Economic pain for all or for the poorer majority

On Wednesday, the US Federal Reserve increased the federal funds rate by three-quarters of a point, continuing the fastest pace of rate hikes since the 1980s.

In his comments Wednesday, Federal Reserve Chairman Jerome Powell declared that “economic pain” was necessary to reduce inflation. He went on to say that the members of the Federal Open Market Committee expected unemployment to rise from the current 3.7 percent to 4.4 percent in 2023, an increase that would mean the destruction of 1.3 million jobs. Powell made it clear that the Fed was willing to throw the economy into a recession, destroying millions of more jobs.

Powell complained that the Fed’s recent rate hikes had not been sufficient, saying,

“Despite the slowdown in growth, the labor market has remained extremely tight, with the unemployment rate near a 50-year low, job vacancies near historical highs, and wage growth elevated.”

In several countries, we do notice shortages in several jobs, in particular in the service sector, like health care, nursing, and education, but also in the horeca (hotel and restaurant sector). This staff shortage increased even further after the Corona lockdown and now creates a lot of problems in different sectors. Most people are confronted by such a staff shortage when they want to take a plane. At airports they often have to line up for hours, because there not being enough security and customs agents.

I personally find it strange the Fed expects

“supply and demand conditions in the labour market to come into better balance overtime, easing the upward pressure on wages and prices.”

But it does not come to the good for the citizens, they are pushed into more poverty by the rising prices of necessary products and being abandoned by their bosses who are encouraged by the government not to give in to give better salaries.

Clearly the Federal Reserve Chairman Jerome Powell lets the world know that people would have to endure economic pain

“how long it takes for wages … to come down.”

In other words, when Powell and the ruling class talk about fighting inflation, they are not talking about stopping corporate price-gouging and bringing a halt to exaggerated profits. No, they are talking about ensuring that real wages continue to fall, driving up corporate profits.

I am convinced that it is not the wages that are driving up inflation. More than once our leaders want us to believe that and also try to bring fear over the people that they would lose power of concurrence.

For the U.S.A. it is even more ridiculous that the government want people to believe they should reduce their income even more. Real average hourly wages of US workers have fallen by 2.8 percent over the last 12 months. Price gouging and record corporate profits account for 53 percent of inflationary price increases, according to the Economic Policy Institute, while wages — which have fallen in real terms over the last year — account for no more than 8 percent. But the American, Britain and Belgian ruling class considers even a small, nominal pay rise completely unacceptable and is determined to keep its foot on the neck of the working class.
For them, giving in to workers’ demands to raise wages and use companies’ excess profits to mitigate energy costs is not going to work.

For sure the population shall have to learn how to beat the inflation.

Photo by Karolina Grabowska on Pexels.com

In many countries consumers tend to hear less about non-commodity costs, but they make up an increasingly large proportion of energy bills due to the introduction of large-scale renewable subsidies to help drive towards decarbonising energy and the ambitious goal of Net Zero. Alongside this, network and balancing costs have increased due to the growing impact of new sources of energy generation. Governments at the moment have earned a lot of money by levying excise duties and taxes, such as VAT. With that extra income, they could arrange some matching for less well-off households.

At the moment, the super wealthy are laughing all the way to the actual bank, filling their pockets with extra income from the dividends on the energy shares. In several countries, those super-rich are further pampered by the government. In this, they are laughing in their fists. This while increasing numbers of the rest of the population come to rely on food banks.

The danger exists that in the USA and some other developed countries the government chooses to frighten people with the economic situation so that they shall reduce expenditure and have the banks using their savings as cheap money, at the same time using the threat of economic destitution as a battering ram to suppress a wages movement by the working class and impose even more brutal conditions of exploitation.

The squeeze of fear of losing jobs and having even less money to bear increased costs means that many workers will be willing to respond to proposals to cut wages yet again. In doing so, the bosses feel supreme now that they can wield the means of pressure of possibly job visions and the state supports them in doing so, claiming that one would otherwise lose competitiveness.

The Washington Post columnist Megan McArdle, praises former Federal Reserve Chairman Paul Volcker for raising interest rates to nearly 20 percent in the early 1980s and provoking

“the country’s worst economic recession since the Great Depression”

that put “one-tenth of the labour force” out of work. Volcker sent a clear message, McArdle said,

“If inflation creeps up, the institution will do whatever it takes to get it back under control.”

Some seem to have forgotten how Volcker took these measures to beat back a wave of militant struggles by workers against the ravages of inflation, including the 111-day coal miners strike in 1977-78. The “Volcker Shock” led to a wave of plant closures, mass lay-offs, savage wage cuts and Reagan’s smashing of the air traffic controller strike, which the Democratic Party-appointed Volcker called the most important single action

“the administration took in helping the anti-inflation fight”

because it transformed

“the climate of labour-management relations” both “profoundly” and “constructively.”

It can well be that the inflationary crisis shall be leading to a resurgence of the class struggle, because there is a good reason that the lower and middle class come to stand on their leg and raise their voice.

It is good to see that in certain countries militant strikes to demand substantial wage increases are coming off the floor, and opposing brutal working conditions, as corporations seek to squeeze more out of fewer and fewer workers. Indeed, the squeezing of workers and the widening of inequality between the common people and the rich must end.

The Wall Street Journal sounded the alarm in an article titled

“Freight Labor Unrest Is Going Global and Weighing on Supply Chains,”

which warned,

“From seaport docks in Los Angeles and Liverpool to rail yards in Chicago and warehouses in Europe and the U.S., clashes between cargo workers and management have been rising this year, adding complications and uncertainty to the flow of goods around the world.”

We can not allow the capitalist governments and central banks in Europe to follow the US Fed’s lead in carrying out a pre-emptive strike against this movement. UK Prime Minister Liz Truss instructed railway employees to “get back to work” and end their strikes over pay, job security and working conditions. She is working closely with the trade unions, which suspended the strikes out of respect for Queen Elizabeth.

If governments are not going to listen to their citizens, the danger also exists that discontent will grow to such an extent that more and more people will turn against the ruling government members and seek solace from far-right parties that blame others for everything and promise to stand up for local people.

The fight to defend both the right to a job and the right to a decent standard of living will entail a direct challenge to the capitalist system and the socialist transformation of the economy to satisfy human needs, instead of profit.

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Published by Marcus Ampe

Retired dancer, choreographer, choreologist Founder of the Dance impresario office and archive: Danscontact-Dansarchief plus the Association for Bible scholars, the Lifestyle magazines "Stepping Toes" and "From Guestwriters" and creator of the site "Messiah for all". - Gepensioneerd danser, choreograaf, choreoloog. Stichter van Danscontact-Dansarchief plus van de Vereniging voor Bijbelvorsers, de Lifestyle magazines "Stepping Toes" en "From Guestwriters" en maker van de site "Messiah for all". View more posts