The Cost of Living Crisis

Labour Party politicians at national and local level are going around talking about a ‘cost of living crisis’. Presumably their spin-doctors have told them that this could be a vote-winner. They could be right as it’s true that over the past few years the cost of living has being rising faster than wages and welfare benefits (except the state pension). But what can Labour do about this? Basically, nothing. They are not even promising to do much. It’s just a ploy to give the impression that they care about people’s concerns.

The cost of living is the cost of buying the things people need to keep themselves fit to work or, in the case of welfare recipients, to maintain a minimum standard of living. It goes up all the time these days as maintaining a 2 percent rate of currency inflation is deliberate government policy. But, with inflation, wages, which are also a price, go up too. As long as they go up at the same rate or more than the price of the things wage and salary workers need to buy then there is no extra problem,  no ’cost of living crisis’. There’s still the problem, of course, that they are never enough for a decent standard of living and that employers reap a profit from their work.

Wages at least keeping up with prices is what normally happens in the upswing phase of the capitalist business cycle, due to the law of supply and demand and trade union pressure. During the downturn phase, on the other hand, the increased unemployment exerts a downward pressure on wages which the unions are not always able to counter, and wages rise less than other prices. In this case, there is an additional ‘cost of living crisis’. Which is the situation today and which the Labour Party is trying to exploit for vote-catching purposes.

In theory there are two ways of dealing with this: either increase money wages more or freeze prices. In the dim and distant past the Labour Party would have promised to increase people’s incomes as the way-out. But not today. Experience of being the government has taught them that under capitalism priority has to be given to profits and profit-making as this is what makes the system go round. Increasing wages at the expense of profits is a non-starter.

As to increasing benefits, there’s absolutely no question of them doing this since they are anxious to get rid of their once attractive image as ‘the welfare party’. Their spin-doctors have told them that, so successful has been the media campaign to present welfare recipients as ‘scroungers,’ this is now a vote-loser.

So, price control is the only option left. But, even here, they are not being serious. All they are promising is a two-year freeze on gas and electricity prices. But what about all the other bills for everyday living expenses? These are not going to be frozen as Labour know, once again from the experience of being the government under capitalism, that price controls don’t work, at least not for any length of time and not without causing other economic problems. And they’re nothing to do with Marxism as the Daily Mail claims. That’s about getting rid of prices  – and wages and profits –altogether.

The promise to freeze energy prices for a while is just a gesture designed to give the impression that they care. Unfortunately enough people seem to have been taken in to put Labour ahead in the opinion polls. To counter this, and give the impression that they too care, the Tories have floated the idea of an increase in the minimum wage. In real terms this is 10 percent lower than it was before the slump broke in 2008. The ulterior motive here is clear. It’s a move to save on government spending as it will reduce the amount paid out as ‘tax credits’, the subsidy to low-paying employers introduced by the last Labour government. Those on the minimum wage would get an increase in what their employer pays them, but a decrease in what the government does.

Faced with these cynical vote-catching ploys, most people won’t really think it makes much difference which party or parties form the government. They are right. Whatever the politicians say to get elected, governments have virtually no control over the relationship between wages and other prices. This depends on which phase of its business cycle capitalism is in. Governments have not much choice other than to go along with what capitalism throws at them. That’s why they are always betraying their promises. Not because they are necessarily dishonest, but because in promising measures to make capitalism work in the interest of wage and salary workers they are promising the impossible.

For socialists there is also a wider question. Why is there a ‘cost of living’? Why do we have to pay for the things we need to live and enjoy life? Given the level of productivity achieved today, we could go over to a socialist society, based on the common ownership and democratic control of the means of production, where people could have free access to what they need in accordance with the principle ‘from each according to their ability, to each according to their needs’. Then nobody would have to worry about where the money to pay the next bill is to come from as they wouldn’t be charged for access to essentials such as heating and lighting.

Adam Buick

Leave a Reply