Submitted by World Revolution on
Everywhere you look, prices are going up! The prices of the energy suppliers have jumped up and so heating bills and travelling to and from work have become more expensive. There are big increases in the prices of essential foods, like bread and milk, and shoppers are getting a lot less for their money in their weekly supermarket shopping. And while prices keep going up.... wages don't.
"The problem is universal. Perhaps it's the first time that whether you live in a rich or a poor country, you are expressing the same type of concerns: Italians worried by the price of pasta, Guatemalans by the price of maize, the French and the Senegalese by the price of bread." (Le Monde, 17/10/07.) The price of pork, the meat the Chinese eat more than any other, has almost doubled in price in one year, while the prices of other farming products like chicken and eggs are also rising fast. Japan imports 60% of its goods and nearly all foods have gone up in price.
Why are prices rising so much?
The main explanation from the bourgeoisie for this is that the Asiatic economies are ‘too healthy': "The fall in the level of food production (aggravated by drought and the boom in bio-diesel, amongst other things) and the increase in demand (that has come about especially in emerging countries, like India and China, eager to copy the western style of eating) have brought about a rise in prices just as extraordinary as unexpected."(La Republica, in Courrier International no 888) In brief, it's a simple problem of disequilibrium between supply and demand!
That's sheer propaganda! The price rises are a direct product of the economic crisis. They are the first repercussion of the now famous subprimes crisis, which broke out this past summer in the US, on the living standards of the world's working class. All the central banks responded in the same way to the ‘black hole' of debt in the American market, making massive amounts of low cost money available (lending to speculators at very low rates), hoping to limit the contagion and the damage in the short term. But this policy won't work: it is only expanding the escalating debts that, in reality, will only further fuel and aggravate the crisis. By supplying banks that are facing bankruptcy and the stock markets with the vast amounts of money, the hundreds of billions of dollars, they require, the bourgeoisie and the central banks are only unleashing a deep spiral of international inflation.
But why is inflation affecting raw materials and basic foodstuffs indispensable to millions of human beings? The answer is reflected in the inhuman nature of the decaying system itself: "Raw materials attract speculators in search of new markets for their investments following this summer's crisis in the American property market. This pushes prices up."(Liberation, 2/11/07). Hence, the ‘crazy upward spiral' in fuel prices comes from speculative investing "which has retreated from certain markets (shares, bonds, currencies) to invest in ‘commodities', particularly oil". (Le Monde, 20/10/07). It's the same with cereals/grains: following the crash in August, "Goldman Sachs and Mark Faber, in line with all the other speculators, advise investing in the agricultural products markets where you can afford to take more chances."(Nouvelle Solidarité, 3/09/07). All these vultures are quite tight fisted about keeping their capital safe! And one of them openly expressed their limitless cynicism: "If the world is slowing down right now, it won't affect agricultural products because, no matter what happens, people will still have to eat"! (Bloomberg, 19/08/07.)
J.Sheeran, Executive director of the UN World Food Programme says "we are losing ground to hunger" Sweet euphamism! In the 82 poorest countries, where 60 to 90% of the family budget is spent on food, an expected 20% increase in the price of corn means that much of the population will suffer famine, and ultimately death; it's that simple! We have already seen food riots in Mexico, in Yemen, in Brazil, in Burkina Faso, or in Morocco again, since 2006. "The United Nations has warned that global food inflation could spark social unrest and force governments to reintroduce price controls to maintain stability" (Financial Times, 16/1/08). And governments are being forced to act. On 14 January 10,000 people took to the streets of Jakarta, capital of Indonesia, protesting at the doubling of the price of soyabeans, one of the country's staple foods, forcing the government to take action. In the same week, the Egyptian government banned exports of rice to protect local supplies and curb unrest. In Vietnam, protests by the poor and labour unrest faced with foods prices escalating, has forced the ‘communist' authorities to intervene. In China, "constant price rises are counteracting improvements in living standards."(Nanfang Zhoumo, Canton journal). In the West, it is becoming a luxury to eat properly. In France, where consuming around 400 grams of fruit and vegetables per person per day (recommended by the government) is equivalent to between 5 and 12% of the basic minimum wage (SMIC), it is clear that a lot of workers will not be in a position to satisfy these basic requirements.
Heading for another 1929?
If you read the papers, it is clear that the spectre of the 1929 Crash and the Depression haunts the whole bourgeoisie. They are asking: ‘Is another 1929 on its way?'
