2023-08-11 16:41:34
The European population is witnessing a new rise in interest rates by the ECB, in parallel to the US Federal Reserve, which have gone from 0% barely a year and a half ago, to 4.25% today, in a downward trend. that no end is seen. At the same time, the Banks announce historic profits and the CEOE acknowledges, in its 2022 study, that it is business profits that “have accelerated the escalation of prices” (El Confidencial).
From all the propaganda media, to justify the rise in interest rates, they say that it is to combat inflation; and for that they hit wages with an ax, seeking to reduce family consumption.
The causes of inflation
If the simplistic logic of the ECB and the “progress” government is followed, the responsibility for the high inflation rates lies with the workers who earn a lot and consume like madmen, overheating the economy: the rise in interest rates is the jug of cold water that prevents overheating. Thus, the OECD Employment Outlook Report 2023 highlights that Spanish workers lose 1.2% of purchasing power due to inflation.
The reality is quite another; Inflation is determined by the sum of many factors, beginning with a historical one, the financialization and monetization of the economy introduced in the 70s by the neoliberal phase of capitalism, or translated into common language, the conversion of absolutely all spheres of life and social relationships. Marx said that capitalism turns everything it touches into merchandise; I suspect that not even in his dreams did he think that they would turn even the most intimate thoughts of people into merchandise, as is now done through social networks. “The dreams of (capitalist) reason produce monsters”, paraphrasing Goya.
This phase leads to the formula for the circulation of capital, DMD’, which implied that for an increase in invested capital (D’, money) the productive process had to occur, M (merchandise) tends to simplify in DD’, with an increase that is given, not by the increase in the exploitation of the working class, but by simple and pure speculative and monetary maneuvers.
But capitalism, despite itself, continues to be a mode of production built on the production of commodities, based on the law of value (“the value of a commodity is determined by the labor time socially necessary to produce it) and the consequences that the increase in productivity has on the rate of profit. It is precisely the downward trend of this trend that favors the neoliberal formulas for the financialization and monetization of the economy, since capital seeks high returns on its investments that it does not find in the productive apparatus.
40 years after the worldwide triumph of these formulas that have led to the dismantling of all the social conquests of the 50s and 60s, the “jug” of the neoliberal milkmaid story has exploded and spilled all the milk. The 2007/8 crisis was the beginning of the end of this phase, with the bank failures (Lehmman Brothers, the Spanish savings bank system, etc.), the Great Recession and the economic and geopolitical consequences that followed. The social and psychological ones deserve a specific analysis.
The pandemic caused a sudden halt in the world economy, disorganizing the distribution channels that were based on “just in time” and work without stocks, that is, on the speed in the circulation of capital that accelerated the accumulation process, reducing distribution costs to a minimum. This went to hell when those channels were closed.
When it seemed that the rhythms prior to the pandemic were recovering, the war between Russia and Ukraine broke out, as a manifestation of another of the profound changes caused by the 2007/8 crisis, the emergence of new powers that demand their place in the world market before the decline of the hegemonic powers, the USA and its “allies” in the European Union.
In the fight against the pandemic, and to prevent the consequences from being absolutely catastrophic, the states increased their debt ceiling, the European Union relaxed the conditions for the public deficit, million-dollar investments were made in pharmaceutical companies to urgently research vaccines, etc All this injection of money led to its devaluation, which is now returning in the form of inflation.
To this increase in the deficit must be added the billions of euros that the US and the EU are going to spend on weapons and military investments. In fact, the most plausible perspective is that the NATO states will continue to increase their deficit with spending on weapons, a minimum of 2% of GDP, as they approved at their Madrid Summit last year.
All this wrapped up in the investment effort that the “next generation” funds represent to increase the competitiveness of the European and Western economy against their Chinese-Russian “enemies”; about 750 billion euros that they hope to recover if the competition allows it. Because capitalism continues to be a mode of production based on the laws of the market and competition.
A war economy like the one approved at the aforementioned Summit and the demands for productive change due to the climate crisis are forcing states to make an investment effort that inexorably leads to currency devaluation. By increasing the issuance of the necessary coins, their real value falls, being precise, more quantity to maintain purchasing power, generating inflation. Prices inflate because each dollar invested is worth less and more is needed to stay afloat.
It is not wages and private consumption that generate inflation, but public spending and especially spending on destructive merchandise such as weapons, which do not increase social wealth, but rather destroy it; but the money for everything to flow must be obtained from somewhere, and that is none other than the increase in the exploitation of the working class.
Rise in interest rates: oxygen balloon for Banks
Behind the campaign that the rise in interest rates is to benefit society, the truth is that, once again, the states, led by the ECB, are acting as Lenin defined them, as the “central committee of the bourgeoisie” .
The increase in the cost of borrowed money due to the increase in interest has two parallel effects: one, it favors the concentration and centralization of capital, since it is the large banks that can face the contraction of the market that is going to be caused with better solvency; that is to say, it is a measure to your measure, worth the redundancy.
The second effect of the increase in the cost of money is the looting of the payrolls of the workers. By directly affecting a basic necessity such as housing, any increase implies a transfer of income from wages to the results of banks with record profits. The BSCH, for example, has improved its accounts this year due to the interest rates that “drive Banco Santander’s profits in Spain”; This is how the media titled it, with all the impudence in the world, these days. Meanwhile, those who have to pay a mortgage see how it becomes more expensive between 200 and 300 euros per month.
Earlier this year the system trembled again when several midsize US banks and Credit Suisse declared bankruptcy and were bailed out. The ghost of Lehmann Brothers shook them like a shock and, not crazy, they want to face a new Great Recession, now, within the framework of a war economy. The “central committee of the bourgeoisie” which is the ECB and the states acting as such.
“Leave no one behind” and “subsidies” policies
Faced with the devastating effects that inflation and the rise in interest rates have on wages and the working class, they have two options, that of the extreme right, leave it in the hands of the “law of the jungle” and “save yourself”. who can” as the Italian government is doing: 169,000 families have been notified that as of January 1 they will stop receiving the so-called “citizenship income”.
The “progress” government has opted for another path that they call “leaving no one behind”, and they have dedicated themselves to subsidizing everything that can be subsidized (cultural voucher, transport prices, etc.) announcing more, such as the “universal heritage ” promised by SUMAR in his program. Measures that do not solve the problem because they do not address its structural causes.
In fact, the policies of dealing with social problems based on subsidies aggravate the problem, since it generates more deficits and public debt, the working class will have to pay at some point. What’s more, it is a policy that only fattens the market who reabsorbs the subsidies, adjusting the prices to the new income. Without price control measures, subsidies are only fodder for speculation.
The EU has already announced that by 2024 fiscal relaxation is over and the public deficit will return to the top of 3% of GDP. If we take into account that NATO approved the minimum 2% for military spending, it is not necessary to be a great mathematician to deduce that 1% of GDP remains for social spending. The policy of subsidies and social expenses has an expiration date, January 1, 2024… Wow, the day the Italian government announced the end of “citizen income”, was it a coincidence?
To be radical is not to insult the enemy – “it is not necessary to insult him to defeat him”, Trotsky said -, but to go to the root of the problems to, from this perspective, face the solutions; and this is, without a doubt, in an absolutely decadent capitalism that puts humanity in an infernal spiral of ecological, social, economic and political crisis.
It is the capitalist social relations of production that are at the origin of inflation, it is consubstantial to its structure, since it lives on the sale of merchandise -whatever type it is, as Marx said- and on speculation with its prices. Any economistic, monetarist or financial measure to counteract it only increases the suffering of those who pay for it with their workforce, a suffering that will only be overcome with the socialist transformation of society.
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