Inflation and the Specter of World Revolution

By James Petras

"Inflation is here big time", Charles Holliday CEO, Du Pont. June 24, 2008

"The sustained rise in the price of oil and commodities has hammered
industries.and deepened fears of global inflationary spiral - which has
already provoked riots across Asia - as producers pass on higher costs to
manufacturers and consumers." The Financial Times June 25, 2008. page 1

20/07/08 "ICH" -- - Inflation and all of its repercussions for wage and
salaried workers, fixed income middle classes, as well as manufacturers and
transport industries is splashed all over the financial pages of the major
newspapers throughout the world. Inflation is the great solvent that
dissolves paternalistic ties between employers and workers, landowners and
peasants, clientele-patronage regimes and the urban poor and sets in motion
violent protests against private property and previously popularly elected
regimes. Historical religious, clan, party, ethnic, tribal, caste and other
differences are temporarily suspended, as Hindus and Moslems in India,
Communists and Christians in the Philippines, peasants and workers in China,
industrial workers and public employees in Egypt, blacks and mulattos in
Haiti.join together in sustained mass protests against inflation which
profoundly and visibly erodes their living standards from week to week, in
some cases from one day to another.

But the left, the Anglo-American left? Where and what do our
most prominent public intellectuals, including those with booking agents
charging five-digit lecture fees, have to say about this world-wide revolt?
Nary a word is found in left, center-left magazines, web sites and blogs.
During their lucrative lectures, they thunder against the immoralities of
war and climate change. They hurl imprecations against rulers and
exploiters and their immoralities, and the bellicose interests they
represent (with special exemption of the ubiquitous Zionist Power
configuration). Yet there is hardly a mention of the purveyors of the
global cancer which is literally eating away the bread of everyday life of
billions of people. They talk of a 'peace movement', (which has
disappeared); of one or another dissident electoral candidate; and reminisce
over youth revolts 50 years ago. But like the intellectuals who sipped
their wine while the revolting masses headed for the Bastille, they are at
best irrelevant, unblinking spectators to the greatest turmoil of the new
millennium.

The targeted capitalists and their regimes and the downwardly
mobile middle classes and the masses facing destitution are much more aware
of the centrality of inflation to their profits, living standards and
everyday life and the threats of popular upheavals. The Anglo-American
left, in all of its variants, is destined once again to irrelevance in the
face of world-historic challenges and opportunities. This contrasts with
the intense preoccupation of the capitalist class with inflation. It is the
central topic of weekly meeting of central bankers the world over. Empty
resolutions are approved at the monthly conferences convoked by
international financial institutions. Almost daily there are pronouncements
by finance and economic ministers. Yet the complacent indifference of our
intellectuals is striking.

To awaken from intellectual stupor and political irrelevance in
the face of the mass revolt against inflation, it is necessary for the
Anglo-American left to come to grips with the scope, depth and significance
of accelerating inflation in our times. Inflation is pre-eminently a
political phenomenon in every sense of the word: it is a product of public
policies which deeply affect markets, supply and demand, consumers,
producers and speculators. Inflation is the detonator of mass political
action and offers historic opportunities for broad-based 'regime
transformation' and even revolutions in a way similar to the way the
destructive imperial wars have in the past. Like wars, inflation devastates
vast sectors of society, puts them all in common deteriorating positions and
projects their worst nightmare - a regression into the abyss of mass
destitution.

The Centrality of Inflation
The most threatening challenge to contemporary imperial regimes
and their client nations is out of control inflation and a raging rise in
food prices. Writers on the Left who write of the end of empire and focus
on the financial crises (in the US), or the energy crises (in Europe), or
the grievance of mass peasant protests over corruption in China, have
overlooked the one grievance which cuts across all regimes of the world
(with greater or lesser intensity but everywhere growing more powerful)
namely inflation, especially in vital necessities such as food and fuel
costs.

