far from solved in the public eye.

The Psychological and Social Impact of Persistently High Prices

Isabella Weber, an economics professor at the University of Massachusetts Amherst, has observed the destabilizing effects inflation can have on societies and political systems. His research points out that when inflation is driven by essential goods, it erodes public confidence, creating a sense of instability. The recent inflationary episode, she explains, was particularly damaging because developed economies have not faced inflation at this level since the 1970s. As households struggle to afford the necessities, frustration turns to anger at by policymakers, exacerbated by social divisions.

This discontent has fueled calls for change, especially among voters who feel economically disadvantaged. Sebastian Dullien, director of research at the Macroeconomic Policy Institute in Düsseldorf, noted that many workers perceive wage increases as the result of their hard work, while higher prices are attributed to external factors beyond their control. This dynamic has intensified feelings of injustice and a sense of losing control over the financial future, pushing voters towards anti-establishment candidates in some regions.

What's Next?

As we approach the next election cycles, the legacy of post-Covid inflation remains a powerful political force. From Canada to Germany, economic shocks continue to affect governors, reconfigure political lines and push support for candidates who speak to voters' frustrations with high prices and stagnant wages. The question for policymakers is whether they can meaningfully address these concerns, or whether the political landscape will continue to shift in the face of public dissatisfaction with the status quo.