- "Inflation is here big time" - Charles
Holliday CEO, Du Pont. June 24, 2008
-
- "The sustained rise in the price of oil and commodities
has hammered industriesand deepened fears of global inflationary spiral
which has already provoked riots across Asia as producers pass
on higher costs to manufacturers and consumers." - The Financial
Times June 25, 2008. page 1
-
- Inflation and all of its repercussions for wage and salaried
workers, fixed income middle classes, as well as manufacturers and transport
industries is splashed all over the financial pages of the major newspapers
throughout the world. Inflation is the great solvent that dissolves paternalistic
ties between employers and workers, landowners and peasants, clientele-patronage
regimes and the urban poor and sets in motion violent protests against
private property and previously popularly elected regimes. Historical
religious, clan, party, ethnic, tribal, caste and other differences are
temporarily suspended, as Hindus and Moslems in India, Communists and Christians
in the Philippines, peasants and workers in China, industrial workers and
public employees in Egypt, blacks and mulattos in Haitijoin together in
sustained mass protests against inflation which profoundly and visibly
erodes their living standards from week to week, in some cases from one
day to another.
-
- But the left, the Anglo-American left? Where
and what do our most prominent public intellectuals, including those with
booking agents charging five-digit lecture fees, have to say about this
world-wide revolt? Nary a word is found in left, center-left magazines,
web sites and blogs. During their lucrative lectures, they thunder against
the immoralities of war and climate change. They hurl imprecations against
rulers and exploiters and their immoralities, and the bellicose interests
they represent (with special exemption of the ubiquitous Zionist Power
configuration). Yet there is hardly a mention of the purveyors of the
global cancer which is literally eating away the bread of everyday life
of billions of people. They talk of a 'peace movement', (which has disappeared);
of one or another dissident electoral candidate; and reminisce over youth
revolts 50 years ago. But like the intellectuals who sipped their wine
while the revolting masses headed for the Bastille, they are at best irrelevant,
unblinking spectators to the greatest turmoil of the new millennium.
-
- The targeted capitalists and their regimes
and the downwardly mobile middle classes and the masses facing destitution
are much more aware of the centrality of inflation to their profits, living
standards and everyday life and the threats of popular upheavals. The
Anglo-American left, in all of its variants, is destined once again to
irrelevance in the face of world-historic challenges and opportunities.
This contrasts with the intense preoccupation of the capitalist class
with inflation. It is the central topic of weekly meeting of central bankers
the world over. Empty resolutions are approved at the monthly conferences
convoked by international financial institutions. Almost daily there are
pronouncements by finance and economic ministers. Yet the complacent indifference
of our intellectuals is striking.
-
- To awaken from intellectual stupor and political
irrelevance in the face of the mass revolt against inflation, it is necessary
for the Anglo-American left to come to grips with the scope, depth and
significance of accelerating inflation in our times. Inflation is pre-eminently
a political phenomenon in every sense of the word: it is a product of
public policies which deeply affect markets, supply and demand, consumers,
producers and speculators. Inflation is the detonator of mass political
action and offers historic opportunities for broad-based 'regime transformation'
and even revolutions in a way similar to the way the destructive imperial
wars have in the past. Like wars, inflation devastates vast sectors of
society, puts them all in common deteriorating positions and projects their
worst nightmare a regression into the abyss of mass destitution.
-
- The Centrality of Inflation
-
- The most threatening challenge to contemporary
imperial regimes and their client nations is out of control inflation and
a raging rise in food prices. Writers on the Left who write of the end
of empire and focus on the financial crises (in the US), or the energy
crises (in Europe), or the grievance of mass peasant protests over corruption
in China, have overlooked the one grievance which cuts across all regimes
of the world (with greater or lesser intensity but everywhere growing more
powerful) namely inflation, especially in vital necessities such as food
and fuel costs.
