Capitalists prefer recession to real wage gains

First published as “Inflation Explodes”, in The Anvil, Vol. 11, No. 5, September-October 2022.

The trend of government departments and capitalists severely underestimating inflation in Australia continued with the announcement on October 26 that inflation had risen to a whopping 7.3%. 

Back in June, the Fair Work Commission’s decision on the minimum wage was released. Their report was based on the expectation of inflation gradually hitting a peak of 7.8% by December, before quickly falling in the new year. Having weighed up the considerations of various groups representing big business, as well as the timid counter-proposals of the ACTU, a decision was reached to raise minimum wage rates below $869.60 per week by 5.2%, and those above it by 4.6%. 

This pitiful result (which barely kept up with inflation at the time) was quickly out of date. Now, with a general rise of prices of 7.3% (and bound to go higher), it is nothing short of class war.

When the bosses and politicians sit back as inflation shows no signs of slowing, they are cutting the purchasing power of our wages, and condemning the poorest workers to precariousness and poverty.

For now, it seems their plan is to simply watch as the Reserve Bank of Australia cranks up interest rates (i.e., increases the cost of borrowing money). For those lucky enough to have bought a home, this means rising mortgages. For businesses, this means less investment – and that’s exactly the point. Many capitalists are now openly calling for central banks to intentionally induce a recession. 

Why would capitalists prefer a recession to runaway inflation? Capital is worried about inflation for many reasons, but the most important is the fear of class struggle and a price-wage spiral.

Currently, Australia has a ‘tight labour market’, meaning workers have more job options than usual. Because of this, bosses have to adjust to the pressures of workers being more willing to quit, or even to organise and demand higher wages, so that they can pay for rising rents, utility bills, and other price hikes. To maintain their current rate of profit, capitalists will typically look to pass on the cost of paying higher wages to the consumer by raising the prices of their products… And so inflation rises again…And with it, the risk of demands for even higher wages!

But raising prices is not always possible – there has to be sufficient demand to buy the product at the new price. And here the capitalist is faced simply with a declining rate of profit, and therefore their very survival in the market.

Because of this, the ruling class are increasingly willing to intentionally induce a recession, and restore the power of capital over labour through high unemployment.

So where are things headed and how do we respond? The crisis in the UK is a warning of things to come, and the MACG believes that we should be looking at how the working class of that country is fighting back.

A grassroots direct action campaign called Don’t Pay UK has been organised in response to soaring heating bills, with a non-payment strike set for December 1. As of today, 235,954 people have pledged to take part. But even before striking, British capital and politicians have taken notice. Leaked documents from the energy company E.ON show executives warning the British government of the “existential” risk posed by the strike, with projected losses of up to £265 million per month across the industry. Government action swiftly followed, with the then Chancellor of the Exchequer introducing a two year price cap of  £2500.

This is the power of self-organised direct action – even under right wing governments! But British workers aren’t just stopping at non-payment of bills. As in the US (and to an extent even here in Australia), there has been a very important uptick in strike action. A lot of attention is rightfully being given to the RMT rail strikes, and we wholeheartedly support their fight. But far less has been given to the rapid spread of wildcat strikes across Amazon warehouses back in August. It is worth quoting one of these workers:

“We only planned to go on strike two hours before it actually happened. We had seen the strikes at Tilbury and Rugeley fulfilment centres on TikTok… and it inspired us to strike. [We] started spreading the idea of a walkout through word of mouth… By 1pm, we had over 300 people who walked out… At the beginning, we had no help with the strikes from any trade unions. We organised it all ourselves.”

Like the RMT struggle, the fight of the self-organised Amazon workers is far from over. But through their example, we can see the way forward for turning the class war back in our favour.


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