For Marxists, their narrow focus is on the class struggle at the
workplace and related issues of unemployment and deteriorating work
conditions as the detonator of mass unrest and organized anti-capitalist
action. For environmentalists, the point of mobilization is climate change,
peak oil, environment degradation and the resultant deterioration of human
existence. For anti-imperialists and related anti-war activists, it is the
US, EU and Israeli wars in the Middle East which represent the great moral
challenges of our times and the greatest danger to world peace.

While these progressive analyses and prognoses are righteous in
intent and worthy causes to support, they overlook the fact that they are
not the points of greatest conflict between imperial and client regime and
the great majority of humanity today. The greatest concern and the issue,
which has consistently mobilized hundreds of millions over the past year, is
inflation, rising food and fuel prices, declining living standards, hunger
and the everyday experience (and reality) that conditions are deteriorating
with no end in sight. The point of greatest contention today is not the
workplace (or point of production) but in the 'market', the place of
consumption, where money earned from production purchases less and less of
the necessities of life.

Inflation: Detonator of the First Sustained World Revolt

In Asia, particularly Pakistan, India, Indonesia, South Korea,
Philippines, Nepal, Mongolia and China, hundreds of millions of workers,
peasants, artisans and low-paid self employed workers, as well as
house-wives and pensioners have engaged in sustained mass protests as they
experience a decline in the quality and quantity of food purchases as prices
skyrocket. In Africa, hunger stalks the land and major food riots have
occurred from Egypt through Sub-Saharan Africa to South Africa. In the
Caribbean, Central and South America, food riots have led to the overthrow
of regimes, mass protests, road blockages from Argentina, Bolivia, through
Colombia, Venezuela and Haiti.

Recognizing the revolutionary potential of 'hunger politics'
induced by inflation, even right-wing, as well as center-left regimes have
attempted to limit unrest through (1) food subsidies, (2) raising interest
rates and cutting public expenditures to slow down the economy and lessen
inflation (Brazil), (3) lowering food exports in order to supply local
consumers (Vietnam, India, Indonesia), (4) enacting special laws against
hoarders and speculators (Philippines) and (5) repressing mass protest
(Haiti, Egypt). None of these short-term, local ameliorative measures have
worked: Controls of exports have not lessened imported inflation and
wholesalers/retailers have not complied with price controls and engaged in
hoarding and black market activity. While agricultural production has
increased, the growth of non-food products (ethanol for bio-gas) has grown
even faster. The ineffectiveness of these 'reforms' reflects the failure of
agricultural policies over the past half-century, which have focused on
financing large-scale specialty export agricultural crops and
urban-service-industrial complexes, while neglecting basic food production
by family farmers for local consumption. Countries, as diverse as Cuba,
Egypt, China and the Philippines, have divested from agriculture to service
(tourism in Cuba), recreational facilities for the wealthy (golf courses),
agro-exports (Brazil), real estate (China), technology centers and
commercial shopping malls (Philippines and India). In the process they have
displaced food producing small farmers, depriving them of credits, price
incentives and infrastructure - not to mention confiscating rich
agricultural lands from indebted farmers for conversion to golf courses,
exclusive subdivisions and shopping malls.

The result is the convergence of ongoing protests by
dispossessed peasants and farmers, suffering from lack of access to land,
irrigation and agricultural credits, and masses of poor urban consumers
suffering from inflation of food prices. What is at fault is not merely the
prices but the social relations of production. State priorities and the
configuration of class power, which control the state and decree economic
strategies, reorganized the economy at the expense of local low-cost and
available food production. None of the ameliorative measures taken by
contemporary regimes have even approached the structural roots of the
inflation crisis and the rising cost of food.

Inflation and Structural Vulnerability

Inflation has had such a devastating effect today - even more
than in the past - because of several profound shifts in the occupational
and social organization of the economy. Worldwide class-based trade unions
have declined in numbers and capacity to safeguard the interests of urban
and rural wage labor. With this decline has come the abolition of wage
indexes, sliding scales of wages, which allow workers wages to keep up with
the rise of prices. Secondly the vast growth of informal and service sector
workers are not organized to raise wages in response to increases in food
prices. The growth of pensioners with fixed income has increased their
vulnerability to inflationary prices, leading to sharp declines in
purchasing power. The growth of contract labor, precarious labor contracts
has undermined all possibilities of negotiating labor contracts which allow
wage and salary workers to keep up with inflation.

