Cooking the Books 2 – The Return of Tariff Reform

In an article in The Times, headed ‘PM has a lever to ease cost of living crisis’, James Forsyth, the Spectator’s political editor, wrote that ‘tariff reform would be a good place to start’. He suggested the government ‘scrap tariffs on all imports bar certain sensitive agriculture goods’, claiming that ‘abolishing tariffs on what consumers buy would help shoppers.’

The currently rapid rise in the cost of living – the index of this went up by 5.4 percent in the 12 months to December – is a crisis, but not the same for workers as for employers. For workers, it represents a fall in their standard of living. The remedy for this is an increase in money wages. Given the current labour shortage, this becomes a crisis for employers. Even without trade union pressure, the play of supply and demand on the labour market will bring about an increase in money wages:

‘UK job vacancies surge to record high of 2.7 million as labour shortage worsens’ (Independent, 12 November).

‘UK labour shortages drive up wages’ (Financial Times, 16 November).

‘Moving jobs means big pay rise as firms fight for staff’ (Times, 12 January).

The FT reported:

‘More than half of FTSE 100 companies are now paying employees and contractors the voluntary “living wage” — which takes into account rising living costs — of £9.90 an hour outside London and £11.05 in the capital, compared with the current statutory minimum of £8.91, rising to £9.50’ So, the government has an economic as well as an obvious political reason to do something to ease the rise in the cost of living, and no doubt will.

What about ‘slashing import tariffs’? Would that work?

In the period between the end of the Napoleonic Wars in 1815 and the outbreak of WW1 in 1914, tariffs on food imports were a burning issue. After the defeat of Napoleon, the landlord class, which controlled political power, continued the war-time tariffs imposed on imported cereals as this kept the price and so rents up. However, a high price of bread meant higher money wages.

The factory owners resented this and launched a mass, and ultimately successful, campaign in the 1840s to repeal the ‘Corn Laws’. They knew that reducing the cost of bread would also reduce money wages, so making their exports more competitive. They managed to convince large sections of the working class for well over sixty years that tariffs on imports, a policy the Tories had begun to advocate under the name of ‘Tariff Reform’, would increase their cost of living and so reduce their standard of living.

But, as Engels explained in 1881 in an article on ‘The Wages Theory of the Anti-Corn Law League’:

‘The average price of a commodity is equal to its cost of production; the action of supply and demand consists in bringing it back to that standard around which it oscillates. If this be true of all commodities, it is true also of the commodity Labour (or more strictly speaking, Labour-force). Then the rate of wages is determined by the price of those commodities which enter into the habitual and necessary consumption of the labourer. In other words, all other things remaining unchanged, wages rise and fall with the price of the necessaries of life’ (Labour Standard, 9 July 1881).

If the cost of living (the cost of producing the commodity labour-power) goes up there would be an upward pressure on wages. Which is what is happening today. ‘Slashing import tariffs’ would reduce this pressure; and so benefit employers; not that, for various reasons, it is likely to be adopted. It wouldn’t make workers better off, at most just put a brake on their standard of living getting worse.

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