-
- For Marxists, their narrow focus is on the
class struggle at the workplace and related issues of unemployment and
deteriorating work conditions as the detonator of mass unrest and organized
anti-capitalist action. For environmentalists, the point of mobilization
is climate change, peak oil, environment degradation and the resultant
deterioration of human existence. For anti-imperialists and related anti-war
activists, it is the US, EU and Israeli wars in the Middle East which represent
the great moral challenges of our times and the greatest danger to world
peace.
-
- While these progressive analyses and prognoses
are righteous in intent and worthy causes to support, they overlook the
fact that they are not the points of greatest conflict between imperial
and client regime and the great majority of humanity today. The greatest
concern and the issue, which has consistently mobilized hundreds of millions
over the past year, is inflation, rising food and fuel prices, declining
living standards, hunger and the everyday experience (and reality) that
conditions are deteriorating with no end in sight. The point of greatest
contention today is not the workplace (or point of production) but in the
'market', the place of consumption, where money earned from production
purchases less and less of the necessities of life.
-
- Inflation: Detonator of the First Sustained World Revolt
-
- In Asia, particularly Pakistan, India, Indonesia,
South Korea, Philippines, Nepal, Mongolia and China, hundreds of millions
of workers, peasants, artisans and low-paid self employed workers, as well
as house-wives and pensioners have engaged in sustained mass protests as
they experience a decline in the quality and quantity of food purchases
as prices skyrocket. In Africa, hunger stalks the land and major food
riots have occurred from Egypt through Sub-Saharan Africa to South Africa.
In the Caribbean, Central and South America, food riots have led to the
overthrow of regimes, mass protests, road blockages from Argentina, Bolivia,
through Colombia, Venezuela and Haiti.
-
- Recognizing the revolutionary potential of
'hunger politics' induced by inflation, even right-wing, as well as center-left
regimes have attempted to limit unrest through (1) food subsidies, (2)
raising interest rates and cutting public expenditures to slow down the
economy and lessen inflation (Brazil), (3) lowering food exports in order
to supply local consumers (Vietnam, India, Indonesia), (4) enacting special
laws against hoarders and speculators (Philippines) and (5) repressing
mass protest (Haiti, Egypt). None of these short-term, local ameliorative
measures have worked: Controls of exports have not lessened imported inflation
and wholesalers/retailers have not complied with price controls and engaged
in hoarding and black market activity. While agricultural production has
increased, the growth of non-food products (ethanol for bio-gas) has grown
even faster. The ineffectiveness of these 'reforms' reflects the failure
of agricultural policies over the past half-century, which have focused
on financing large-scale specialty export agricultural crops and urban-service-industrial
complexes, while neglecting basic food production by family farmers for
local consumption. Countries, as diverse as Cuba, Egypt, China and the
Philippines, have divested from agriculture to service (tourism in Cuba),
recreational facilities for the wealthy (golf courses), agro-exports (Brazil),
real estate (China), technology centers and commercial shopping malls (Philippines
and India). In the process they have displaced food producing small farmers,
depriving them of credits, price incentives and infrastructure not
to mention confiscating rich agricultural lands from indebted farmers for
conversion to golf courses, exclusive subdivisions and shopping malls.
-
- The result is the convergence of ongoing
protests by dispossessed peasants and farmers, suffering from lack of access
to land, irrigation and agricultural credits, and masses of poor urban
consumers suffering from inflation of food prices. What is at fault is
not merely the prices but the social relations of production. State priorities
and the configuration of class power, which control the state and decree
economic strategies, reorganized the economy at the expense of local low-cost
and available food production. None of the ameliorative measures taken
by contemporary regimes have even approached the structural roots of the
inflation crisis and the rising cost of food.
-
- Inflation and Structural Vulnerability
-
- Inflation has had such a devastating effect
today even more than in the past because of several profound
shifts in the occupational and social organization of the economy. Worldwide
class-based trade unions have declined in numbers and capacity to safeguard
the interests of urban and rural wage labor. With this decline has come
the abolition of wage indexes, sliding scales of wages, which allow workers
wages to keep up with the rise of prices. Secondly the vast growth of
informal and service sector workers are not organized to raise wages in
response to increases in food prices. The growth of pensioners with fixed
income has increased their vulnerability to inflationary prices, leading
to sharp declines in purchasing power. The growth of contract labor, precarious
labor contracts has undermined all possibilities of negotiating labor contracts
which allow wage and salary workers to keep up with inflation.
