A report by Bank of England governor Mervyn King on the future of the economy seems to have started a run on the pound.
So we can take it that the news isn’t good for the bosses.
We know it isn’t good for us: unemployment up, inflation up, repossessions up…
A crisis that’s made in Britain
Communist Party general secretary Robert Griffiths analyses the economic crisis in Saturday’s Morning Star
The recession starting to hit workers.
AS Britain’s economic growth ground to a halt in the second quarter of 2008, Establishment pundits and politicians became obsessed with official figures and targets.
Can the consumer price index be brought down nearer to the government and Bank of England’s inflation target of 2 per cent?
Will gross domestic growth figures for the next two quarters reveal that economic activity in Britain is actually shrinking and that the economy is therefore technically in recession?
The labour movement and the left should not be sucked into this superficial charade. For millions of people, the recession is already well and truly under way.
We are witnessing the biggest onslaught on working-class living standards since the early days of the Thatcher regime nearly 30 years ago.
Unemployment is rising faster than any time since the late 1970s. The official figure stands just shy of one million, but the real figure is nearly double that. The merciless drive to force the long-term sick and incapacitated off benefits and into low-paid work or destitution will increase the misery, while disguising the full extent of further rises in unemployment.
Pay is increasing by no more than 2.5 per cent a year in the public sector and no more than 3.5 per cent in the private sector. The national minimum wage and state pensions and benefits are lashed to the consumer price index.
Meanwhile, food prices are on average 14 per cent higher than this time last year, the biggest jump since 1980. Basic foodstuffs such as bread, potatoes, chicken, eggs, margarine and butter have all shot up in price by between one-third and a half. Motor fuel is up by a quarter.
Domestic gas prices have gone up by one-third so far this year and electricity by one-quarter. That’s 10 times more than any increase in wages, pensions and benefits.
The real annual rate of inflation for many people in Britain is at least 30 per cent.
Yet the government, the mass media and the Bank of England tell us that, according to the consumer price index, the cost of living is only growing at 4.4 per cent a year. Even the retail price index, which includes housing costs, puts it at a mere 5 per cent.
Why such a huge discrepancy between the fantasy world of government, business and media statisticians, on the one side, and the real world of working class and some middle-class people on the other?
The official indices consider yearly price changes for a “basket” of household expenditure items, each item given different weight according to its prominence in the typical household budget.
According to the latest CPI presumptions, the “typical” household in Britain spends just 10 per cent of its outgoings on food, 3 per cent on gas and electricity and 4 per cent on motor fuel. These are the areas where most of the biggest increases have taken place – but their impact in the “typical” CPI household has, not surprisingly, been negligible.
Mr and Mrs CPI, on the other hand, are keen to buy the newest car and audio visual equipment, go to the opera, eat out frequently and pay young Jemima and Jocelyn’s school fees. So they spend 5 per cent on vehicle purchases, 14 per cent on culture and recreation (excluding pubs and clubs), 2 per cent on education and 11 per cent in restaurants and cafes (but not canteens).
These are areas where many of the smallest price increases have occurred over the past 12 months compared with previously. So, hey presto, the cost of living in Britain has only gone up by 4.4 per cent.
Either government ministers know the extent of this deception, in which case they are fraudsters, or they do not, in which case they are ignorant fools who cannot begin to represent the interests of workers and their families.
The reality is that new Labour primarily represents the interests of big business. This government has orchestrated an Indian summer for the spivs, swindlers and speculators.
Whether in the City, oil, gas, electricity, water or supermarket retailing, the transnational corporations have been permitted, indeed actively encouraged, to make monopoly super-profits.
The kind of creature who flourishes under new Labour is not the hospital worker, the engineer, the carer nor even the small shopkeeper.
Step forward Crispin Odey, senior partner at hedge fund Odey Asset Management.
He has had a successful year trading in food commodity contracts, with no interest in providing food to anyone, and “borrowing” building society shares to sell and then buy back at a profit in a falling market, “shorting” in City jargon.
For performing such socially useful work, he has just helped himself to £28 million in fees and salary.
However, the boardroom chiefs at Britain’s banks do not have the competence to match their greed. They are turning last year’s record profits into this year’s losses, as the sky darkens with chickens coming home to roost.
Not even £100 billion of public money – or £150 billion, if they have their way – will save them all from a “credit crunch” largely of their own making.
Maintaining demand in the economy through private and public-sector borrowing was never going to create Gordon Brown’s “new economic paradigm,” abolishing the fundamental capitalist law of boom and bust.
This policy postponed a periodic crisis of overproduction, when capitalism can no longer sell all or even most of its goods and services at a profit. But it did so in a way which makes the recession all the sharper when it comes, because spending power based on credit collapses more quickly.
At the same time, the banks strive to maintain high interest rates to shore up their income, corporations which had borrowed for expansion seek to maintain high prices to meet their interest payments and a government which refuses to tax the rich and big business has to tax the rest of us and squeeze public-sector pay.
So, economic demand continues to fall and unemployment increases, while interest rates and prices remain relatively high – a repetition of the “stagflation” of the early 1980s.
Although international factors have exacerbated this crisis of the British economy, they did not create it. New Labour’s culpability is far greater, having also allowed manufacturing industry to decline as Britain became overdependent on the financial sector.
Only a left-wing programme can mitigate this crisis in the interests of the working class.
Price controls need to be imposed on household fuel, petrol and basic foodstuffs. A windfall tax on the energy and retail monopoly profits would boost public investment – for example, in council housing and solar panelling – and employment, without adding to the government’s net borrowing deficit, which soared to a record £24 billion last quarter.
Taking gas, electricity and railways out of the hands of profiteering extortionists would be more popular today than it was in the late 1940s.
We need unions to lead a big wages offensive for increases which meet the real rate of inflation. The TUC should demand negotiating rights on the national minimum wage, as the labour movement and the left join campaigning organisations in a fight for higher pensions and benefits and the return of subsistence grants.
Finally, the ideological battle must be waged with greater clarity and vigour.
The “free market” is dominated by monopolies who rig it in order to maximise their profits. It is a market which sucks in huge sums of public money in loans, subsidies and contracts, including the private finance initiative, as a vital source of shareholder profit.
And capitalism remains a system of insecurity, periodic crisis and mass unemployment based on exploitation, oppression and inequality.