The continuous reoccurrence of crises has, in both Marxian economics and the wider economic field has often been perceived as a moment of reckoning, a chance to examine the fundamentals of the current socio-economic system and the contradictions that lie behind them. What has now across the United Kingdom and further afield been labelled the cost of living crisis marked by spiraling inflation, a rise in the prices of essential goods and corresponding fall in real wages. By now the origins of these various phenomena have been found to be relatively varied with some being traced to abnormal climate conditions1, the slowness of the Organization for the Petroleum Exporting Countries (OPEC) to respond to the increased demand following depressed consumption at the start of the COVID-19 pandemic and their current desire to keep production low to avoid future surpluses.
The current Russian hostilities have further intensified the crisis, with numerous European countries speeding up their plans to diversify from Russian sourced natural gas2 which has so far included the suspension of the Nord Stream 2 pipeline project and the corresponding response by Russia to reduce and at the time of writing suspend delivery of natural gas through the Nord Stream 1 pipeline. The issues have further been exacerbated due to an ongoing global shipping3 crisis caused in part to labour shortages following a sudden drop in demand for commodities, adverse climate conditions and in the UK newly introduce barriers to the employment of logistics workers. At the time of writing the Gazprom, the Russian majority state-owned multinational energy company have announced the indefinite closure of Nord Stream 1 further magnifying the rapidly increasing inflation.
Inflation is as famously pointed out by Milton Friedman, typically thought of as a monetary phenomena, behind which lies the assumption that an increase in the supply of circulating currency leads to a rise in prices. Which has lead to some of the criticisms of various stimulus measures as inherently inflationary. Such a sentiment has also been echoed by the former Chancellor of the Exchequer and now current Conservative leadership candidate, Rishi Sunak5 who spoke of fiscal stimulus exacerbating the inflationary pressures in his statement to the House of Commons on May 2022. Behind this thought process as always lies a particular view of political economy which blames public spending for exacerbating inflationary pressure, the thought process being that an increase in the supply of money6 caused by government spending correspondingly leads to an increase in the average price levels, or a devaluation of the currency.
However one part of Friedman’s statement has often been left out, specifically that “Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.” while stimulus had kept people alive and able to support themselves as trade was temporarily suspended, paused or slowed, with COVID safe measures often reducing capacity whilst raising costs. As trade recommenced many of these businesses found themselves either lacking the requisite staff many of whom had either left to avoid exposure, or had moved into fields that had experienced an upturn due to the nature of work during the pandemic, for example front line health roles and logistics. In the UK this has been further exacerbated by factors such as Brexit which not only introduced new barriers to trade, with research by the think tank the ‘UK in a Changing Europe’ suggesting that at least 6% of the food price rises could be derived from added costs to business caused by changing trade agreements6. Much as the government spoke about the ability to more easily source cheap food by reducing tariffs in line with WTO rules, however the current increased costs of transport and pressure from local food producers who, pointed out that such a strategy would be not only challenge food standards but also local farming jobs7.Broadly then most inflation can be thought of as being largely supply side, as suppressed production struggles to keep up with increased demand, with the added impact of geopolitical conflict, between one of the worlds largest producers of natural gas and one of the largest exporters of wheat. The response from the central bank, with this in mind, has been somewhat puzzling, raising interests rates to reduce investment and ‘cool-off’ the economy might seem like a way of dealing with the demand side, but neglects the fact that in order for businesses to respond they will need access to, among other things, sources of investment and credit leading to continued issues with supply.
As the contradictions mounts, a broader question emerges, with the scale of the various costs being levied on small businesses, care homes and the general public, what is the possibility of rupture within the capitalist mode of production? Currently activist movements on the ground are suggesting measures such as the mass nonpayment of bills support for which in the UK has risen to an estimated 1.7 million people8, concerted strike action which according to the Centre for Economics and Business Research is estimated to cost the UK economy an estimated £100 million pounds so far9 among the revival of many of the pandemic mutual aid groups, several of which became crucial pillars of support for their local communities10 as well as in some cases moving the distribution of surplus food, medication and DIY labour outside of the conventional cash nexus. Amidst the crisis interesting fissures have appeared in the account presented to the public by the ruling class, with the appearance of numerous figures from the trade union movement who have pushed back on familiar narratives regarding the impact of wage increases on business profitability with not only experiences and stories from the front line of the labour struggle but a timely reminder of the political nature of economics.