-
- Thirdly, the dominant ideology, promoted
by all capitalist economists and accepted by many trade union officials,
claims that wage increases, and wage indexing induces inflationary pressure.
This leads to collusion between 'labor and capital' in creating a 'lag'
between rising prices and wage adjustments, resulting in declining living
standards. Fourthly this pernicious and erroneous doctrine deflects attention
from the real causes of inflation -- declining capitalist investment in
the productive economy, the vast increase of capital flowing in the paper
economy, the huge increases in profits and the grotesque salaries, bonuses
and payoffs to senior executives, totally unrelated to 'performance'.
As a result there is a decrease in the production and circulation of goods
of mass consumption. The growth of a vast parasitical 'service sector'
with money pursuing fewer actually available goods has led to higher prices.
Most of the affluent classes (the upper 20%) can afford the higher prices,
in part because they can pass on the added costs to the mass of working
class and urban and rural poor. In other words, in the contemporary economy,
inflation benefits the wealthy because they pay their workers in deflated
currency, while they can take advantage of inflation to further jack up
prices and then income. In other words the upper classes have fortified
their economic positions to take account of inflation through their power
over prices, income and other compensations in a way that wage workers
and people on fixed income and other vulnerable sectors cannot. Bankers
protect their loans via adjustable interest rates. Monopoly resource owners
jack up prices to retain profits. Wholesalers mark up prices to compensate
for higher commodity prices. Large-scale retailers squeeze final consumers
the great majority at the bottom of the production and distribution
chain.
-
- Inflation: The Targets of Revolt
-
- The revolts of the mass of vulnerable consumers
are directed at retailers, wholesalers and the government, which are held
responsible for the higher prices. Governments are charged with deregulating
the economy, subsidizing the profiteers, promoting profiteering, complicity
with monopolies, imposing wages and salary constraints without commensurate
control over prices and basic necessities. Where some subsidies or price
controls are decreed they are not consistently implemented or enforced.
Worse still, widespread evasion, hoarding and black-marketeering is rife
because of official complicity and corruption. According to regime bureaucrats
it is 'easier' to control wages than prices hence the uneven and
unjust enforcement. Moreover capitalist producers frequently dis-invest
or withhold products especially necessities from the market as an effective
weapon against price controls, forcing scarcity and inducing popular discontent
with the incumbent regime. Reformist policies and regimes then are forced
to choose between 'lifting controls' to increase profits and prices or
maintaining controls and facing the wrath of masses confronting empty shelves.
Few if any contemporary regimes are willing to make credible threats to
intervene in economic sectors or even enterprises, withholding goods or
investments. Even less likely are regimes willing to actually mobilize
workers, farmers and consumers to take over strategic economic sectors
vital to popular consumption.
-
- Anti-Inflationary Revolts and Extra-Parliamentary Politics
-
- Given the total dominance of unhindered and
unregulated 'free market' ideology among all the leading political parties
and within the executive, legislative and administrative branches of government,
there are no institutional political vehicles through which the consumers
can act to arrest their declining living standards, their decreasing capacity
to meet basic needs and in many regions avoid growing malnutrition and
hunger. Because of the all-pervasive and powerful stranglehold of free
market capitalism among all national and international decision makers,
all the meetings convoked by international organizations to deal with the
'food crisis' (narrowly defined as 'hunger' induced by scarcity and exorbitant
food prices) have repeatedly failed to come up with practical and workable
solutions. At best they simply pledge funds for temporary food aid, subsidies
and proposals for technical or market assistance. No meeting challenges
the power of corporate agriculture to raise prices, allocate investments
to more profitable fuel use rather than food; no crisis managers suggest
massive shifts of credits from agro-exporters to family farmers; no effort
is made to end price gouging by wholesalers or retailers. In other words,
the crisis managers are of the same class as the beneficiaries of high
prices and scarce food producers and therefore they operate within
the same market rules, which perpetuate higher profits and declining living
standards.