Thirdly, the dominant ideology, promoted by all capitalist
economists and accepted by many trade union officials, claims that wage
increases, and wage indexing induces inflationary pressure. This leads to
collusion between 'labor and capital' in creating a 'lag' between rising
prices and wage adjustments, resulting in declining living standards.
Fourthly this pernicious and erroneous doctrine deflects attention from the
real causes of inflation -- declining capitalist investment in the
productive economy, the vast increase of capital flowing in the paper
economy, the huge increases in profits and the grotesque salaries, bonuses
and payoffs to senior executives, totally unrelated to 'performance'. As a
result there is a decrease in the production and circulation of goods of
mass consumption. The growth of a vast parasitical 'service sector' with
money pursuing fewer actually available goods has led to higher prices.
Most of the affluent classes (the upper 20%%) can afford the higher prices,
in part because they can pass on the added costs to the mass of working
class and urban and rural poor. In other words, in the contemporary
economy, inflation benefits the wealthy because they pay their workers in
deflated currency, while they can take advantage of inflation to further
jack up prices and then income. In other words the upper classes have
fortified their economic positions to take account of inflation through
their power over prices, income and other compensations in a way that wage
workers and people on fixed income and other vulnerable sectors cannot.
Bankers protect their loans via adjustable interest rates. Monopoly
resource owners jack up prices to retain profits. Wholesalers mark up
prices to compensate for higher commodity prices. Large-scale retailers
squeeze final consumers - the great majority at the bottom of the production
and distribution chain.

Inflation: The Targets of Revolt

The revolts of the mass of vulnerable consumers are directed at
retailers, wholesalers and the government, which are held responsible for
the higher prices. Governments are charged with deregulating the economy,
subsidizing the profiteers, promoting profiteering, complicity with
monopolies, imposing wages and salary constraints without commensurate
control over prices and basic necessities. Where some subsidies or price
controls are decreed they are not consistently implemented or enforced.
Worse still, widespread evasion, hoarding and black-marketeering is rife
because of official complicity and corruption. According to regime
bureaucrats it is 'easier' to control wages than prices - hence the uneven
and unjust enforcement. Moreover capitalist producers frequently dis-invest
or withhold products especially necessities from the market as an effective
weapon against price controls, forcing scarcity and inducing popular
discontent with the incumbent regime. Reformist policies and regimes then
are forced to choose between 'lifting controls' to increase profits and
prices or maintaining controls and facing the wrath of masses confronting
empty shelves. Few if any contemporary regimes are willing to make credible
threats to intervene in economic sectors or even enterprises, withholding
goods or investments. Even less likely are regimes willing to actually
mobilize workers, farmers and consumers to take over strategic economic
sectors vital to popular consumption.

Anti-Inflationary Revolts and Extra-Parliamentary Politics

Given the total dominance of unhindered and unregulated 'free
market' ideology among all the leading political parties and within the
executive, legislative and administrative branches of government, there are
no institutional political vehicles through which the consumers can act to
arrest their declining living standards, their decreasing capacity to meet
basic needs and in many regions avoid growing malnutrition and hunger.
Because of the all-pervasive and powerful stranglehold of free market
capitalism among all national and international decision makers, all the
meetings convoked by international organizations to deal with the 'food
crisis' (narrowly defined as 'hunger' induced by scarcity and exorbitant
food prices) have repeatedly failed to come up with practical and workable
solutions. At best they simply pledge funds for temporary food aid,
subsidies and proposals for technical or market assistance. No meeting
challenges the power of corporate agriculture to raise prices, allocate
investments to more profitable fuel use rather than food; no crisis managers
suggest massive shifts of credits from agro-exporters to family farmers; no
effort is made to end price gouging by wholesalers or retailers. In other
words, the crisis managers are of the same class as the beneficiaries of
high prices and scarce food producers - and therefore they operate within
the same market rules, which perpetuate higher profits and declining living
standards.

