Inflation is now running at 17% and is expected to top 20% by the end of the year. For the government, of course, the chief cause of inflation is "excessive wage demands" and public spending. "We have to live within our means", Thatcher says. But do wage demands cause inflation? Below, Pete Marais examines the real causes of inflation and how working people can safeguard themselves against it.
The inflation gripping Britain today - and most Western capitalist countries - stems from the end of the "post-war boom" period. Building on the ashes of the war. and using the complex technology developed during the war years. inaustry expanaed More and more workers were hired. Wages increased and - in Britain - many workers were able to afford cars, houses and other consumer products considered a "luxury" in the pre-war years.
But capitalism cannot expand indefinitely without leading to a crisis. As each industry manufactures and sells more goods, markets inevitably become "saturated". There aren't enough customers. Industry slows down production. Workers are fired. In turn, their purchasing power declines, cutting sales back even more. The economy slumps into depression.
DEFICIT SPENDING Inflation is a direct result of this over-production crisis of capitalism on a world scale. The 1930s taught the capitalist rulers that they cannot afford to let a world "downturn" reach its natural limits. They cannot afford to impose massive "trade barriers" which promote bankruptcies and growing lines of unemployed.
These crisis conditions only serve, they learnt to their cost, to provoke a mass working class upsurge as happened in the 30s when socialist revolution was on the agenda in many European countries.
In order to prevent a recurrence of such dangerous trends, capitalist governments have resorted more and more to "deficit spending" to offset these recessions. What this means, in concrete terms, is that they spend more money than they take in in taxes.
INFLATION Over the past 8 years, for example, government hand-outs to private industry have soared from a mere £21 millions a year to a colossal £8 billions. The deficit spending to "aid" ailing companies -promote arms manufacture - is financed by the creation of new money in a central bank.
As the government pours out money to keep alive "ailing" firms, new money is poured into the system by the banks. The end result is that even when companies have overproduced and find they can't during that period has soared by a colossal 56%, we can see that in real purchasing terms our standard of living has actually declined by 3%.
CUTBACKS Would it therefore be correct of workers in Britain to support the Thatcher government's decision to it be correct to accept Thatcher's inflation is by the government spending only what it receives in and to taxes and eliminating deficit spending?
ary policies would be suicidal. In of the right-wing Tories will only lead to a mass destruction of education and other social services are peeled away.
to mass unemployment as thousands of workers employed in the public sector are pushed out onto on demand, would only serve to slow down industry and lead to unemployment in other sectors of the economy as goods can't find y customers. governments - the only two solumines living standards unemployment as part of a generalised recession. we consider, however, that inflation cut back the social services? Would argument that the only way to stop To support Thatcher's detlationthe first place, the "fiscal" policies workers living standards as health, held.
In the second case, they will lead the dole. Such a move, cutting back For Thatcher - and all capitalist tions they can offer working people are either inflation - which under— or mass SPUC.
socialists should fight clearly for an end to arms expenditure which eats up a vast proportion of government revenue. Instead of cutting back on movement should fight to slash the A bold public works programme sands of skilled workers at present working people should fight to gain protection against inflation. Unions should campaign to have automatic increases to keep pace with the cost supermarkets and shopping centres.
Moreover, cost of living clauses