The cost of living crisis is a capitalist crisis

Economic crises are an inescapable feature of life under the market system. Socialist planning is our only way out.

Proletarian writers

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To prevent the ruling class from passing the burden of the overproduction crisis onto the backs of the poor, we must organise resistance and make demands now. But we also need to work for the replacement of the system that causes such crises in the first place.

Proletarian writers

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Download our Cost of Living leaflet.

Apart from the tiny minority of superrich exploiters who live in a tax-free bubble of privilege and ignorance, just about everyone knows in practice what is meant by the ‘cost of living crisis’.

The rapidly rising cost of living – or, indeed, of barely surviving – is imposing itself on ever wider circles, whether in the form of swingeing energy bill hikes, rising inflation, low wages, job insecurity, the housing crisis, food bank queues, hospital waiting lists, ambulances that don’t arrive, GPs who can’t be seen, schools that don’t educate, and the general trashing of the various social services on which workers depend.

People are right to be angry, and increasing numbers are joining the fight-back against the attempt to make workers pay for the crisis. Postal, rail, Amazon workers and dockers have all been taking determined strike action in pursuit of wages that keep pace with inflation; doctors, nurses and teachers are preparing to join the fray; and protest groups like Don’t Pay UK and Enough Is Enough are gaining traction.

What is at the root of the trouble?

It is right that workers should demand short-term fixes to keep them from falling into the jaws of dire poverty NOW. But we also need to look deeper and understand where this crisis has actually come from, so we can understand what we need to do to address not only its most pressing and immediate symptoms, but also its root causes.

What, after all, is the point in organising a movement capable of forcing significant concessions from our rulers – a feat in itself given the current disorganised state of the British working class – if we don’t at the same time do something to address the social and economic forces that brought us to this emergency in the first place? Aren’t we just dooming ourselves and our children to fight the same battles over again in a few months’ or years’ time?

What we need to understand is that this specific crisis is only the latest episode in the life-history of the capitalist system – part of a saga of cyclical boom-and-bust crises that stretches back nearly 200 years, to the first general crisis of 1825. These crises are rooted deep within the contradictions of capitalist production – that is, of unplanned production for the market, which ‘regulates’ by letting producers know (too late) whether or not there is a ‘market’ for their goods at the point of sale (not production), and in which a ‘market’ only exists where those who want or need something also have the ability to pay for it.

The fundamental problem at the heart of the system is that capitalists make their profits by taking from the workers a part of the wealth that they produce without paying them for it. Which ultimately means that more goods are produced than workers have the money to buy back. At the same time, the capitalists try to increase their profits by paying workers as little as possible – meaning, in most cases, the bare minimum needed for survival.

And they try to win the battle of competition against other producers by modernising their machinery, which means employing still fewer workers as more processes are automated.

All of this exacerbates the fundamental problem, which is that the working class can’t afford to buy the multitude of products that were created by its own labour. On the one hand are products that can’t be sold; on the other are workers going without for want of the means to buy them.

The interaction of these iron laws of capitalist production mean that, although the workers produce an incredible, and constantly increasing, amount of wealth, that wealth is not available to society as a whole, but is concentrated in the hands of the owners of capital (vast sums of which are needed to set up modern means of production and employ the workers which make them go).

The number of workers employed is reduced. Competition among them for work is high. Wages are forced lower and lower. Workers live in deepening penury although they are surrounded by plenty.

When capitalist enterprises are left with goods that can’t be sold, they try to solve the problem by selling overseas. Eventually, however, even the world market is glutted and all they can do is to cut production and put even more workers out of work – thus taking more ‘demand’ out of the market and fuelling the downward spiral.

This is what scientific socialism calls an ‘overproduction crisis’, and it’s absolutely inescapable under capitalism – it is baked into the DNA of the system of production for profit; for the market.

Since the capitalist economists can’t admit that Marx was right about their system, they have to call things by other names. Hence, the chaos brought by the overproduction crisis in 2008 was known as the ‘banking’ or ‘financial’ crisis. When the next shock came around in 2020 and sent markets into a tailspin it was labelled a ‘Covid’ crisis (although the stock markets crashed before western governments abruptly opted for lockdowns).

The current downward turn of the crisis, exacerbated in its effects by rampant inflation, has been branded the ‘cost of living’ crisis, and is being blamed variously on the Ukraine war, Covid disruptions and volatile energy markets.

Global markets mean global crises

Since the development of capitalism into monopoly capitalism more than a century ago, the system has become global, and thus its economic crises affect every country that is in any way connected to the world market. Since that time, the periods of relative prosperity have been fewer and further between, and the contradictions of the system have become even deeper and more intractable.

