Inflation--Second try at upload

Tom Condit tomcondit at igc.apc.org
Thu Mar 2 21:56:41 MST 1995


Dear comrades:

I'm posting the text of a leaflet on inflation and the so-called
"wage spiral" produced by the Labor Committee of the Los Angeles
Peace & Freedom Party. This is intended to be a propaganda
leaflet of the type put on literature tables, rather than an
agitational leaflet for mass distribution.  Needless to say, we'd
like it to be factually and theoretically "correct" insofar as
possible.

In reading over the leaflet, I have an uneasy feeling that
something isn't quite right, but I'm not sure what and I don't
know whether it's just a stylistic problem.  Any expert
criticisms?

I should say that the authors are "ordinary" (whatever that
means) rank and file workers in Los Angeles.  I live in the San
Francisco Bay Area myself, so I don't know the full composition
of the committee, but I know that it includes at least one member
each of the Communist Party, Socialist Party and Solidarity, and
an ex-member of the Internationalist Workers Party (Fourth
Int'l), the U.S. "Morenoite" group.  They're not there as
representatives of their parties but as individuals.  if we're
ever going to have left unity in this country (or anywhere), this
type of work on joint projects, rather than grandiose unity
conferences, is where it's going to come from.

Please direct any comments to me at tomcondit at igc.apc.org.

Thanks in advance,

Tom Condit

***

"The Wage-Spiral Theory"
A new ideological assault upon Labor and the working class

By L.A. County Peace & Freedom Party Labor Committee

Alan Greenspan, Chairman of the Federal Reserve Board, has stated
repeatedly in recent months his opinion that with underemployment
dropping below 7% brakes should be applied to the economic
engine. He warns that if the official unemployment rate should
fall below 6.2% the economy will "overheat" and lead to a rise in
the Consumer Price Index (CPI) and then, Greenspan says, interest
rates should be hiked to "slow the rate of growth.

The Clinton Administration agrees in principle but would set the
rate of considered "healthy" unemployment at a slightly different
mark. Laura D'Andrea Tyson, Chair of the President's Council of
Economic Advisors stated, "Once source of inflation could be the
rate of growth of unit labor cost...but unit labor costs have
been decelerating, not accelerating..." She goes on to say,
"...Labor market pressures do not push wage inflation higher
until the unemployment rate falls to the range of 5.9% to 6.3%."

The ruling class has for years attempted to minimize the number
of people affected by unemployment through "creative accounting"
techniques in the Bureau of Labor Statistics' (BLS) regularly
published unemployment figures. It is commonly known that the
"official" statistics do not include discouraged workers, those
who cannot find work. In 1992, the difference between the
official number and the more realistic "correction paper" issued
by the BLS was 4.3 million people.

The need to cover up the real unemployment figure is tacit
recognition that underemployment is an embarrassment and needs to
be covered up. But while still covering up the extent of the
crisis, the ruling class now seems engaged in an attempt to
explain away what unemployment they can't deny as being "natural"
or "healthy" and even useful in keeping inflation in check.

In a gross display of how the truth is distorted and the lengths
that the ruling class will go to divert responsibility, they now
tell us that inflation is caused by the unemployed and "wage
inflation" (i.e., wage increases) drives up the cost of products
and reduces profitability, therefore becoming inflationary. This
"blame the victim" tactic is old, but clearly this attempt is
desperation. Tying wage increases or "unit labor costs" to the
Consumer Price Index and claiming an increase in the former
causes an increase in the latter is just not factual. Between
1955 and 1965 the Consumer Price Index went up only 1.6%, the
slowest of any post-war decade, while wages increased 20% -- plus
gains in supplemental benefits. The unemployment rate was well
under the alleged "inflationary" range cited by both the Council
of Economic Advisors and the Federal Reserve Board chairman.

The fact is higher wages never cause higher prices. Workers are
always trying to keep up with price increases, not the other way
around. Wages are determined by class struggle between capital
and labor. Prices are determined by the values produced, the
balance of supply and demand, and the ability of the corporations
to boos prices. The difference between what a product sells for
and what it costs to make has been increasing. Corporations have
been taking more and more of this "surplus value" throughout the
century, while workers struggle to keep up with price increases
they can't afford.

Unemployment does not cause inflation. Increased capitalist
expropriation of surplus value does. If there is a connection
between unemployment and the Consumer Price Index it is that
while corporations try to maintain low wages and working
conditions and argue that unemployment is "healthy," prices
continue to climb as they extract even greater profits from the
increased "surplus value." Unemployment equals increased profits
and maintaining this "pool of cheap labor" is why they attempt to
hide the extent of the problem or develop wild theories to
justify its existence.




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