UK Food Prices Rise 19% As Brexit & Boycotts Bite

UK food prices rose by 19.1%, year on year, last month, the highest rate of increase since August 1977, and up from 18% the previous month. The cause is quite simple. Its down to Brexit, the boycott of Russian food and energy supplies to the world market, and the vast ocean of liquidity that central banks have pumped into the economy over the last 40 years to inflate the prices of the assets owned by the ruling class of speculators. General UK inflation also rose by 10.1, as against predictions it would fall to 9.6%.

In August 1977, food inflation was 21.9%. That was in conditions where, globally, central banks had again printed huge quantities of money tokens, primarily Dollars, thrown into circulation to finance the Vietnam War, but also to finance the huge Keynesian fiscal stimulus programmes introduced in a vain hope of countering the effects of the crisis phase of the long wave cycle that began to manifest after 1974.

For 30 years, after 1945, in the period of long wave upswing, the Keynesian drugs of fiscal stimulus worked to cut short the periodic recessions – as Mandel describes, five of them between 1945 to 1974, “The Second Slump” - but, after 1974, as the long wave entered the crisis phase, instead of stimulus having a multiplier effect on demand, it simply had a multiplier effect on the ability and willingness of firms to raise prices, followed by a need for workers to raise wages, leading to a price-wage spiral.

To protect firms from rising wages squeezing profits further, central banks created even more liquidity, to facilitate the higher prices, and to facilitate the government deficits. Showing that printing more of these money tokens does not reduce interest rates, as inflation soared, and both governments and companies need to pay higher money prices for their inputs, borrowing rose, pushing interest rates also to the highest levels of the cycle. As Marx says, interest rates always reach the highest level during the crisis phase.

It also disproves the hope of the speculators who think they can reduce inflation by causing a recession. Instead, it simply leads to the kind of stagflation seen in Weimar in the 1920's, and globally in the 1970's, and early 80's. At that time, inflation, itself, stood at around 20%, reaching 27% in the first years of Thatcher's government. So, the 21.9% food price rises compared well to today's 19.1% in conditions of 10.1% general UK inflation. The relatively lower rate in 1977, was due to the fact that Britain was beginning to benefit from its recent entry into the EEC, and the free access to large amounts of cheaper food produced on the Continent. In the years that followed, with the EU also creating a free movement of labour, those food prices fell even further, as EU workers were available to provide the labour required also to gather in the UK harvest, and process it in factories.

All of that has gone as a result of the idiotic decision to pursue Brexit. The price of UK produced food has risen sharply as it no longer has access to those migrant workers, and the additional costs and frictions created at the border now means that the cost of importing cheap EU food supplies has risen sharply too. But, the other cause, besides the general inflation caused by astronomical levels of liquidity injections, is the consequence of UK/NATO/G7 boycotts of Russian grain/food/fertiliser and energy supplies that has pushed up global food prices, creating shortages, and meaning that exporters sell to wherever they can get the highest prices, also pushing up UK prices.

Both Brexit, and the boycott of Russian food and energy supplies is a reflection of the domination of reactionary, petty-bourgeois nationalism, and the idea of national self-determination (taking back control), defence of the fatherland, and so on that goes with it, as the world once again heads towards another world war driven by those reactionary nationalist sentiments. Even the logic bourgeois social-democracy, based upon imperialist large-scale capital demands opposition to the ideas of petty-bourgeois nationalism, and the putting up of new borders, and demands a further extension of the globalisation and dismantling of borders that began in the post-war period, and saw the creation of multinational, politico-economic structures.

But, in Britain, as we head to elections, not only is the Tory Party engrossed in that 19th century, petty-bourgeois nationalism and jingoism, but so too is Starmer's Blue Labour Party, leaving little hope of any required change of direction. Far from it, Starmer is now a committed hardline Brexiter, saying he will not even seek to restore free movement, let alone single market membership or re-joining the EU, and he is even more embroiled in Colonel Blimpish warmongering in relation to Ukraine, and demands for further boycotts and so on against Russia.

The 10.1% rise in general inflation, itself, for reasons described in previous posts, understating the real level of inflation, and effect on workers costs of living, comes as the speculators and their pundits were predicting a sharp reduction, though, then, only to 9.6% (5 times the Bank of England target of 2%). Its down only marginally from the previous month's 10.4%, which itself shocked the pundits by going up from 10.1%, when they expected it to have dropped closer to 9%.

This simply shows what I described for the last two years, and also set out at Christmas, which is that inflation, as Marx sets out, is a monetary phenomenon. Money is the measuring stick of the value of commodities, just as a yard, metre, or foot is the measuring stick of length, or an hour is a measuring stick of time. If you make the measuring stick smaller, then the result is you get a larger indication of value, length, or time, even though the actual value, length or time being measured has not changed.

If you measure distance in metres, rather than yards, you get a smaller number, because metres are larger than yards. If you measure in feet rather than yards, you get a larger number, because feet are smaller than yards. If you call a foot a yard, it doesn't change that, and instead of measuring something as 30 feet (10 old yards), you will now measure it as 30 new yards! If you print additional money tokens, so that each token represents only half the amount of social labour-time/value as it did before, then twice as many of these tokens (say £'s) are required to represent any given amount of value, and the manifestation of that would be a doubling of prices. That is the basis of the massive inflation of asset prices (houses, shares, bonds, art, wine, vinyl records etc.) over the last 40 years, as central banks printed huge quantities of tokens, and additional credit, used to buy up those assets. It is also the basis of the current inflation, as that liquidity was directed at consumption during the lockdowns.

The inflation is not going away any time soon, because to remove it requires reducing all of that liquidity, which would mean, as wages rise profits get squeezed, and central banks have already found that raising interest rates to try to cause a recession, has instead led to asset prices falling sharply, leaving banks and financial institutions exposed, whose balance sheets are a fiction based upon those inflated asset prices. So, workers should ignore the lies of governments about needing to moderate pay claims to prevent inflation rising, and should demand pay rises ahead of current headline inflation to protect their living standards, and they need to rely on their own strength, and a new leadership of the labour movement, developed from their own ranks, to fight for it.