Saturday 14 June 2008

Pay, Inflation, Credit Crunch and Shell

This morning I went over to the Stanlow fuel depot in Ellesmere Port, to show support for members there striking for better pay.

The pickets were understandably angry at the press reports claiming ridiculous earnings - many of which are either fictitious or based on massive amounts of overtime and unsocial hours.

The strikers work for two haulage companies doing fuel deliveries for Shell, whose profits are astronomical. Why shouldn't the drivers get a fair share?

The strike has been given a huge boost by solidarity from drivers for other oil companies, who had all refused to cross the picket lines. The drivers from this one depot normally deliver around 20 million litres of fuel a day, so the strike is certain to have a real impact.

After chatting to the pickets, I came back to Manchester and took part in a workshop on the Economics of the Pay Freeze hosted by Graham Turner, an economist whose book "Credit Crunch: Housing Bubbles, Globalisation And The Worldwide" was recently published by Pluto Press.

When most politicians and the media are either trying to blame working people for inflation or arguing that even if it isn't our fault, we are going to have to accept reduced living standards, this discussion couldn't have come at a better time.

Turner argues that the roots of the credit crunch lie in the way companies have taken advantage of defeats for organised workers to hold down real wages over the last few decades. At the same time, they have increased profits by moving work around the world in pursuit of lower wages. If wages are held down and well-paid jobs replaced by poor ones, this would normally cut consumer demand. As we haven't succeeded in winning good enough wages through collective struggle, working people have got by on credit (debt), which has expanded enormously. This expansion has happened in Asia, Africa, and Eastern Europe, not just in the US, EU and Japan.

I've heard the growth of personal debt described elsewhere as "privatised Keynesianism" - whereas in the post-war decades governments would inject money into the economy to ward off recession, in recent years it is working people who have done so by building up debt.

Turner was extremely critical of governments and central banks who seem obsessed with warding off inflation following the credit crunch, whereas he sees the main risk being a 1930s style slump. He sees strong parallels with the experience in Japan over the last couple of decades.

It's clear that the causes of inflation are rising energy and food prices. Turner is amongst those who believe the world has reached "peak oil" production and that therefore oil prices are likely to continue rising as supply declines. He argues that the main causes of the rise in food prices are the massive increase in use of wheat for bio-fuels in the USA, combined with poor rice crops which may be linked to climate change. In previous famines those of us on the left could point to there being ample food in the world (the issue being poverty). If the oil price keeps rising, using wheat for fuel instead of food will become even more profitable and famine is likely to become and even bigger threat.

Not only aren't wages the cause of rising prices, many workers are seeing their living standards eroded further by inflation - we are failing to keep up. This is often masked by "average earnings" figures including a (very) lucky few.

So what solutions were discussed? Here were a few ideas:

  • Push for wage rises above inflation, protecting workers from rising prices and helping bring housing costs under control without the need for a slump
  • Introduce controls on credit to avoid a bubble building up again and prevent debt becoming a substitute for adequate wages
  • Instead of allowing banks to repossess homes and sell them cheap - further fueling the slump, why not bring them into public ownership, helping tackle the shortage of council housing while protecting people's homes?
  • Why not nationalise the oil company profits and spend them on a mixture of developing alternative energy provision/conservation and fuel subsidies for the poor?
  • Cut interest rates to prevent a slump, rather than pushing them up to ward off inflation which isn't coming from too much consumption
If we are entering a period of recession and rising fuel and food prices, it is inevitable that groups of workers will resist, regardless of which industry they work in, or whether they happen to be in the public or private sector. I think the danger is the idea that fighting to preserve your standard of living is a selfish act which will undermine the economy and leave other workers worse off. This idea is a cancer which could eat away at workers' confidence and unity. It's not enough just to fight for better pay - we have to put those fights in a wider context if we're not going to be on the back foot all the time. I thought the workshop was a useful attempt to grapple with these problems.

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