The protracted boom that followed World War 2 was fuelled partly by the need to rebuild all that had been destroyed and partly by the need for the imperialist powers to stand together and provide a meaningful social safety net to their workers, who were calling for socialist revolutions across Europe after the experience of two world wars and the great depression.

But how many British workers understand that we owe the council houses, old people’s homes, national health service, free education etc of this period to the threat of the Soviet example? Or that the accelerated pace of their destruction followed the collapse of the USSR? Most of those who call themselves ‘socialist’ or even ‘communist’ certainly don’t publicise this important fact – they’re too busy claiming the welfare state as the product of British ‘civilisation’ and the good old 1945 ‘socialist’ Labour government. (You know, the one that founded Nato, suppressed Malayan and Kenyan liberation fighters, and took Britain to war in Korea.)

Today we are seeing once again how the most powerful monopoly-capitalist powers – the imperialists – use their vast economic and military might to try to save themselves at the expense of others – at the expense of their own workers, at the expense of the oppressed countries abroad, at the expense of their rival imperialist powers, and by attempting to break down all resistance to their unfettered looting of the globe.

It is important to remember all this when our rulers try to fool us into accepting responsibility for a crisis which is solely the fault of their own rotten system. It is not ‘inflationary wage claims’ that are to blame for the cost of living crisis. When a worker asks for his pay to be adjusted in line with the current inflation rate, all he’s really asking for is to keep his real wages stationary.

In fact, most if not all of the current hotly-disputed pay claims are predicated on lowering real wages! Meanwhile, the exploiters conveniently forget about the frantic money-printing that has been stoking inflation ever since the unresolved crisis of 2008 – of which the present crisis is merely a deepening and an extension.

The crisis and the drive to war

Nor is the cost of living crisis in Britain to be laid at the door of Vladimir Putin, though by fuelling the USA’s proxy war against Russia by every means possible, our rulers have indeed exposed the country to the backfiring consequences of their own aggressive sanctions regime.

Britain’s dangerous war rhetoric serves two purposes. On the one hand, it provides a useful distraction, misdirecting workers’ anger at their rapidly worsening conditions: whipping up Russophobia whilst the bosses are picking their pockets and robbing them blind via a never-ending stream of subsidies (arms and ‘advisers’ to Ukraine; profit guarantees to failing rail franchises; yet more private contracts to ‘help’ schools and hospitals ‘catch up’ after Covid; unlimited subs to the energy giants via the ‘price cap’ for residents and businesses …)

On the other hand, our rulers seek to hide the fact that only through war can they find any way out of the crisis which their own system has created. They hope to escape the trap by destroying, breaking up and looting the territories and peoples of all those countries that currently defy their diktat, Russia and China in particular.

Neither ‘greedy workers’ nor foreign ‘dictators’ are to blame for the cost of living crisis that is now causing such widespread misery.

We should rather look at the giant energy companies maximising their profits by screwing every last farthing out of their ‘customers’; or at the private health companies making a fast buck by hastening the collapse of the NHS; or at the privatised water authorities that won’t fix leaks but will poison our rivers whilst paying their CEOs and shareholders handsomely.

Urgent measures needed

Meanwhile, with the crisis deepening by the day, we must demand urgent measures to address the cost of living for workers and stop ordinary people from bearing the burden of a crisis that was not of their making.

We demand:

  • Nationalisation of ALL utilities (without compensation) along with monopoly producers, manufacturers and distributors of food so as to ensure a secure supply of all necessaries at affordable prices, free from the vacillations and disruptions of the world market.
  • Requisition and building of social housing and introduction of a rent cap to address the housing crisis.
  • Leaving Nato, bringing all troops and military contractors home, and ending all aspects of British involvement in aggressive wars abroad.
  • Lifting the minimum wage to a level providing a decent family existence.
  • Legislation for pay/benefit rises that keep pace with REAL inflation.
  • An end to currency devaluation through endless money printing.
  • An end to the self-defeating sanctions war against Russia, which is fuelling both the energy and the inflation crises.
  • An end to all subsidies to monopoly corporations and banks. Any business considered ‘too big to fail’ or ‘necessary to the national economy’ that cannot make an adequate profit out of ordinary operations should be nationalised without compensation and run according to a plan based on meeting the needs of the people.

The market has proved itself to be totally unable to meet the needs of the people. The capitalists have shown themselves to be entirely unable to run their own system for the benefit of society.

Ultimately, only socialist science can enable us to understand the root causes of this crisis of capitalist production. And only socialist science can enable us to create a real working-class party that will let workers bring their power to bear to create a society that not only solves the problems that press on us so heavily and urgently today, but actually offers us the prospect of a bright and fulfilling future.

Download our Cost of Living leaflet.