Tag Archives: Inflation

The UK's working classes have lost out

Tighter money as class conflict: why the UK’s working classes lost out

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In previous posts I argued that: (1) the UK’s working classes have lost out as a result of our rulers’ responses to covid, the war in Ukraine, and inflation; and (2) this outcome wasn’t necessary.  The next step is to explain why elites responded in the way that they did, why they chose policies detrimental to the working class.  In this essay, the focus will be on the decision to tighten monetary policy in the face of rising prices.  Subsequent posts will examine the choices of proxy war with Russia and lockdowns.

Explanations of the policy response to inflation have come in three types: those emphasising a monetarist bias; those concentrating on central bank credibility; and those focusing on distributional conflict.  The first two can be readily dismissed, as we’ll see, but the third puts us on the right track: the response to inflation has been detrimental to the working class because policymakers have prioritised the interests of productive capital; this reflects not only a structural advantage enjoyed by capital but also the weakness of Britain’s labour movement.

As I’ve detailed elsewhere, current price rises have been driven primarily by supply-side shocks (lockdowns, the war in Ukraine) and secondarily by corporate profiteering.  The policy response, however, has been to hike interest rates, giving the impression that our rulers are treating inflation as a problem of excess aggregate demand.  According to this approach, tighter money should remove demand from the economy and so bring prices down.  This may well happen.  But the point here is that, from the standpoint of the working class, a better approach would be for policymakers to promote supply-enhancing measures and to rein in price gouging.  So why haven’t they done these things?

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Britain's working classes didn't have to lose out

Britain’s working classes didn’t have to lose out

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In my previous post, I showed that working class Britons have borne the brunt of our rulers’ responses to covid, the war in Ukraine, and inflation.  I also suggested that this result is puzzling, given that as of early 2020, the working class seemed to be in the political ascendancy.  At this time, the government, parliament, and the opposition had a material interest in, and appeared committed to, improving the working class lot.  One possible explanation is that, while our rulers really wanted to promote “the interests of ordinary working people”, circumstances overtook them, making it necessary to impose lockdowns, engage in a proxy war against Russia, and raise interest rates.  My aim here is to demonstrate that this explanation doesn’t stand up.  Alternatives were available and Britain’s working classes didn’t have to lose out.

The ruling elite has to a large extent framed its policy choices as unavoidable.  During the pandemic, then prime minister Boris Johnson stated that “there is no alternative” to lockdowns – or rather, the only alternative is “medical … disaster”.  The government’s opponents within parliament and the media vigorously assented to this view.  Their only complaint was that the Johnson administration didn’t impose lockdowns quickly enough, that it was “too slow and behind the curve”.

Elite rhetoric on Ukraine has followed the same broad pattern.  Johnson stated that there is “no alternative” to conducting a proxy war against Russia and that its impact on our living standards is the necessary “price of freedom”.  Both of his successors – the short-lived Liz Truss and the current prime minister Rishi Sunak – have reiterated this position.  Again, ostensible opponents of the government have largely fallen in line, with criticism limited to matters of degree rather than kind.  The Guardian’s Simon Tisdall writes that we have to suffer – the “less wealthy” in particular – to prevent the “disaster” of Russia’s “lawless butchery” prevailing.  His only objection is that current policy isn’t “enough to bring Putin to heel” and so Britain and other NATO members should “use their overwhelming power … to force Putin’s marauding troops back inside Russia’s recognised borders”.  Not proxy war but direct war.

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Lockdowns, sanctions against Russia, and inflation have made Britain's working classes poorer and less secure.

Lockdowns, sanctions, inflation: how Britain’s working classes lost out

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It was only a short while ago that Britain’s working classes were on the rise.  Brexit was to a large extent a working class revolt against the status quo, and our ruling elite seemed to get the message: “we will … [shift] the balance of Britain decisively in favour of ordinary working class people”, declared prime minister Theresa May at the 2016 Conservative party conference.  May’s calling of a snap election in 2017 led to her party losing its majority in the House of Commons, paving the way for a parliamentary impasse over Brexit.  When this impasse was finally broken, working class votes were once again crucial. The December 2019 election saw many traditional Labour constituencies – the so-call ‘red wall’ – turn blue, giving May’s successor, Boris Johnson, an emphatic victory.

Following this victory, many commentators forecast that the Conservatives would become a blue collar party.  The academic Philip Cunliffe wrote that “the Tories will now lead a working class revolt to overturn the neoliberal order”.  There were solid grounds for thinking this.  The Conservatives not only pledged a number of pro-worker policies – such as using post-Brexit state aid and procurement freedoms to revive industry – they also had a material interest in delivering: without the red wall, Labour would have practically no chance of forming a majority government, at least for the time being.

It was for this reason that Keir Starmer, upon becoming Labour leader in April 2020, quickly set about reaching out to the working classes, as shown by the emphasis he placed on patriotism.  Though some took umbrage with this approach, arguing that Labour’s “old heartlands [were] gone for good” and that the party should focus on consolidating its support in big cities among young graduates and professionals, these critics ignore basic electoral realities: parties with geographically concentrated vote-shares struggle to win under first-past-the-post.[i] (You could also say that Labour has a historic obligation to rebuild the red wall since the party was founded to protect working class interests.)

By spring 2020, then, both the Tories and Labour had a political interest in, and seemed to be committed to, making life better for the working class.  Yet over the last two or so years the policy choices of our rulers have made the working classes worse off.

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