THE governor of the Bank of England, in his Tuesday night speech detailed the source of the gigantic inflationary rise in living costs that has pauperised the working class, and slashed its living standards. He stressed that this must continue if there is to be any ‘recovery’ for the capitalist system.
He said: ‘Three factors account for almost all the increase in prices over the past four years. First, import prices (excluding energy) have risen by over 20%. (all emphasis by News Line) Much of that reflects the fall in sterling in late 2007 and 2008. . . .
More recently, large and unexpected increases in the prices of a range of commodities, including food, have pushed up import prices. For example, over the past six months the prices of base metals have risen by 25%, foodstuffs by 40% (with wheat prices up by 60%), and cotton prices by no less than 70%.
‘Since imports account for somewhere between a quarter and a third of overall expenditure, higher import prices have driven up the overall price level by around 6%. . . .
‘Second, there has also been a rise in world energy prices. Sterling oil prices have risen by 110% since the start of 2007 and gas prices by 130%. . .
Third, the combined effect of the recent changes to the standard rate of VAT, including the rise to 20% this month, is likely to push up the level of prices by around 11/%. . .
He adds: ‘The three factors I described – higher import and energy prices and taxes – have squeezed real take-home pay by around 12%. . . so real wages fell sharply. And given the rise in VAT and other price rises this year, real wages are likely to fall again. As a result, in 2011 real wages are likely to be no higher than they were in 2005.
‘One has to go back to the 1920s to find a time when real wages fell over a period of six years.’
He is over the moon about this situation, but has a message for the queasy. ‘Monetary policy cannot be based on wishful thinking. So, unpleasant though it is, the Monetary Policy Committee (MPC) neither can, nor should try to, prevent the squeeze in living standards, half of which is coming in the form of higher prices and half in earnings rising at a rate lower than normal. That is why the MPC, despite vigorous debate and perfectly reasonable small differences in view on policy, was unanimous in recognising the need for an exceptional policy response to the banking crisis and the subsequent downturn in the UK and world economy.’
Waging the class war, starving the working class to rescue the bankers is the chosen policy.
He asked ‘Should the bank rate rise now?’ He answers his question – ‘No’ and states ‘The outlook is shaped by the two conditions that are necessary for a successful rebalancing of our economy: the significant fiscal consolidation over the next five years and the large fall of 20% in the real exchange rate that will enable our export and import-competing sectors to expand and take advantage of the recovery in the world economy.’ The road to recovery is through savage expenditure cuts and further wage cuts.
He gives a hint when he would like to raise interest rates.
He states: ‘Nevertheless, there are upside risks to inflation. Further rises in world commodity and energy prices cannot be ruled out, and attempts to resist their implications for real take-home pay by pushing up wages would require a response by the MPC.
When workers fight for real wage rises, King will call for a bank rate rise to douse the militancy with a jobless flood!
King’s class war outlook and policy must be answered by the workers.
They must tell the bosses that despite the fact that it favours peace it cannot stand by and allow millions of families to be crushed to save a handful of plutocrats and their system that are responsible for the crisis in the first place.
They must add: ‘Further since our policy also cannot be based on wishful thinking, we must put an end to you and your capitalist system with a socialist revolution, to consign the capitalist law of the jungle society to a museum and replace it with socialism, based on a socialist planned economy.’