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Back in 2021, when inflation increased dramatically as a new conflict shut off the world’s access to a critical source of fossil fuels, renowned economist Isabella Weber was derided by the rest of her profession for suggesting that governments adopt price controls in response. In the wake of this inflationary crisis, incumbent governments were punished severely at the ballots. Weber had a pithy response: “unemployment hurts governments, inflation kills them.”
This observation remains true today. During last Thursday’s local elections, Labour suffered historic losses across England and Wales, losing control of more than 30 councils and, for the first time in over a century, losing a national election in Wales. Keir Starmer’s party couldn’t even break 20% in projected national vote share. Neither could the Conservatives, who shed over 550 seats.
Reform UK were the night’s big winners, seizing control of 14 councils in England - including Sunderland, Essex, and Barnsley - and picking up more than 1,400 councilors. They came second in Wales, tied for second in Scotland, and would lead a national poll if one were held today.
The Greens also had a strong night, taking five councils including Norwich and Hackney in London, winning two mayoralties in London - in Hackney and Lewisham - and gaining hundreds of councilors. The Liberal Democrats made quiet but significant gains too.
For Prime Minister Keir Starmer, the results were an utter humiliation. The primary cause of his defeat was the cost-of-living crisis.
Reform made gains in Scotland and Wales. But their rise was contained by progressive nationalist parties that have placed the cost of living - and the incompetence and corruption on show in Westminster - at the heart of their campaigns.
Wales was the night’s most dramatic story. Nationalist party Plaid Cymru won 43 seats but fell short of a majority. Reform came second with 34 seats. And Welsh Labour, which has dominated Welsh politics for over a century, suffered a historic collapse, finishing third with only 11% of the vote. Welsh Labour leader and First Minister Eluned Morgan lost her seat in the process, becoming the UK’s first head of government to be unseated while in office.
In Scotland, the SNP remain the largest party at Holyrood but fell short of a majority. Reform UK made their first inroads into Scottish politics, ending the night tied for second place with Labour – a remarkable result for a party, which, until recently, had virtually no presence north of the border. The Scottish Greens came third in another strong showing, followed by the Conservatives and Liberal Democrats.
Five parties are now splitting the vote in near-equal measure, with no party commanding anything close to a majority of public support. Labour and the Tories - twin pillars of Britain’s political settlement - are crumbling simultaneously. It is hard to view this outcome as anything other than a damning indictment of the political establishment.
For Prime Minister Keir Starmer, the results were an utter humiliation. And the primary cause of his defeat was the cost-of-living crisis: a crisis that has been devastating communities across the country for years, and which has been largely ignored by Westminster.
The recovery that wasn’t
The cost-of-living crisis began in 2022, when the recovery from the COVID-19 pandemic came head-to-head with Russia’s invasion of Ukraine. Demand increased suddenly due to the lifting of lockdown restrictions, and supply contracted due to the huge constraints on production imposed by the energy crisis. Prices shot up as a result.
Before 2022, inflation had been low for some time – primarily because the “recovery” from the financial crisis of 2008 had been so weak. With much of the west facing high debt, stagnant wages, and low productivity, the only engine of global demand was China. Monetary policy remained extremely loose as central banks tried to stimulate demand.
The cost of borrowing shot up at the same time as food and energy prices began to rise. Wages did not keep up. The result was a huge decline in the living standards of millions of households across the rich world.
Loose monetary policy provided something of a salve to the low-wage equilibrium experienced by many advanced economies following the financial crisis. Households were able to access huge mortgages at very low interest rates – as well as borrowing to purchase consumer goods. The cost-of-living crisis put a sharp end to this period of easy money.
In 2021, central banks began a sustained increase in interest rates for the first time since the financial crisis. The cost of borrowing shot up at the same time as food and energy prices began to rise. Wages did not keep up. The result was a huge decline in the living standards of millions of households across the rich world.
Shock or system failure?
Policymakers treated this inflationary shock as a one off “black swan” event driven by forces outside of their control. And it is true that the proximate causes of this shock were the recovery from the pandemic and the war in Ukraine. But the deeper drivers were structural.
As I argued at the time, rising prices have become the new normal thanks to climate breakdown, geopolitical conflict, and the corporate capture of our economies. Households could still access cheap goods imports from places like China. But the basic essentials – food, housing, energy – are becoming more expensive every year. And our governments – captured by vested interests – have refused to act.
The last crisis was not a random, “black swan” event triggered by variables outside our control. It emerged from the interaction of multiple crises afflicting the capitalist world system. So it was not particularly surprising when, just a few years later, it happened again.
With Trump and Netanyahu’s senseless war in Iran, prices rose sharply as a new conflict cut off the world’s access to a critical source of fossil fuels. But this time, the consequences were, if anything, more severe. The world could just about make do with fewer Russian fossil fuels; it could not make do without fossil fuels from the Middle East.
