By the Editorial Board
Last week, the Bureau of Labor Statistics released the latest Consumer Price Index (CPI) numbers for January, which show a 7.5% increase in prices across the board when compared to January 2020, the largest increase since February 1982. While the politicians and capitalist economists are generally blaming the pandemic for high prices, the ultimate responsibility lies in the economic crisis, the subsequent intervention from the imperialist State in the economy, and the imperialist monopolies who take advantage of the crisis. Now, once again, the working class is being forced to bear the burden of the economic crisis, with the price of essential goods like groceries and gasoline continuing to climb as wages fall behind.
The imperialist monopolies have made trillions through the economic crisis, while it’s been our class which has struggled to feed our families and keep a roof over our heads as wages continue to stagnate and the cost of living increases. Working mothers have been fired or reprimanded for missing work to care for their children while at the same time being mainly responsible for trying to stretch every dollar to fill their fridges. While increasing the misery of the people, the situation will also bring deeper disillusionment with the failing imperialist system and in turn breed greater resistance, as has already been seen in the US and around the world.
Crisis and Inflation
Since December 2020, gas prices have increased nearly 50%, energy prices have increased 29.3%, and meat and egg prices have increased 12.5%, with nearly all other consumer goods tracked across the economy seeing increases as well. Inflation has been even worse than expected by capitalist economists (7% as of December and rising), and is likely to get worse and spread throughout various sectors of the economy—as a point of comparison, inflation was only 1.8% during 2019. The rising cost of living means suffering for the people and the working class: evictions, lack of basic necessities, and stagnating wages. As the proletariat (the working class) fights to make ends meet, huge monopolies like Pfizer, British Petroleum, and Amazon are seeing record-breaking profits as others like Tyson Foods and Procter & Gamble see large increases in profits and profit margins.
Inflation can be understood as a general increase in the price of goods, which means that the dollar has lost value, so consumers get fewer goods for every US dollar than they did last year. Inflation is generally tied to the growth of the economy and the money supply, especially interest rates—the capitalist logic is that with lower interest rates, it is easier for people to borrow money and spend it, thus stimulating growth in the economy and increasing demand in relation to supply, which causes prices to increase. A moderate annual inflation rate, usually around 2%, is considered by the capitalists to be a sign of healthy growth in an economy, but when it gets too high it begins to disrupt spending as people are unable to afford what they once could. When people spend less, supply outstrips demand and causes prices to fall, a major factor leading to economic crises, depressions, and recessions.
The ruling class has used the pandemic and the State’s COVID relief programs as a scapegoat for inflation, blaming the cost of raw materials, labor, and supply chain issues for the price increases. This mirrors the way they blamed the start of the economic crisis in early 2020 on COVID. At that time, the ruling class diverted attention from falling prices and other economic indications of an impending depression, using the pandemic’s spread and the first wave of shutdowns as an excuse for the massive contraction of the economy. While the pandemic did have direct effects on employment, supply and demand, and the supply chain, it only aggravated the already existing issues, based in the irreconcilable contradictions of the imperialist system.
The economic crisis should be understood as one of relative overproduction, in which more is produced than can be sold profitably. Technological advances cause production to expand with fewer workers to exploit, and the competition between capitalists compels them to produce more than their competitors and sell for a lower price, causing the rate of profit to fall. Production increases faster than workers’ wages, and this means that as more and more goods are produced, the people are unable to buy them, putting further downward pressure on prices. As prices continue to fall, the economy crashes, and this cycle repeats itself every ten years or so because it is not based on mistakes or freak accidents, but on the inherent problems of capitalism and the way it functions.
The crisis became much more dramatic as the pandemic forced many producers to shut down, with the large monopolies swallowing up smaller producers and expanding their share of the market. In order to recover prices, these monopolies constrict production generally and reduced production of less-popular products in favor of their best-selling ones. At the same time, the imperialist State stepped in to aid the monopoly corporations, with the Federal Reserve stimulating lending and borrowing by reducing interest rates as low as possible, buying US debt securities, lowering the amount of cash that banks are required to hold in reserves, and directly lending to corporations at low interest rates. The State’s measures stimulated lending and borrowing and injecting more money into the economy; the capitalists’ shutdown, as well as the laying off of workers, decreased the supply of goods available, reversing the relative balance between supply and demand, raising prices from unprofitable levels.
Many of these tactics had already been used in the recovery from the 2008 economic crisis, and show the growing preference of large monopolies to utilize the State to intervene in the economy, especially in times of crisis. The State and the monopoly capitalists it serves have achieved their goal of raising prices, so much so that inflation is now causing its own problems—in short, they pushed the pendulum too far in the other direction and are now trying once again to shift the balance in the economy by increasing federal interest rates. All of these problems demonstrate that the imperialist State is experiencing increasing difficulty in trying to control and stabilize the economy.
As US imperialism continues to decay and the rate of profit continues to decline around the world, the cyclical economic crises become deeper and more severe, and the recovery process becomes more difficult. This is exactly why US imperialism is finding itself in a position where the State must intervene in order to ‘rescue’ the economy from imploding.
The Role of Monopolies
Apart from monetary policy, another factor also should not be overlooked as a cause for rising prices: the control of imperialist monopolies and their drive for profits. Imperialism is the highest stage of capitalism—it is characterized by monopolies: that is, massive capitalist corporations that dominate the economic life of the people. These imperialist monopolies are parasitic by nature—they feed on the exploitation of workers around the world, raw materials from the Third World, and control of the markets. The considerable power they wield allows the imperialists to control the production of everything society needs, from the harvesting of raw materials to selling the finished product, including setting prices. Even liberal bourgeois (i.e., capitalist) economists like Robert Reich, secretary of labor under Bill Clinton, have highlighted the role of monopolies in raising prices while raking in record profits.
Of course, Reich’s solution is to ask the imperialist State to increase regulations on the monopolies—the very same monopolies that the US government answers to, depends on, and handpicks appointed representatives from in order to fill top cabinet positions. Reich says that the problem of the monopolies’ high prices can only be addressed through one means: “the aggressive use of antitrust laws to bust up monopolies.” The US has some history of enacting anti-trust laws in order to break up monopolies, but here we sit with massive monopolies continuing to run the economy and dictate the terms of our survival.
Reich and liberals like him ignore the inherent contradictions in capitalism to avoid the inevitable conclusion: only a complete revolution to smash the existing system can create a society not at the mercy of cyclical economic crisis and inherent dysfunction.
Just as with the economic crisis, the imperialists make the working class carry the weight of the decaying economic system by making us pay more for everyday goods even though we still receive the same paychecks we were scraping by on last year. Throughout the past year especially, workers have been going on strike and fighting for higher pay and better conditions, but unless you’ve received an 8% raise in the past year, you are falling behind as the real purchasing power of those wages declines. Capitalist economists are predicting that the problem will get worse before it gets better. Workers need to demand that their wages increase along with inflation at a minimum, otherwise any gains made in the labor struggle will be quickly lost to the rising cost of living.
The working class must make the battle for their daily needs part of the fight for something much greater: the total overthrow of this system which can only answer each crisis with another crisis. The imperialist system is on life support—it is the working class, through building the organization that can lead revolution, who will pull the plug on it.
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