In the News April 19

Economic Matters of Concern

Discussion on Increase in Price of Necessities

Economist David Macdonald of the Canadian Centre for Policy Alternatives suggests that the recent surge in price inflation arises in part from a similar recent surge in corporate profits. He disputes some of the mainstream narrative of reasons behind the rise in prices of gasoline, vehicles, housing and food. He suggests a correlation between prices and profits with global cartels using their dominant position in the economy to force prices higher resulting in higher profits.

Macdonald writes, “Both the increases in the price of gasoline and vehicles are often ascribed to international supply shocks, such as the high price of oil and the chip shortage for auto manufacturers. Higher food prices, and particularly meat prices, are often explained by higher input costs due to the 2021 drought in the Prairies.

“But scratch the surface and there is more at play right now. The meat packing industry was hit with a class action lawsuit alleging four companies that control 85 per cent of that industry colluded to increase prices and profits. Incidentally Cargill, one of those named, saw record profits in 2021, in part due to surging beef prices.”

No apparent reason points to why gasoline prices should have risen so much and so rapidly, especially in the U.S. and Canada. No supply or other problems such as a significant change in the price of production have arisen in those two countries. Even in Europe the supply of oil and natural gas from Russia has as yet not been greatly disrupted. According to Russia, it has no intention of doing so as long as European buyers properly pay for the commodities they receive.

U.S./NATO sanctions on Russia are hampering its ability to receive payment from the sale of its commodities. If this continues or becomes worse, it would prevent Russia from continuing to supply Europe with energy and other products including food. European countries will have to defy the U.S./NATO sanctions for imports of Russian commodities to continue. A few countries such as Hungary and Armenia have already decided to defy the sanctions and many in larger countries are demanding their governments do the same and not bow down to U.S./NATO pressure.

The U.S./NATO proxy war against Russia has provided energy cartels with excuses to raise prices, which is translating into higher profits. The U.S./NATO proxy war against Russia using Ukrainians as cannon fodder has also provided impetus to the military/industrial/financial cartels to increase guaranteed military sales to government buyers and for public authorities to borrow money from private moneylenders. U.S. military sales have also increased to vassals within its imperialist system of states including Canada, Europe, south Korea, Japan, Taiwan, the Philippines and elsewhere. The U.S. ruling elite are preparing wider wars to crush all competitors and any who seek to free themselves from the grip and exploitation of U.S. imperialist global hegemony.

David Macdonald presents an important aspect of the problem of higher prices as emerging from an economy under the control of global cartels, which manipulate it in their favour. They are using the pandemic to increase their expropriation of the value workers produce and are doing the same with the U.S./NATO proxy war in Europe.

The immense profits for the cartels arise from the new value workers produce in the various sectors of the economy. The expropriation of profit from the new value exists in contradiction with the claims of the working people who produce the value in the first place, and from governments which claim a certain amount. Higher prices for necessities, the means of living for working people, effectively lower their claim on the new value they produce. Price inflation presents the necessity for an increased battle at the workplace for higher wages and in society for increased funding for social programs.

Higher prices do not necessarily change the amount of new value workers produce but do change its representation in money and distribution. More in profits results in less of the new value that workers produce going to them directly in wages and less going to people generally in social programs. Without working people organizing a determined battle to defend their rights and claims, the situation will worsen and result in a fall in the standard of living.

General price inflation without wages and social programs keeping up also works in favour of investors in large projects as their initial investment shrinks in relation to its current value in money. The owners of a project can even sell their project for greater than what they invested in the first place, adding yet another dimension to their profit. Working people can combat this theft of the new value they have produced by fighting for increases in both wages and funding for social programs.

Deflation has the opposite effect to inflation and lowers the rate of return or profit on a project. This is one reason why central banks and others in the ruling elite in imperialist economies aim for at least two per cent inflation and cringe at the prospect of deflation.

Deflation should be the norm in a modern economy because prices should fall as worker productivity increases through the application of science and technology to the production process, allowing for a constant increase in the standard of living, better working conditions and less necessary working time for the people. The ruling elite do everything in their power to avoid deflation as they want to seize the benefits from productivity for themselves.

Working people in the immediate sense have to organize to defend their direct claim on the value they produce as wages and their indirect claim in the form of social programs. This entails not only class struggle at work to defend the price they receive from the sale of their capacity to work and to defend their working conditions, but the development of mass movements in opposition to the self-serving manipulation of prices by global cartels and for governments to Stop Paying the Rich and Increase Funding for Social Programs.

In the long term, working people have to set an aim to take over control of the total value they produce and decide among themselves how it should be distributed. This means developing the movement for democratic renewal, which entails wresting control of economic and political affairs away from the global oligarchy and putting it into the hands of the actual producers.

For the Macdonald article click here.

Workers’ Forum, posted April 19, 2022.

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