The closure of the Strait of Hormuz sent oil and gas prices soaring. This was not a response to an immediate shortage of fossil fuels – the world had built up substantial oil reserves in the wake of the last crisis. Instead, it was primarily driven by speculators betting on future supply constraints. Nevertheless, these price increases were immediately passed onto consumers at the pump.
At first, we were told the war would only last a few days. Then, a few weeks. But, by this point, the damage was already done. Not only had the world been cut off from a key source of fossil fuels; oil and gas infrastructure across the Middle East had also been damaged, constraining output for years to come. And a host of critical industries found themselves unable to access critical inputs to production derived from fossil fuels – from fertilisers, to plastics.
The cost of greed crisis
In countries like the UK, most consumers had not recovered from the last cost of living crisis when the new one hit. The previous crisis undoubtedly increased support for Reform; this crisis consolidated their role as the primary party of protest. But this time, it is Starmer’s head on the chopping block. As Weber pointed out all those years ago, unemployment hurts governments, inflation kills them.
Weber’s observation was not glib. She had spent months telling policymakers that they needed to introduce price controls in response to the rampant profiteering that was taking place on the back of the cost-of-living crisis. Her research found that companies operating in oligopolistic industries were using the crisis as an excuse to raise prices more than they needed to. Weber called this phenomenon “sellers’ inflation”. The press called it “greedflation”.
In response, Weber advocated price controls on essentials to ensure that the inflationary crisis did not lead to a massive transfer of wealth from households to the shareholders of powerful corporations. She was laughed out of the room by economists like Paul Krugman, who responded that price controls would lead to USSR-style bread lines. Weber calmly pointed out that these policy tools had been used in the past – most notably during the First and Second World Wars. When these price controls were ended abruptly after the war, inflation shot up, causing yet another boom-bust cycle.
At the same time, other campaigners advocated a windfall tax to capture excess corporate profits made during the crisis, with the proceeds used to support vulnerable households. In the UK, facing significant public pressure, the government did introduce a windfall tax on the big oil companies. But not nearly enough was done to protect households from the impact of rising prices. Indicators of poverty, ill-health, and deprivation all started to flash red.
Starmer’s false mandate
It was on the back of the first crisis that Keir Starmer swept to power in 2024. At the time, Starmer believed that his victory was his own. He had successfully purged the Labour party of the left and, in doing so, made them electable again. His moderate, sensible policy agenda appealed to voters up and down the country tired of populism on both the left and the right. Or so the story went.
But Starmer’s victory was not his own. Most voters were not paying attention to his management of the Labour Party – nor to his meek policy agenda. They were paying attention to their bank statements, which showed an ever-increasing chasm between income and expenditure. They punished the Conservative Party with near annihilation. And Starmer reaped the rewards, achieving a huge Parliamentary majority on the back of a meagre vote share. A few shrewd commentators noted that Jeremy Corbyn had won more votes in 2017 than Starmer did in 2024.
Starmer’s hubris prevented him from learning the right lessons from his election victory. He had not received a huge mandate to revive Blair’s New Labour project. He had won big on the back of voters’ disillusionment with the Tories. His task was simple: make stuff affordable again. He failed. Now, he has been punished at the ballot.
The vote for Reform is a response to pervasive mistrust. It is a cynical vote against the establishment – one that denies the possibility of real, positive change, and instead seeks to punish those in charge for their failures.
Starmer and his acolytes will not learn any of the right lessons from this election loss. They will see Reform’s gains as a reason to adopt more reactionary rhetoric on migration. But, as countless political scientists have shown, you cannot beat the far right at its own game.
While Starmer uses this loss as a reason to attack migrants, the economic situation in the UK will continue to deteriorate. Life for most people will continue to get worse. And, safe in the halls of Westminster, our political class will largely fail to notice this decline in living standards.
Without action, Reform will continue to reap the rewards of the enshittification of life in the UK. The left cannot beat them using top-down electoral politics alone. Most people are sick of politicians telling them they will make life affordable again and failing to deliver. If we want to protect people from inflation, we don’t just need a policy agenda – we need to build power in workplaces and communities.
We need strong unions that can protect workers from cuts to real wages. We need tenants’ unions that can protect people from predatory landlords. And we need community organising to deliver the kind of mutual aid that has always protected workers from crises caused by capital. A strong left-populist electoral strategy can build on these elements – but it cannot replace them. People are too sick of politicians’ lies to trust in elections.
The vote for Reform is a response to this pervasive mistrust. It is a cynical vote against the establishment – one that denies the possibility of real, positive change, and instead seeks to punish those in charge for their failures. The issue is that a vote for Reform will not punish the elites who have caused these crises. It will embolden them.
