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Inflation, capital and labour

22 June 2023

RMT workers carry a clear message on the TUC demo "We demand better", London, June 2022. Photo Workers.

Current inflation can be traced back to the 2007-008 financial crisis, but it’s endemic to capitalism. It’s time for workers to question the underlying economics…

Inflation caused by the government’s money printing has been a feature of Britain’s economy for some time now. Called “Quantitative Easing” it was a response to the 2007-2008 financial collapse, ultimately created by the decisions of central banks: the Bank of England, the US Fed and the European Central Bank.

But until the latter part of 2021, the money created since 2008 in response to the ongoing financial crisis mainly had an effect on things such as inflated house prices, inflated equity markets and inflated bond (gilt) prices.


In other words inflation initially took a hold in asset prices rather than in the price of everyday commodities. Companies, governments and, to an extent, individuals loaded up debt during a period of low interest rates.

Incidentally, students in Britain also accumulated debt from their student loans. Graduates are often now saddled with deferred debts of £50,000 or more. And worse still their interest rates were much higher than for general loans.

But none of what’s happened since 2008 is considered inflationary by the government’s apologists. That’s hardly a shock, but they continue to lecture workers on what “we” have to suffer to “cure” inflation. Either they can’t contemplate that it’s endemic to capitalism, or can’t openly say so.


The inflationary emphasis began to shift after 2019. As well as propping up asset prices, the government started to pump money directly into everyday circulation. This was prompted by a little reported event on 17 September 2019 in certain financial markets.

‘Governments and economists did not see this instability coming.’

This became known as the “repo crisis”. In short, there were not enough readily avalable funds for major US banks and financial institutions to settle short term debts. Governments and economists did not see this instability coming, and still don’t really know why it happened.

As a result short term interest rates spiked and the US central bank (known as “the Fed”) pumped billions of dollars into financial markets.

Not aired

The importance of this financial event, which had an international impact, hasn’t really been aired. Presumably because the government wants to keep it away from the prying eyes of the working class.

Between the impact of the 2019 repo event and March 2021, over £300 billion of printed money was put in direct circulation into the British economy. That’s equivalent to around 15 per cent of the UK’s GDP.

And for much of that time the economy was closed due to lockdowns in response to the coronavirus pandemic. As the Covid-19 Inquiry stumbles along, it’s clear that policy makers were taking a punt on that strategy and had not considered the economic (or social) consequences. And equally clearly, they are all trying to distance themselves from the decision.


Less than a year later, in February 2022, the NATO-inspired war in Ukraine kicked off. The British government subsequently imposed sanctions which, along with the earlier money printing, have served to further pump up domestic prices. And government borrowing still continues to rise, according to the latest figures published in June.

It’s not particularly difficult to realise that excessive money put into circulation accompanied by the war sanctions have created inflation. The difficulty comes in accepting the consequences and deciding what to do about it.


British politicians of all stripes subordinate themselves to NATO, with the incantation that, “we are fighting for freedom”. The simple question for workers to ask in response is, “what freedom?” The reality of inflation is jacked-up profits and the intensification of an attack on our living standards. That should be no surprise to anyone, it’s a regular feature of the capitalist economy.

So rather than the “shock and awe” confrontation of the Thatcher years, the attack on workers since 2008 has slowly unfolded. We have arrived in 2023 with an inflationary regime where capital is gouging out profits through inflated prices while wages are suppressed.


But now there is a major contradiction: there are limits to what capitalists can sell to British workers. Our purchasing power has become too restricted to sustain an economy geared to current prices.

‘It is harder for politicians to lay inflation at the door of workers’ pay claims.’

This contradiction between profit-seeking price hikes and what workers can buy has prompted many people, in particular trade unionists, to begin to scrutinise what’s what. And it’s becoming harder for politicians and economists to lay inflation at the door of workers’ pay claims.

Wages have always chased price rises anyway, but the timing of the latest bout of inflation has made that clear to everyone. Well everyone except Chancellors and ex-Chancellors. Jeremy Hunt and Philip Hammond seem united in seeking to cap wages, one way or another – preferably by an economic recession, even greater immigration and a return to the EU fold.


For far too long economic orthodoxy has determined that rent should go to major landowners, interest to financiers and the balance of profit to the manufacturers. This well-rehearsed economic mantra has provided capital with a greater claim to a reward, than labour has to wages.

‘The next step is for workers to refuse to accept a poor bargain with the owners of capital.’

But workers already realise that through their work it is they who are the sole creators of value. So the next step must be for workers to refuse to accept what amounts to a very poor bargain with the owners of capital.

This change in outlook, if taken to its logical conclusion, will necessitate an end to a system that ensures the bulk of the value created by workers is syphoned off to private concerns through the medium of rent, interest and profit. These three factors, the Holy Trinity for profit seekers, are an integral part of what currently passes as economics.

False premise

Deep down working people realise that Britain’s economy has rested on a false premise that has led to false conclusions. Our economic way of life has for far too long been based on a suspension of disbelief where it has been argued that Britain could survive as a service economy and cannot be independent.

Realisation of the opposite is now coming to the surface. This is part of a process of workers gaining sufficient confidence to take control.