THE number out of work in the UK rose by 137,000 to 1.86 million in the three months to October – the highest level since 1997.
The unemployment rate rose to six per cent from 5.8 per cent, the Office for National Statistics said.
The number claiming Jobseeker’s Allowance in November rose 75,700 to 1.07 million – the largest rise since March 1991. The expectation is that by Xmas 2009 unemployment will be above three million.
The prospect therefore is that the Bank of England will be following the path of the US, which on Tuesday cut its interest rate to zero.
Such a development in the UK will see massive inflationary pressures emerge through a collapse of the pound.
The pound has already had a 20 per cent fall in its price against the euro and 25 per cent against the dollar.
Zero interest rates will provoke a collapse of the currency that will make the run on sterling in Black Wednesday 1993 appear as childsplay, and result in sky high interest rates and a massive inflation.
The contradictory pressures on the pound were seen in the latest inflation figure.
Lower petrol costs helped to reduce the Consumer Prices Index inflation rate down to 4.1 per cent in November from 4.5 per cent the month before. At the same time higher food prices were an upward inflationary pressure, which prevented the much bigger cut in price inflation that was expected.
The critical situation of British capitalism, already foundering on the rocks of the capitalist crisis, was reflected in Tuesday’s letter to Chancellor Darling from BoE Governor King.
He pointed to the collapse of the Lehman Brothers bank as a disaster for capitalism which triggered ‘sharp falls in business and consumer confidence’.
He continued that the US-UK multi-billion bailout measures had not resolved the credit crisis, writing: ‘Additional measures, building on the government’s package to support the banking system announced in October, will probably be required to underpin lending to households and companies.’
This is taken to mean that the government will have to pump more cash into the banks and take control of them to see that they lend it out instead of hoarding it.
This spectre of a dictatorship over the banks, even for the good of capitalism as a whole, is already sending shivers down the spines of the propagandists of capitalism.
However, the good side of this situation is, according to the BoE governor: ‘In the meantime, the weak outlook for activity will open up a significant margin of spare capacity in the economy which will restrain price and wage increases.’
This means that three million unemployed will be just the ticket for holding down and cutting wages.
King, however, does not say that we have seen the end of inflation.
He writes: ‘In particular, the direct effects of the cut in VAT will temporarily lower inflation through much of 2009 with a corresponding increase in inflation through 2010 as the cut in VAT is reversed. As you noted in the PBR, the MPC’s remit explicitly recognises that inflation will on occasions depart from the target as a result of shocks and disturbances’ and that ‘attempts to keep inflation at target in these circumstances may cause undesirable volatility in output.’
In truth there are lots of shocks and disturbances on the way, both at home and abroad, in the Gulf, central Asia and in the Middle East. Such a shock was Opec’s decision to cut oil production by 2.2 million barrels a day.
The essential truth of the situation is that capitalism is having its back broken.
The only way that it can be kept going is through imposing the entire burden of the crisis onto the working class and the middle class, however unbearable is the experience.
For the working class and the middle class there is only one way out of this crisis. That is through the socialist revolution to smash capitalism and go forward to socialism.
