Rising wages, inflation and the crisis of capitalism

As the global capitalist economy teeters from crisis to crisis, workers are being told that an inflation-matching wage increase will hurt the economy and “fuel” inflation.

Inflation is already here.

Wages are stagnating, falling and have been for a long time, yet part of the ruling class argues that wage hikes will worsen inflation and destroy the economy.

The Reserve Bank of Australia (RBA) has made it clear that wages will continue to fall. Workers can expect effective pay cuts of 3% over the next two years, he said. After that, wages “may” grow above the rate of inflation. Again, they can’t.

Inflation is rising all over the world and it’s hard to imagine that wages are likely to keep pace.

Bank of England Governor Andrew Bailley put it bluntly when he said: “I’m not saying nobody gets a pay rise, don’t get me wrong. But what I am saying is that we have to exercise restraint in wage negotiations, otherwise it will get out of control”.

In other words, workers and their needs come after the greater needs of the economy and capitalism.

By the way, Bailley, who is so opposed to a pay rise, gets by on over A$1 million a year.

Karl Marx’s ideas were opposed by the mainstream then, as they are today, but he was right, and his ideas are still right.

Australian Council of Trade Union Secretary Sally McManus has blamed the Scott Morrison government for a decade of falling real wages. Wages have been hit over the past decade, but a coalition government isn’t the only reason.

For decades, labor’s share of income has been losing ground to capital. Inequality grew steadily as capitalism raised the bar in its pursuit of profit at all costs.

Today, the gap between rich and poor is the widest it has been in 40 years. Two out of three workers in the world belong to the “informal” category – temporary or short-term employees.

Economists and bourgeois politicians tell us that things are fundamentally sound, that “prudent economic management” will protect the economy. But the problem is global and pulling economic leverage in the developed capitalist world will not save a single economy.

The state maintains the fiction that individual economies, even moderately small ones, can stand above global economic forces. This fiction is repeated during election campaigns.

Rising inflation and interest rates, rising precarious work and stagnating and falling wages are the fault of this or that government and can be corrected by this or that opposition, provided you vote for them. .

Capitalism is in deep crisis and nation states are powerless to do anything.

Marx wrote about a general downward trend in the overall rate of profit. This does not mean that the fall is constant. It falters and, for capital, there is always the threat of a real slide. Wealth is still being created, but more of it is diverted to a smaller and smaller layer of the capitalist class.

In 1950, at the dawn of the brief “golden age” of capitalism, the profit rate of the G20 countries reached 9.5%. This was linked to the capitalist boom after the Second World War. However, it peaked at 10.3% in 1966. By 1982, the profit rate had fallen back to 6.6%.

After that, the massive shift of capital and production to low-wage countries – capitalist globalization – meant that first world economies and communities were gutted in capital’s attempt to “right ship” and again guarantee an increasing rate of profit. It was a brief respite. The rate of profit rose to 7.8%, before beginning its slow downward spiral from 1998. Today, the rate of profit is less than 6.8% and everything indicates that it continues to fall.

Capitalism was forced to change course in order to survive. It operated in a context of economic nationalism and protectionism, but was forced to go global due to the persistence of the crisis. Globalization has failed to resolve the crisis and economic nationalism, trade wars and the emergence of trading blocs have once again become the order of the day.

Australia’s attachment to the United States, the global hegemony, will make life much harder for working people, who are still being forced to bear the brunt. The US economy is at a standstill; its gross domestic product contracted in the first quarter of the year.

President Donald Trump has sought to erect trade barriers with China, continuing President Barack Obama’s “lockdown” policy. President Joe Biden has been unable to resurrect anything like an open trade regime.

Meanwhile, China’s economy continues to grow, albeit at a slower pace than in previous years.

The “retreat” from globalization, the hallmark of the Trump and Biden administrations, seems to be backfiring. The American campaign to resuscitate industry and bring back capital, which sounded good for the working class, has been badly skewed by neoliberal globalization. The European Union, Canada, South Korea and Japan are all looking for free trade opportunities.

Traditionally, the United States seeks to profit economically from the misery of war in Ukraine. Behind the rhetoric of lend-lease agreements and the possible reintroduction of some form of Marshall Plan lie simple economic calculations. Ukraine’s devastation will benefit the United States, but it’s a dark and bitter way to earn a dollar.

We must remember that the economy would stop without the working class. There should never be any question of making pleas and demanding an increase in the minimum wage.

A living wage is a right, but under neoliberalism it has to be fought for.

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