Education Information

1. Introduction

The “cost of living crisis” in the UK can be simply summed up: prices, especially of essentials, are too high, and wages, and other working-class incomes are too low. The basic steps to resolving the crisis are simple: prices, especially of essentials, must be brought down, and wages, salaries, benefits, and pensions must be increased. This pamphlet shows that the big businesses dominating production and distribution make huge profits out of high inflation, while working people lose out. It sets out factual evidence to illustrate that the source of record profits is the fall in real wages as inflation rises. A large part of the income of working people is transferred directly into the profits of big business. The pamphlet also shows that the deeper roots of the “cost of living crisis” lie in the unique weaknesses of the productive side of the British economy. These weaknesses can be clearly seen in very low investment and poor productivity growth for many years. These arguments are made to clarify how the government and trade unions could in practice deal with the problem of inflation. The answer must be wage increases to stop the income of workers from falling. It must also include price controls and regulation of profits to stop the transfer of income from workers to big business. More fundamentally, the answer must involve sustained public intervention to deal with the weaknesses of production, especially of manufacturing, and to rebalance the economy in favour of industry and other productive sectors. The UK must become more self-reliant in the years ahead. The plain argument that high prices go together with high profits, falling wages, and weak production is often distorted and hidden by mainstream commentary in the media and elsewhere. To explain the crisis, it is usually argued that wages are too high, or that the government has “printed” too much money. It is also argued that events far away, such as the war in Ukraine, are solely to blame. This pamphlet shows why these arguments do not work. The causes of the crisis are ultimately to be found in relations of property and power in the economy that have created deep problems because production is focussed on profit making. It

7