Given the failures of official policies and the lack of any
institutional solutions of redress, the only outlet for downwardly mobile
masses is extra-parliamentary opposition; the sacking of trains, stores and
wholesale warehouses; the overthrow or voting out of office of incumbent
regimes; the blocking of transport and seizure of government buildings; mass
marches and demonstrations facing legislative and executive houses.
Incumbent regimes everywhere fear mass repudiation in upcoming elections,
even as their 'populist' opponents provide no systematic alternative. As
yet the mass consumer protests, even as they draw heavily upon the families
of workers, have yet to enlist the organized working class at its point of
production. Only on rare occasions have organized workers engaged in
'general strikes' against price increases of basic foodstuffs. The process
of linking producter and consumer sectors is however not far on the horizon
as local joint actions are occurring and calling into question the reliance
on unrestricted markets. Bourgeois journalists, some financial editorial
writers and a few government advisers are aware of the growing danger of
inflation, rising food prices and the profit/wage gap to the capitalist
system and are calling for anti-inflationary policies and public regulation.
Faced with the deepening financial crisis resulting from the speculative
crash and the necessity of large-scale, long-term state intervention and
bail-outs, sectors of the capitalist class are also calling for greater
state supervision and tighter controls over covert (off the books)
institutional swindles.

Popular perception of massive state bailouts of banks and
proposals for new regulations to save the financial system has reinforced
the idea that the state can equally (or with greater justice) interfere to
regulate food and fuel prices and to prop up declining living standards.

Inflation and the Transition from Protest to Popular Uprisings

Inflation and high levels of engagement of the state in saving
capitalism has raised mass discontent from a local protest against local
price gougers and profiteers to a national political protest against a class
biased state, which ignores deteriorating living standards and concerns
itself only with the very rich.

Previously apolitical or even conservative workers, peasants and
households who experienced incremental and cumulative gains in living
standards through long hours and multiple household workers are now seeing
their livelihood decline. Their earnings are devalued. Their capacity to
satisfy basic needs deteriorating. The sensation of 'going backwards' or
losing control over their everyday lives and of downward mobility is fueling
mass collective anger. The treadmill of added work without rewards, respect
or recognition is reinforced daily by the added costs to everyday goods.
Inflation destabilizes all calculations, not only for the future, but also
of everyday life: What to buy or not buy. What to pay or what to pay off.
Uncertainly about what is affordable today and unaffordable tomorrow.
Uncertainty spreads from the poorest to the 'stable workers', from the
'fixed income' pensioners to the 'secure public employees'. Inflation's
global spread undermines living standards in Europe and the Americas, Asia
and Africa, and with it, discontent erodes party loyalties and confidence in
electoral and/or regime legitimacy. Historically nothing undermines public
confidence in the currency, the banks, politicians and the existing market
ideology as much as daily creeping inflation. The greatest fear of all is
the sense that a lifetime of effort will result in the 'loss of everything - home, transport, health, and education - as prices rise faster than income. At some point, rampant inflation leads to absolute regression and with that a rupture with all previous loyalties and commitments.

Conclusion

Inflation, as it accelerates, in the past and today, is the
great solvent of incremental everyday habits and politics: Today it
undermines incumbent politicians; tomorrow it can call into question regimes
and social orders.

In the past, inflationary disorders and desperation brought
forth rightist demagogues who specialize in imposing order and stability.
It ill behooves the left to once again ignore the destructive effects of
inflation, the demands for order and stability and mass consumer discontent.
Inflationary fears are as much entrenched as class and property issues.
Combating inflation, especially basic price increases is central to any
prospect for a social transformation, which claims to benefit the wage and
salaried workers, urban or rural dwellers, the poor, minorities, consumers
and producers.

Professor Petras' forthcoming book is: Zionism, Militarism and the Decline
of US Power (Clarity Press. Ste 469, 3277 Roswell Road, Atlanta, GA 30305).