On Thursday, the Bureau of Labor Statistics (BLS) released its latest inflation report, and the news is not good for workers. According to the Consumer Price Index (CPI) – which measures the cost of consumer goods – inflation for all goods, including food and energy, rose again in January, this time by 0 .6%. This latest increase brings the annual inflation rate to 7.5%, a figure not seen since the early 1980s, when runaway inflation and a sluggish economy amounted to all-out economic warfare against American workers. While salaries for this same period also increased somewhat, increasing between 4 and 4.4%this is still far less than the current rate of inflation and represents only a fraction of the value that workers’ wages have lost over the past decades of neoliberal austerity.
While unsurprising to anyone paying attention, these latest figures exceeded the expectations of most bourgeois analysts who have been saying for months that the current inflation rate is a transitory phenomenon caused largely by the pandemic, rising oil prices, rising demand, and weakened and overburdened global supply chains. While these factors have certainly contributed to higher costs, they are by no means the end of the story. In fact, big business has unsurprisingly used the inflation crisis to raise the prices of many commodities, even those unaffected by supply chain disruptions, far beyond what is needed to cover rising production costs, making record profits on the backs of workers and consumers. In the process.
As Economist Matt Stoller explained in december, the increased profit motive of large corporations in the meat processing, automotive, and retail sectors, among others, is leading to widespread price increases across the economy and could represent up to at 3% of the current annual inflation rate. And indeed, corporate profit margins, despite inflation and the vagaries of the pandemic, have skyrocketed over the past year, to levels not seen since 1950, far exceeding what they were earning before the pandemic. From Exxon Mobil to Tyson, AstraZeneca, Amazon and Starbucks, companies are wreaking havoc even as workers around the world struggle to maintain the value of their already low wages. While bourgeois economists like Stoller think this problem can be controlled by anti-monopoly legislation or taxes on excess profits, such a predatory pursuit of profit and increasing exploitation of workers is endemic to capitalist production and cannot be reversed. eliminated by law.
Despite this corporate windfall, however, the Dow Jones Industrial Average dropped nearly 1.5 percent, and other indexes fell sharply on the announcement of the report, largely on fears of a quicker and more aggressive Federal Reserve response to the crisis. It looks like a full interest rate hike could come as early as March, and many analysts are predicting that the Fed could raise interest rates to as high as 1.75% by the end of the month. year. Interest rates are currently close to zero. While at first glance interest rate hikes may seem of little concern to most workers who have little or no investment, they are designed to “chill the economy” by simultaneously discouraging spending and encouraging savings, which can have serious consequences. consequences for workers. As we explained last month:
Higher interest rates have a real effect on workers. They make money more expensive to spend and reduce disposable income. For the most marginalized people in society, they can make basic needs less accessible. And historically, higher interest rates have also prevented American businesses from expanding employment.
And of course, interest rate hikes have always been used as a stick to punish workers and undermine the power of unions. In the 1980s, for example, the Reagan administration and Federal Reserve Chairman Paul Volker oversaw a policy of rising interest rates that resulted in the loss of millions of manufacturing jobs and a unemployment above 10%.
In addition, rising interest rates will almost certainly lead to further austerity as cities and states face rising borrowing costs to maintain or finance new investments in education, infrastructure, social housing and services for the poor or homeless, many of whom are still suffering from the negative economic and health effects of the pandemic.
The ongoing inflationary crisis, the cost of which is passed on entirely to the working class, is just another example of the failure of a system that prioritizes chaotic production in the service of profit over planned economy built around human needs. For the ruling class, there is no solution to the crisis that does not involve additional pain for workers, but that does not mean there is nothing to fight for. Using the methods of class struggle, strikes and mass demonstrations, we can unite the working class to demand more of the value we produce, to resist austerity, to fight for automatic raises wages and benefits and to demand a freeze on the price of vital and basic necessities paid for by the profits of the corporations that oversee their production. It is only in such struggles that we can discover and build our true strength as a class, capable of directly struggling for power and control of the productive forces of society.
James Dennis Hoff
James Dennis Hoff is a writer, educator, labor activist and member of the editorial board of Left Voice. He teaches at the City University of New York.