Hannah Sell, Socialist Party general secretary
The Economist magazine has “built a statistical model to examine the relationship between food-and-fuel-price inflation and political unrest.” It concludes that “many countries can expect to see a doubling of unrest this year.”
Their ‘statistical model of the bleeding obvious’ is attempting to warn the capitalist class of looming trouble ahead. For them, ‘unrest’ means problems for the stability of their system and their ability to make profits.
It is a different story for the millions of workers in Britain paying more than £100 to fill up their petrol tank, watching their electricity and gas prices soar, and scrabbling to buy enough to eat – with pasta costing 50% more than a year ago, bread 16% and rice 15%.
For us, a bit of unrest sounds increasingly like a necessity. That’s why the national RMT rail strikes on 21, 23 and 25 June had such enthusiastic support from the majority of working-class people in Britain.
Real-terms pay has fallen by 3.4% over the last year, so it is a huge relief to see a group of workers stand up and say ‘no further’, launching a fight to defend their jobs, pay and conditions. As a result, others are gaining confidence to follow suit.
The strike has, of course, laid bare Tory prime minister Boris Johnson’s lie that he stands for levelling up wages. On the contrary, his government is determined to hold all our wages down, making working-class people pay for the economic and Covid crises.
Johnson has raised the spectre of a ‘1970s-style wage-price spiral’ if workers refuse to just suck up the misery on offer under his government. As RMT general secretary Mick Lynch has correctly responded, what we are witnessing is the opposite: prices are spiralling, while wages fail to keep up.
And it is a false argument that giving workers decent pay rises automatically leads to price rises, thereby creating a ‘spiral’. Unite the Union published a report which shows that in Britain the profits of the biggest 350 listed companies were 73% higher in 2021 than pre-pandemic levels in 2019. Even removing energy companies from the list, profits were up 52%.
There is nothing to stop these companies raising wages without increasing prices by a single penny, if they took the money out of their own very fat bank accounts. And in reality, of course, the bosses always increase prices to the maximum they can get away with and still find a market to sell their products, regardless of what they are paying their workers.
When ‘prestige’ brands like Nike or Apple move production to a lower-wage economy, they don’t lower their prices one penny, provided workers in the West are still prepared to pay for the brand name.
What do socialists say?
But what are the causes of the current problems in the world, and particularly the British, economy? And what solutions do socialists put forward?
Capitalism is a chaotic, unplanned system, based on the private ownership by a tiny minority – the capitalist class – of industry, banks, science and technique. It is driven not by any rational plan, but by the thirst for profit of this tiny minority.
Ultimately, that profit stems from the exploitation of the working class. Precisely because it is based not on rational planning but an anarchic competition for profit, capitalism has always been cyclical, with periodic recessions. But today it is an increasingly ailing system, with more frequent crises and weaker recoveries.
The current surge in inflation has a number of causes, including the huge sums pumped into the economy by governments to prevent economic disaster during the pandemic, the inevitable spike in demand following economies reopening, the disruption of global supply chains caused by Covid measures, and now the war in Ukraine, and more generally, the increased global tensions between the major powers.
The global increase in energy prices, which has fed through into the prices of other commodities, is an important factor. This in itself has multiple causes.
The Russian invasion of Ukraine has triggered further rises, coming on top of the increases flowing from the surge in demand for energy when economies first reopened, as Covid restrictions were lifted.
Lying behind those immediate causes is the failure of the major energy companies to invest – above all in clean energy – over decades and, of course, their profiteering. For example, in Britain, around 50% of gas comes from the North Sea, but the increased costs to consumers in Britain are just as high as in countries like Germany that are more reliant on Russia.
These are global factors, but inflation in Britain is the highest of the G7 economically developed capitalist countries. One main reason for that is the drop in the value of sterling, making all imported goods more expensive.
As David Smith put it in the traditionally Tory-supporting Sunday Times, sterling has become a “no-mates currency”, having suffered a slump “the biggest of any big currency in the floating-rate era.” He points to various reasons, summed up as “global investors do not like what they see of the UK economy or British politics”.
Recent OECD figures showed that Britain is on the brink of recession and forecast zero growth this year, behind every economically developed country, except Russia. And the markets – interested only in where they can make the biggest profit – can see that.
In addition, Smith points out: “Breaking international law in a way that threatens a trade war with your biggest trading partners – to shore up a deeply flawed leader – is a ‘sell’ signal.” In other words, he puts a large part of the blame for sterling’s slide at the feet of Johnson and his hangers-on, who the international finance markets judge as unreliable.
However, the incompetent corrupt character of the Johnson government is not an accident. Ultimately, it reflects the ailing character of British capitalism.
