31st August 2022
Postal workers – part of the growing numbers of workers demanding action on pay
The war in Ukraine has become a convenient shorthand for the cause of the economic crisis currently engulfing the capitalist world. The script suggests that the conflict has seen oil and gas prices soar, putting pressure upon Western economies. Sanctions imposed upon Russia, with Western European nations inviting pressure upon themselves by refusing to take Russian energy, has exacerbated the situation.
The reality however is somewhat different. The surge in oil prices actually began well ahead of the conflict in Ukraine, which started in February 2022. Oil prices however began their surge in April 2020 and have in fact dropped from $130 per barrel in May to $95 per barrel in July. The oil price surge over the past two years has inevitably been paralleled by a commensurate rise in commodity prices, resulting in an increased cost for goods and services. The current cost of living crisis certainly did not begin in February.
The real source of the current economic instability is the United States, where a massive increase in money supply into the economy, coupled with a lack of investment has combined to increase commodity prices. As the Socialist Economic Bulletin (12th August 2022) notes,
“Furthermore, because of the weight of the US in the global economy and especially because most globally traded commodities are denominated in US dollars, then this inevitable surge in prices was bound to have a global impact. This is the source of the current global surge in prices, the period we are still in.”
It is to this extent that the current economic crisis and rampant inflation in Britain can be put down to international factors. The war in Ukraine has certainly exacerbated the situation but it is by no means the root cause. If anything, the US has taken advantage of the reduction in Russian gas supplies to coax European consumers into purchasing liquefied natural gas (LNG), from the United States. This is having a particular impact in Germany, the biggest EU economy, and will tie Western economies even more tightly into the dollar dominated international trade system.
Sanctions against Russia and an increasingly belligerent attitude towards China from the US are increasing the chances of further military conflict, of which Ukraine may just be the precursor, but also of an economic showdown. The Chinese and Russians are already exploring alternatives to the dollar dominated international banking and payments system and it may not be long before dual financial structures are in place.
In Britain the Tory leadership candidates, Rishi Sunak and Liz Truss, give every appearance of equivocating over how to address the issues as they affect the economies of the UK. However, their main concerns are focussed upon cushioning the profits of the energy suppliers and producers, the real purpose of the so called energy cap, rather than reducing the cost of energy to the consumer. To the extent that the Tory leadership hopefuls worry about the impact on working class people it is confined to the threat of losing votes and seats, with a General Election no more than two years away.
The rising tide of working class action in response to the crisis is however helping many join the dots between the super profits of the energy companies, the excessive salaries of Chief Executives in the corporations which dominate the economy, and the mendacious line pedalled by the Bank of England and Tory Ministers that it is the demands of workers for increased wages that fuels inflation.
Given the real life experience of the working class, there is an opportunity for the Labour Party to show decisive leadership and back workers wage demands, articulate a vision for a society not based upon profit and greed, and push the new Prime Minister, from the moment they take office, to drop any plans for tax cuts to the rich in favour of addressing the needs of the poorest in society.
The momentum in the trade union movement is certainly heading this way and is even reflected in positions adopted by the TUC. The Labour leadership has at least come out and backed a freeze on the energy price cap, which is a step in the right direction.
However, while this is one small step for the Labour Party it is not a giant step towards socialism. Across the G7 economies Britain is the only one with predicted negative growth in 2023, has by far the highest rate of inflation in 2022 and is predicted to have the highest inflation rate across the G7 in 2023. Only radical action can change this.
Whatever ‘differences’ the Tory leadership hopefuls profess they remain committed, as does their party, to a low wage economy, reduced public service funding, constrained trade union activity and tax cuts for the rich. The past twelve years of Tory government has seen exactly that and follows the pattern set down by every Tory government in history.
In addition to the price cap freeze Labour needs to reassert its call for the nationalisation of water, energy, mail and transport services, in order to address the needs of communities rather than profiteering shareholders. Pay demands must at least keep pace with inflation, a realistic minimum wage should be established and demands for investment in green infrastructure must be accelerated.
Labour should not be afraid to call for the scrapping of the Trident nuclear programme as unaffordable and unnecessary. An end to weapons supplies to Ukraine and the call for a negotiated end to the conflict must also be a priority if an escalation of the war is not to continue.
As the world is configured international factors will always play a part in determining the economic landscape. That is not to say that national governments have no control, even within a capitalist economy, or that they cannot lay the groundwork towards the transition to a socialist economic model. Whatever the difficulties or obstacles faced, it is at least imperative that the vision of an alternative society is both outlined and fought for. If the current Labour leadership does not have the stomach for such a fight mass pressure from the grass roots must push them in that direction.
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