Cooking the Books 1 + 2
Levelling Up
Introducing the government’s Levelling Up White Paper in the House of Commons on 2 February, Michael Gove declared that it ‘sets out our detailed strategy to make opportunity more equal and to shift wealth and power decisively towards working people and their families’.
Steve Baker, the Tory MP for ‘Singapore-on-Thames’, denounced the White Paper as ‘socialist’ and as a policy ‘that would not be out of place in Labour’s manifesto’ (bit.ly/3Ls1r6f).
Actually, it had already appeared in a Labour Party manifesto, that for the October 1974 general election, which ended:
‘We are a democratic socialist party and our objective is to bring about a fundamental and irreversible shift in the balance of wealth and power in favour of working people and their families.’
So Baker had a sort of point, except it is wrong to describe either Gove’s White Paper or the Labour Party as ‘socialist’. The Labour Party may stand for political democracy (though it is not organised democratically internally) but it has never been a socialist party. It used to once stand for nationalisation but that was only state capitalism. It has always talked about standing for redistributing wealth to working people but that’s reformism as it assumes the continued existence of the rich, and has never worked for long as the operation of the capitalist economy reverses any moves towards this, geared as it is to continually bring about the accumulation of wealth in the hands of a few.
Labour won the October 1974 election but, capitalism being capitalism, they were unable to deliver on that declaration. That was a year after the post-war boom had come to an end and the Labour government’s attempt to spend its way out of it led only to stagflation. Far from redistributing wealth in favour of workers the government tried to impose an incomes policy to keep wages down.
What Gove proposes is all smoke and mirrors. Shifting power to working people turns out to be giving local politicians more say in how central government money should be spent in their area, while shifting wealth to working people is not putting any money in their pocket but spending more on infrastructure, education, health and housing in the chosen areas instead of in London and the South East (whose ‘working people’ are presumably considered to already have enough wealth and power). Anyway, it’s not supposed to happen until 2030, by which time it will be only be remembered as another broken promise.
It is hard to believe that Gove, who had been a well-informed political journalist before becoming an MP, did not deliberately choose to use the phrase ‘shift wealth and power to working people and their families’. This would be to rub in the Labour Party’s face that the present Tory government had stolen their clothes. Already in an article in the Daily Telegraph on 1 January last year Johnson himself had praised the discovery of the AstraZeneca vaccine as an example of a successful collaboration between ‘state activism’ and ‘free market capitalism’. State activism is what the likes of Baker oppose (and mistakenly regard as socialism) but it’s traditionally been Labour Party policy.
As, having abandoned state capitalism as their long-term goal, Labour now accepts that the ‘commanding heights of the economy’ should remain in the hands of private corporations, it too accepts the operation of capitalist market forces. So, it really is ‘Labour, Tory, Same Old Story’. No wonder the Labour Party has nothing much else to do than criticise the Prime Minister’s personal behaviour.
Go on, ask for a pay rise
‘Don’t ask for a pay rise, workers are told’ was the headline in the Times (4 February) referring to the Governor of the Bank of England, Andrew Bailey, who had said. ‘While it will be ‘painful’ for workers to accept prices would rise faster than wages, some moderation of wage rises is needed to prevent inflation becoming entrenched.’
According to the Independent:
‘Mr Bailey, who is paid around £500,000 per year, reiterated his assertion that workers should show ‘restraint’ when asking for salary increases. The governor encouraged companies not to give staff big pay rises, warning it could lead to a spiral of higher prices being followed by higher wages, pushing inflation higher’ (bit.ly/3sCFkBH).
The assumption here is that wage increases can spark off a ‘wage-price spiral’, but wages are a price and go up with the prices of what workers need to consume to recreate and maintain their labour-power. Wages follow prices, not vice versa. So, if you want to talk about a spiral, ‘price-wage spiral’ would be more accurate.
The February report of the Monetary Policy Committee of the Bank of England that Bailey was commenting on estimated that, due to the increase in price of gas and some other imported goods, by April the annual rate of increase of the Consumer Price Index will be 7.25 percent. The Times again:
‘The last time that inflation reached the levels forecast for April this year was in 1991, when it hit 7.9 per cent. The committee expects inflation still to be above 5 per cent in a year’s time. People will face the worst hit to real incomes since comparable records began in 1990 as take-home pay falls by five times the amount it did during the 2008 financial crisis.’
The report also pointed out that, with unemployment comparatively low at 3.8 percent, there is a ‘tight’ labour market.
All this means that workers both need a compensatory wage increase and are in a good bargaining position to get one. So why shouldn’t they go for it? They would be mugs (or masochists) not to. So good luck to them.
It is significant that, while the Governor told workers not to ask for a wage increase to cover the rise in prices (ie, to accept a cut in their real wages), he did not ask those capitalist employers in a position to do so, not to increase their prices (ie, to accept a cut in profits).
The effect of workers not getting a wage increase would be to increase profits. Maybe this is what Bailey had in mind. More likely, however, is that he really believes that wage increases can cause prices to rise and that wage restraint can prevent ‘inflation’.
These days (as in the quote above from the Times) ‘inflation’ has come to mean any increase in the level of prices as measured by such indexes as the CPI. But this fails to distinguish between two different ways in which this can happen. One is classic inflation where the monetary authority issues more money than is required by the economy, ie, over-issues, or ‘inflates,’ it. The other is when the index goes up due to an increase in the price of some key good (as currently gas) or in the prices of a whole range of goods. The Bank of England is in fact charged with trying to ensure that prices go up by around 2 percent a year, ie, that real wages go down by that amount, other things being equal.
For socialists there is a wider question. Why is there a ‘cost of living’? Why do we have to pay for the things we need to live?