Brutal and blind
Capitalism is not healthy anywhere. In its early days – despite the inevitable periodic crises, its brutal exploitation and blind, unplanned character – capitalism nonetheless took society forward. The drive to maximise their profits pushed the capitalists to invest in the development of the productive forces, of science and technique.
Today the progressive side of this basic driving force of capitalism has rotted away. In Britain, where capitalism first developed, it is particularly sick.
For example, if you take the US’s five biggest firms, three were founded after 1990, and the others in the 1970s. Four have valuations in the trillions. By contrast, the average age of the five biggest companies based in Britain is 135 years old. None is worth over $250 billion.
Levels of investment are extremely low. The journals of British capitalism are forced to reflect on the sickness of their system.
The Financial Times, for example, bemoaned the lack of investment, declaring: “It is difficult to overestimate the lack of UK capital expenditure growth, compared with the wider economy, its historical trend or other countries.” Meanwhile, for the Economist magazine, Britain was “stuck in a rut and has become the stagnation nation.”
British capitalism decline
Over decades, declining British capitalism has turned away from concentrating on manufacturing, with it now making up less than 10% of the economy, lower any other G7 country. Most of the goods we buy are therefore imported, and get more expensive when sterling falls.
The economy is instead highly dependent on finance and services, but its declining even in those fields! In 15 years, the London Stock Exchange’s share of global equity values has fallen from 8.5% to 3.6%.
The particular weakness of British capitalism leaves it very limited room to manoeuvre in the current crisis. A country with stronger manufacturing might at least be able to take advantage of the fall in sterling to increase exports.
So far that is not the case, however. This year’s first-quarter figures showed exports of food and drink to the EU were down 17% on pre-Covid levels. Exports to other countries increased marginally, but not enough to offset the decrease to the EU.
The Covid-related huge increase in government debt levels – now the highest since the early 1960s – is not peculiar to Britain. However, the particular weaknesses of British capitalism mean that there is a real danger that the debts could become a serious problem, if the markets decide that Britain is a basket case and act accordingly, demanding higher interest rate payments on British government debt.
And the gigantic levels of overall debt – corporate and personal, as well as state – mean that even small increases in interest rates could lead to widespread bankruptcy for businesses and people if they can’t service their debts. Last year, more than 20% of UK businesses were ‘zombies’ – only able to pay the interest on their debts when interest rates were at rock bottom.
The prospect of small rises, by historical standards, in interest rates leading to a deep recession is very real. Nonetheless, to try and tackle inflation, the Bank of England is compelled to start to raise rates.
None of these problems for British capitalism mean that the capitalist elite – including member of the rich list, Tory chancellor Rishi Sunak – is struggling. On the contrary, if the health of capitalism was only measured by the health of the richest, it would be considered in its prime!
In Britain, the average pay of the chief executives of the 100 biggest companies on the London stock market is up from 47 times that of the average worker in 1998 to 145 times today. During 2020 alone, when the Covid pandemic was at its height, the wealth of Britain’s billionaires increased by a fifth.
It does mean, however, that unless the workers’ movement follows the lead given by the RMT, and launches a serious struggle of coordinated strikes to defend our pay and conditions, the capitalist class will make us pay for the multiple crises in their system.
For decades British capitalism’s ‘solution’ to its problems has been to drive down our wages in a ‘race to the bottom’. If they could get away with it, however, the fall in living standards we are facing now would be worse than what has come before. However, it is already clear that millions of workers will not accept this, and are determined to fight back.
It also sharply poses the need to fight for an alternative to this rotten, failing system in Britain and worldwide. Capitalism and its blind, unplanned profiteering don’t work.
That is why we fight for the nationalisation of the major monopolies and banks that dominate the economy, with compensation paid only on the basis of proven need. This would lay the basis for the development of a democratic socialist plan of production, harnessing science and technique to meet the needs of humanity while protecting the planet.
Such a socialist plan would create the basis to transform people’s existence. The basics of a civilised life – a decent income, an affordable and secure home, time for leisure – would quickly be guaranteed for all.
Fighting for socialism, and even taking steps in that direction, requires the working class having a political voice – our own party – alongside fighting back industrially. To give one example, the case to nationalise our rail system under democratic workers’ control is crystal clear. It would allow all rail workers pay, jobs and conditions to be guaranteed, but also the provision of cheap, or better still free, rail travel for all as part of a serious plan of action on climate change.
Clearly, however, Keir Starmer’s pro-capitalist Labour has no intention of taking such radical measures, and will not even support the RMT strike action. Therefore, the need for the trade union movement to start to build its own party is an essential part of the struggle against the crisis and chaos of capitalism.