-
- Given the failures of official policies and
the lack of any institutional solutions of redress, the only outlet for
downwardly mobile masses is extra-parliamentary opposition; the sacking
of trains, stores and wholesale warehouses; the overthrow or voting out
of office of incumbent regimes; the blocking of transport and seizure of
government buildings; mass marches and demonstrations facing legislative
and executive houses. Incumbent regimes everywhere fear mass repudiation
in upcoming elections, even as their 'populist' opponents provide no systematic
alternative. As yet the mass consumer protests, even as they draw heavily
upon the families of workers, have yet to enlist the organized working
class at its point of production. Only on rare occasions have organized
workers engaged in 'general strikes' against price increases of basic foodstuffs.
The process of linking producter and consumer sectors is however not far
on the horizon as local joint actions are occurring and calling into question
the reliance on unrestricted markets. Bourgeois journalists, some financial
editorial writers and a few government advisers are aware of the growing
danger of inflation, rising food prices and the profit/wage gap to the
capitalist system and are calling for anti-inflationary policies and public
regulation. Faced with the deepening financial crisis resulting from the
speculative crash and the necessity of large-scale, long-term state intervention
and bail-outs, sectors of the capitalist class are also calling for greater
state supervision and tighter controls over covert (off the books) institutional
swindles.
-
- Popular perception of massive state bailouts
of banks and proposals for new regulations to save the financial system
has reinforced the idea that the state can equally (or with greater justice)
interfere to regulate food and fuel prices and to prop up declining living
standards.
-
- Inflation and the Transition from Protest to Popular
Uprisings
-
- Inflation and high levels of engagement of
the state in saving capitalism has raised mass discontent from a local
protest against local price gougers and profiteers to a national political
protest against a class biased state, which ignores deteriorating living
standards and concerns itself only with the very rich.
-
- Previously apolitical or even conservative
workers, peasants and households who experienced incremental and cumulative
gains in living standards through long hours and multiple household workers
are now seeing their livelihood decline. Their earnings are devalued.
Their capacity to satisfy basic needs deteriorating. The sensation of
'going backwards' or losing control over their everyday lives and of downward
mobility is fueling mass collective anger. The treadmill of added work
without rewards, respect or recognition is reinforced daily by the added
costs to everyday goods. Inflation destabilizes all calculations, not
only for the future, but also of everyday life: What to buy or not buy.
What to pay or what to pay off. Uncertainly about what is affordable today
and unaffordable tomorrow. Uncertainty spreads from the poorest to the
'stable workers', from the 'fixed income' pensioners to the 'secure public
employees'. Inflation's global spread undermines living standards in Europe
and the Americas, Asia and Africa, and with it, discontent erodes party
loyalties and confidence in electoral and/or regime legitimacy. Historically
nothing undermines public confidence in the currency, the banks, politicians
and the existing market ideology as much as daily creeping inflation.
The greatest fear of all is the sense that a lifetime of effort will result
in the 'loss of everything' home, transport, health, and education
as prices rise faster than income. At some point, rampant inflation
leads to absolute regression and with that a rupture with all previous
loyalties and commitments.
-
- Conclusion
-
- Inflation, as it accelerates, in the past
and today, is the great solvent of incremental everyday habits and politics:
Today it undermines incumbent politicians; tomorrow it can call into question
regimes and social orders.
-
- In the past, inflationary disorders and desperation
brought forth rightist demagogues who specialize in imposing order and
stability. It ill behooves the left to once again ignore the destructive
effects of inflation, the demands for order and stability and mass consumer
discontent. Inflationary fears are as much entrenched as class and property
issues. Combating inflation, especially basic price increases is central
to any prospect for a social transformation, which claims to benefit the
wage and salaried workers, urban or rural dwellers, the poor, minorities,
consumers and producers.
-
- Professor Petras' forthcoming book is: Zionism, Militarism
and the Decline of US Power (Clarity Press. Ste 469, 3277 Roswell Road,
Atlanta, GA 30305).
|
