At the start of 2022, the economist Isabella Weber told her tens of thousands of Twitter followers she was taking a break from social media after suffering a “brutal” pile-on from those who disagreed with her on how to deal with inflation.
Weber, a 35-year-old German academic at the University of Massachusetts Amherst, suffered harassment from the right-wing media and cryptocurrency cheerleaders and also criticism from the Nobel prizewinning economist Paul Krugman for suggesting inflation-fighting ideas that have now been widely adopted by governments across Europe.
“I could not imagine how terrible such an experience would be before it happened to me,” says Weber, who says she received threatening phone calls and hate-fuelled emails, and had pictures of herself circulated online by trolls. “I felt threatened in an existential way. It felt like I had lost my voice as thousands of people were telling me I was stupid,” she says of her decision to leave social media for a while.
Weber had touched a nerve in a Guardian article in late December 2021. It suggested that surging energy prices after the end of Covid-19 lockdowns could be countered by price controls, mimicking interventionist policies in the US and UK after the Second World War. Weber drew on her award- winning research on how China avoided the “shock therapy” of economic liberalisation when it moved from a command-driven economy after the 1980s.
Today, Weber’s energy price controls are used in big economies such as the UK and Germany, and her work on how corporate profits are helping to drive inflation is exercising the minds of the world’s most powerful central bankers. She was named one of the 100 Women of the Year by Focus magazine and was drafted in to help the German government design its energy price brake last year. But her experience at the hands of trolls, many of whom were economists with large followings, shone a light on the elitism and sexism in parts of the economics community.
“If you’re a woman working in economics from a non-Ivy League university who is saying something outside the mainstream, the presumption is that you simply don’t understand basic economics,” she says. “If a senior male economist at an elite institution had written an article identical to mine, people would have praised him for being a brilliant thinker who can think outside the box and push the boundaries of our understanding at a momentous time for the world economy.”
The abuse only subsided after the American economist James Galbraith defended her, along with supporters such as Mariana Mazzucato at University College London. Krugman deleted tweets attacking Weber’s article as “truly stupid” and made a public apology. At the height of Europe’s energy crisis last September, Krugman seemed to endorse Weber’s analysis, warning that governments should not “always let markets rip”. He wrote in The New York Times: “Right now protecting families and preserving a sense of fairness have to take priority over textbook market efficiency.”
Weber is now a superstar draw at academic conferences, where her work on inflationary dynamics is helping to set the policy agenda in countries still battling stubbornly high prices a year after the war in Ukraine started. Despite being widely lauded, she says few economists bring up the abuse she suffered.
Weber’s prescience on the role of strategic price controls has been followed by an equally important contribution to the study of how companies’ pricing power is forcing up inflation, a phenomenon that has been dubbed “greedflation”.
Weber prefers to use the term “sellers’ inflation” to describe how the shock of a global energy crisis and supply chain shortages during the pandemic led companies to pass on costs to consumers and make inflation a “generalised” feature of the economy. This in turn led to workers asking for more pay, she says. “People will fight back by asking for higher nominal wages. The question is how companies will react to this. There is no law of nature to say that this will result in a wage-price spiral.”
Weber’s work defies long-running concerns from central bankers that workers’ pay demands would create entrenched inflation. Rather, as wages look to have peaked in most rich world economies this year, the story of ever-expanding profit margins is now front and centre of the inflation debate.
Christine Lagarde, the European Central Bank president, said last week that some businesses took advantage of the inflationary environment to raise prices unduly in 2022. Data from the Bank of England shows that companies are increasing prices at the fastest level since last autumn despite sharp falls in energy prices in recent months.
Weber says windfall taxes on profits, like those adopted in the UK on energy producers, are a powerful tool to deter companies from profiteering. She also supports the creation of emergency reserves of vital goods such as gas and oil to deal with future crises.
“Governments should develop shock absorbers in systemically important sectors that could suffer from price explosions and have the potential to rock price stability across the economy. This is a type of economic policy disaster preparedness needed to avoid a supply shock leading to inflation getting out of hand,” she says.
Rather than doing a victory lap over her ideas becoming mainstream policy, Weber is frustrated that the main tool to fight inflation is still raising interest rates. The Fed and the ECB raised borrowing costs again this month, with the Bank of England expected to follow suit this week.
“The institutional and policy playbook we have to fight inflation is still the old one. The power of the established paradigms in economics is so overwhelming compared to the upstart attempts to try and do something different. This was part of my motivation to stick my neck out in 2021. There are few perfect solutions but we have to start expanding our toolbox.”
