The tractors arrived in Washington in February of 1979. Comprising three thousand farmers from around the country, the “Tractorcade” eventually converged on the Federal Reserve to protest rising interest rates, which would reach a high of 21 percent in the early 1980s and cause the foreclosure of thousands of family farms. The Fed’s rate hikes, designed to bring down inflation, would also spark two recessions, unleash the worst unemployment since the Great Depression, and help decimate the labor movement and elevate the financial industry. But inflation did eventually fall.

Despite the carnage, Fed Chair Paul Volcker’s policy is widely admired by economists across the political spectrum and set the terms for current chair Jerome Powell’s approach to rising prices today. The “success” of the “Volcker shock” set in place an understanding of inflation as a technical problem to be solved by expert manipulation of a single economic lever.

Both today’s inflation, peaking at 9.1 percent in June 2022 but down to 3.3 percent this May, and the response—the Fed has raised interest rates above 5 percent, but is expected to begin lowering them later this year—pale in comparison to those of the 1970s and ’80s. But the consequences have been serious, especially for poorer Americans. One analysis found that the cost to feed a family of four on a modest budget increased 50 percent from January 2020 to January 2024—2.5 times the rate of overall inflation. For lower-income families and individuals, who carry more credit-card and student debt and are more likely to rely on financing to make home and car purchases, the “cure” of rising interest rates exacerbates the disease of inflation. 

Meanwhile, though rising interest rates should, in theory, push asset prices down, richer and older Americans have seen their stock portfolios and home values continue to rise. Locked into low interest rates, homeowners have kept their houses off the market, further constricting supply. High interest rates effectively shut lower-income Americans out of the housing market, but also lead to higher rents by increasing demand and discouraging construction.

Rate hikes don’t just widen inequality and inflict economic pain on those who are already suffering; they also misconstrue inflation as a problem of high demand and a tight labor market. The evidence suggests that inflation is primarily an effect of pandemic supply-chain shocks and an underlying concentration of economic power that enabled corporations to raise prices without fear of competition. Corporate profits accounted for over 50 percent of inflation from 2020 to 2021, compared to a historical norm of 11 percent.

To their credit, the Biden administration’s executive agencies have taken steps to address predatory pricing, price-fixing, and monopolies. The Federal Trade Commission (FTC), for example, recently filed a complaint alleging that an American oil executive had conspired with OPEC and other industry executives to constrict production and raise prices during the pandemic. One analyst estimates that this single price-fixing scheme was responsible for over a quarter of inflation in the industry in 2021. Meanwhile, in a recently filed lawsuit, the Justice Department alleges that an analytics firm illegally compiled and shared sensitive information among poultry processors, enabling them to conspire to raise prices and constrict supply. A few conglomerates control vast swathes of the meat and poultry industry, which accounted for half of grocery-price inflation. During the pandemic, their profits rose by 300 percent. Similar “algorithmic price-fixing,” where firms pool data and coordinate prices through an “independent” algorithm provider, has been alleged in the airline, hotel, pharmaceutical, and rental industries.

New technology also offers consolidated industries new opportunities to bilk consumers on an individual level. A report from the American Prospect details the strategies companies are using to tailor prices to individuals based on data about their location, income, and consumption behavior. The McDonald’s app, for example, is run by a company that advertises its ability to use precise user data, including when customers get paid, to predict and exploit their “price sensitivity.” Uber has similarly been accused of using riders’ phone battery levels to fine-tune prices. The FTC has targeted data brokers to prevent this “surveillance pricing,” but new data and price-gouging laws are needed to empower regulators.

President Biden has also announced a “Strike Force on Unfair and Illegal Pricing,” proposed new rules to crack down on junk fees, and floated corporate-tax increases. But, given the scale of the problem, the administration’s tools have been too limited in scope and too slow to take effect. Biden has struggled to find effective messaging on inflation amid public dissatisfaction with his handling of the economy. What’s missing is a broader narrative that connects high prices to fundamental imbalances in economic and political power. 

Although the Tractorcade farmers were able to secure a meeting with Fed officials in 1979, their protests had no effect. As one farmer put it, “I’ve learned you can’t play a basketball game in a football field.” Then, as now, the Fed saw inflation as a technical problem beyond the competence of ordinary citizens and their elected representatives. But the problem with our politicians is not one of competence but of courage. Until more of them stand up to the corporate interests that have caused and profited from the current cost-of-living crisis, no amount of tinkering with interest rates will solve the underlying problem.