It's true there are similarities: the stock markets wobble and the yo-yo movements of shares can't disguise the fall in values; the mountains of debt appear insolvable, the crisis of confidence between banks deepens as losses multiply; the panic of the small savers forming endless queues outside their banks to withdraw their funds, in the US, in Germany and in England; the perspective facing many US workers of finding themselves without a roof over their head and without work, from one day to the next.
The Crash of the New York Stock Exchange in 1929, the famous ‘Black Thursday', triggered the first major economic crisis of a capitalism in decline. The Depression revealed the chronic overproduction of goods characteristic of capitalist decadence. The crisis of 1929 took the form of a slump and is remembered because of the fact that the bourgeoisie fell back on the old responses that had worked in past crises... of the 19th century (that is, when capitalism was still in its full bloom, in its ascendancy). But this time, not only did they not work, in the new historical conditions (capitalist decadence), they made things worse. In practical terms, when the Federal Bank of America restricted the quantity of money in circulation, it bankrupted most of the banks, and the loss of credit put an enormous brake on economic activity. The protectionist measures put in place to defend the national economies fragmented the world economy, blocking international commerce and thus lead to production contracting even further.
If the bourgeoisie hasn't found any real solutions to the historical economic crisis of its system since the 1930s (And this is because the destruction of capitalism is the only solution!), it has nonetheless adapted to this state of permanent crisis, being able to phase it in over time. In a real sense, the economy is still sinking, but more slowly. The bourgeoisie has understood how to use state mechanisms to deal with financial crises by playing with interest rates and by injecting liquidity into the banking system. That's why the current economic crisis, since 1968, has not taken the form of the brutal economic collapse like 1929. The decline has been more gradual. The crisis has staggered from recession to recession, each deeper and of a longer duration, while going through one pseudo-recovery after another, each successively shorter and less effective. This smoothing out of the unfolding crisis into a downwards spiral allows the bourgeoisie to deny its very existence, to cover up the bankruptcy of its system, but it does this at the cost of overloading the system with mountains of debt and running into more and more dangerous contradictions. The extremely fragile nature of the world financial system is the proof of the diminishing effect of all the palliatives used by the bourgeoisie.
The current crisis will not therefore produce a brutal breakdown of the economy as in 1929. However, despite this, we can still predict that the crisis will nonetheless become more serious and much deeper. When the New Deal, the programme to boost the economy to deal with the crisis of overproduction, was inaugurated in the 1930s in the US, the financing of all the credit for the government loans was only a tiny part of the annual national earnings (the equivalent of less than 3 months of military expenditures at the time of the Second World War)! Today, the American debt is already 400% of GNP! The certainty of some capitalist circles "that a very deep US depression (...) is going to have widespread consequences, though not to the degree of the crisis of 1929, (...) even if 1929 is still the last available reference point in modern history" (Global Europe Anticipation, Bulletin no. 17) shows the bourgeoisie is very nervous about the future! The crisis of 2007 has a global impact. "With the contagion of the real economy already underway, not just in the US but across the whole planet, the collapse of the property markets in Britain, France and Spain is now the focus at the end of 2007, while in Asia, China and Japan are going to face simultaneously the reduction in their exports to the American market and the rapid fall in the value of all their credit holdings in US dollars (US currency Treasury bonds, shares of the US companies, etc.)" (idem).
The perspective of severe recession accompanied by increasing inflation will give rise to a brutal degradation of living conditions and to the increased exploitation of the working class. Despite the promises mouthed by politicians from all sides, capitalism is incapable of finding a way out and hiding its open bankruptcy today. The only perspective it offers humanity is increasing poverty. The future, the hopes and the salvation of humanity depend on the struggle of the working class! Scott 26.11.07
 After the bursting of the Internet bubble in 2000-2001 and with the risk of a brutal dive into recession, the US State initially decided to create a new bubble that would bolster consumption. With this property bubble, systematic loans were made available to the least wealthy of American households. It would be enough for a few years till in turn it burst again, with the risks a lot worse still for the world economy (read our article ‘The housing crisis, a symptom of the crisis of capitalism', on our website: internationalism.org).
 "The quantity of money in circulation is determined by the sum of the prices of commodities (money value remaining the same), and the latter by the quantity of commodities in circulation" (Engels, On Capital). An increase in the quantity of money in circulation without increase in production of goods amounts to a devaluation; the prices (monetary expression of the value) must therefore increase in the same proportion to express the value of the goods, which, itself, doesn't change.