In recent TV spots Eddie Dempsey highlighted the number of billionaires that have risen amidst one of the sharpest declines in real wages11 and Mick Lynch revealed the significant discrepancies in remuneration between executives and and frontline staff which recently rose from 34-1 to 63-112. This is particularly interesting when compared with a recent interview with the current Prime Minister Liz Truss who when asked about the “fairness” of her tax cuts which look to continue the the trend of upwards redistribution, simply responded that she believed this to be a fair arrangement13.
One of the fastest growing campaigns, aimed at addressing this crisis Enough is Enough is based around five main points, a wage rise to meet the cost of inflation, a cut in energy bills, an end to food poverty, affordable housing and fair taxation. For many I suspect this might seem much like a familiar return to terrain often occupied by the mainstream left, who in lieu of the overthrowing of or the break with British capital instead aim for its restoration. Despite this the name does reveal an underlying discontent with the given settlement and given the inability of the current national government to offer much to address the substance of the issues raised perhaps the possibility of further radicalization.
Some evidence of this can be seen by the fact that consensus has also been shifting on broader questions with the majority of the people who voted for the ruling party now, counter to neoliberal dogma, now asking for the temporary public ownership of utilities14. Additionally while Liz Truss has in the short term opted to reclaim the burden of subsidizing energy bills, which is estimated to go over 100bn, through higher debt and general taxation15, the public have supported a windfall tax on energy producers who have reported over £170 billion in excess profits.16 Among the details of the TUC’s proposals is additionally the idea of a right to energy17, this again does not stop the commodification of energy provision in itself however it does challenge the idea of utility provision merely being a commercial enterprise like any other. A similar argument was made again by the New Economics Foundation, who suggested having a free amount of energy with a higher marginal cost on excess usage18.
Similarly in a sun article setting out parts of the newly crowned Prime Minister Liz Truss’s policy platform, among the listed items was a commitment to lower the costs of natural gas produced in the UK to bring down energy bills by forcing producers to charge less19. While this again does not signal the end of the commodity form, and I would question whether it is actually a promise that can be delivered on at all, it does perhaps signal a chance in the primacy of free-market logic as an intractable law.
The notion of ideology has been a firm fixture of the current leadership contest, with words like libertarian, free-market, small-state being used to describe the newly crowned prime minister’s stance on everything from trade to public spending to her firm commitment to cut taxes however an examination of her policies by three economists who backed her campaign reveal a willingness to engage in far more public spending than one might expect from a conservative, however as outlined in the ‘Trussnomics: A Beginners Guide’20 published in The Spectator rather than fund this spending through taxation, Truss appears intent on letting the deficit increase with the belief by building a consensus more open to the whims of private capital the UK will be able to borrow on markets who recognize the high-growth strategy being pursued.
This signals distance between the deficit hawks behind the last wave of austerity and once again the possibility of a split not with the capital relation itself but at least a decade of conservative thinking which prioritized reducing the deficit above public spending. This shift in strategy may end up obscuring some of the key details, vital for a left intervention most notably the question of distribution, inequality and the fact that underwriting the costs of supply-side shocks will, in itself do little to secure the UKs long-term energy future, nor the long-term functioning of its economy, with the energy price freeze for businesses only set at six months23. Many have already highlighted this, with the grassroots campaign Don’t Pay pointing out that bills will still double leading to a real fall in wages, despite over £170bn public money being used to effectively subsidize private corporations.
As raised in ‘Planet On Fire: A Manifesto For The Age of Environment Breakdown’ such crises could rather than be simply a method of preserving existing state of the energy market instead being a route to transformation, whether that be through changing the legal framework allowing for greater co-ordinationation rights being granted to a wider range of stakeholders expanded beyond the usual shareholder obligations, binding commitments to environmental targets and greater collective bargaining rights for workers creating the grounds for not only greater public ownership of the economy.
Parts of the familiar terrain on which the parliamentary left typically struggle, namely the use of state spending as a solution to the problems of capitalism, appears to be shifting, while it’s yet uncertain whether “Trussnomics” is, or can be, the answer to several years of slowed growth, stagnant wages, and falling living standards one thing does appear to be clear, attempting to wage the struggle on the same ideological grounds as prior to the cost-of-living crisis before is a project unlikely to succeed and setting out a vision for an economy transformed beyond the question of public spending increases is urgently needed.