Inflation, the upward spiral of prices of goods and services, is presented as an unstoppable force of nature. It is nothing of the kind. Instead it is the product of the chaotic and uncontrolled nature of free market capitalism. Inflation can be triggered in many ways.
These include capitalists’ reactions to sudden shortages of basic raw materials and a rise in the number of bosses using cheap debt to keep failing companies afloat. The spiral can also begin when governments print more money to hand to banks and firms in a bid to stave off recession. That cash can then flood into speculative markets, such as property.
All of these factors are at work in the present crisis. First Covid and then the war in Ukraine have helped break global supply chains for raw materials. As countries across the world began to fully reopen their economies after Covid lockdowns demand for oil and gas rose tenfold.
Producers keen to take advantage of the price rises that followed largely refused to increase the flow of fuel. Wholesale companies also used shortages as an excuse for profiteering. They bumped up their petrol and gas prices to grab as much profit as possible. By the end of this year oil companies are expected to hand over £60 billion to shareholders.
In a system built on fossil fuels rising prices will impact the production and distribution of almost every product on the market. This will lead to a price spiral. Firms that can will pass increased costs on to their customers in a bid to maintain profits.
But some, particularly those firms whose customers cannot afford the higher prices, will be forced out of business. Capitalism uses markets to ensure that the people that suffer the burden of rising prices are workers and the poor—not the bosses. Supermarkets raising the price of goods—especially on the cheapest “basics” ranges—will mean than many will go hungry.
A few hundred pounds extra a month for food is nothing to chancellor Rishi Sunak—he’d happily spend that on a single meal out. There is, however, a political price for the Tories as the inflation spiral continues. Even many right wing newspapers have criticised Sunak’s spring statement for failing to help those hit hardest by the economic crisis.
But the right’s solution to rising inflation is to allow to let rip the free market. That means ending safety restrictions to allow cheaper food to be produced. And, though they will never admit it, it means making workers pay for the crisis by allowing benefits and wages to be devalued by inflation.
Instead, the government should use its power to impose price controls on all essential goods. Trade unions should combine their demands for pay rises of at least inflation with demands for government action on prices. That would help people on benefits and pensions withstand the tide of price rises.
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