US Producer Prices Surge Profits Squeezed

US producer prices surged last month, as a result of Trump's tariffs, which have increased the costs of US inputs to production. Producer prices rose 0.9% on the month, more than 4 times the expected figure of 0.2%. If it continued at that rate, it would mean a rise of more than 11% in the next year. Even compared to the past year, it means that producer prices rose by 3.3% as against a predicted 2.4%. The figures for core PPI were even more stark. They rose by 3.7% year on year.

The cause of this rise in prices is directly, Trump's tariffs, which are a tax on US producers and consumers. As I have set out, recently, in the end, this means, in current conditions a tax on US profits, which, inevitably, will initially be countered by a rise in all US domestic prices, leading to a price-wage spiral. The parallel is striking, as this is the largest increase in prices since the ending of lockdowns in 2022, and the surge in inflation that followed. The effect of the Trump consumption tax is seen in the fact that there was a 38.9% increase in the price of fresh fruit and vegetables. The Trump administration, of course, wants all of those food items to be produced in the US, rather than imported, but, another reason for the rise in costs and prices is that all of the labourers that work on the land to produce those crops are currently being harassed by the goons of Trump's ICE hit squads.

As I pointed out recently, this rise in costs, and consequently of producer prices, inevitably passes through into all US prices. At the moment, because many US companies bought large amounts of imports ahead of the imposition of Trump's tariffs, they are able to avoid passing some of those costs through. The producers are the first to work off that inventory, and to have to begin to raise their prices. So, its hard to know how much the difference between this surge in producer prices, as compared to the rise in retail prices is simply down to wholesale and retail inventories still being depleted or is the result of wholesalers and retailers eating some of the higher costs out of their profits.

Either way, in current conditions of tight labour markets, any rise in prices will result in a price-wage spiral, so that either firms eat some of the higher costs from their profits by not raising their prices, or they raise their prices, facilitated by central bank liquidity, and, then, face higher wage costs, as workers demand higher wages to compensate for the higher prices. The latter is more likely, which also means that one of Trump's election promises of reducing prices will go the same way as his promises about no more foreign military adventures, and his promise to have ended the Ukraine war within 24 hours. The inevitable contradictions are exploding in his face already, and his petty-bourgeois nationalist MAGA base is fragmenting.

Anti-Duhring,Part II, Political Economy, IV – The Force Theory (Concluded) - Part 1 of 10

Engels quotes, at length, a passage from Duhring in which he asserts that Man's domination over Nature, first required the domination of Man over Man. As with other premises of Duhring's theory, no evidence for this assertion is provided. Duhring justifies the claim solely by asserting that, in order to cultivate large tracts of land, this requires landed property, and the existence of slaves, because no single person, or family, could do so on their own.

Engels notes,

“In the first place "domination over nature" and the "cultivation of landed property" are by no means the same thing. In industry, domination over nature is exercised on quite another and more gigantic scale than in agriculture, which must still submit to the command of weather conditions instead of commanding them.” (p 224)

Indeed, as Marx describes, in Capital III, it is in capitalist industry that develops in the towns that command over nature is established by the use of science and technology. The consequence of this capitalistic industrial production, in the towns, is, then, to continually and rapidly increase the demand, by that industry, for raw materials and food that a still pre-capitalist agriculture cannot keep pace with. A first consequence of that is the clearing of lands to give over to sheep, to meet the demand for wool, but a second consequence is the increasing degradation of the soil. As Marx notes, its only when capital, itself, then, enters agriculture that this despoliation is ended, as it applies the same scientific methods to this primary production that it had done in the towns with industrial production.

“Secondly, if we confine ourselves to the cultivation of landed property in extensive tracts, what it boils down to is whose landed property it is. We find in the early history of all civilised peoples, not the “large landed proprietors” whom Herr Dühring interpolates here with the usual sleight of hand, he calls "natural dialectics", but tribal and village communities with common ownership of the land.” (p 224)

As Engels set out, in The Origin of The Family, Private Property and The State, and Marx details, in Capital III, and elsewhere, across the globe, from India to Ireland, it is common ownership of the land, whether by clans or village communities, that can be seen, and the cultivation of this land is then undertaken by various means, depending on the given geographical and historical conditions.

“... sometimes the arable land was tilled jointly for account of the community, and sometimes in separate parcels of land temporarily allotted to families by the community, while woodland and pastureland continued to be used in common.” (p 224)

Engels notes that, again, as in the case of Duhring's knowledge of the law, he seemed to have no knowledge of these extensive studies of land ownership, for example, even in respect of that of “Maurer’s epoch-making writings on the primitive constitution of the German Mark, the basis of all German law, and of the ever-increasing mass of literature, chiefly stimulated by Maurer, which is devoted to proving the primitive common ownership of the land among all civilised peoples of Europe and Asia, and to showing the various forms of its existence and dissolution.” (p 225)

The Asiatic Mode of Production, which writers such as Adam Smith had analysed, arose, not on the back of individual landed property, but on the basis of a requirement for a collective ownership, because of a requirement for large-scale civil engineering projects, related, usually, to hydraulics, but, also, the need for land terracing.

“... the very term landlord is not to be found in the various languages...” (p 225)

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Anti-Duhring, Part II Political, Economy, III – The Force Theory (Continued) - Part 10 of 10

US imperialism, similarly, tried to maintain a monopoly of nuclear technology, and, given its nature as the ultimate destructive power, relative to labour – a sort of organic composition of the means of destruction – those imperialist powers that have it have also tried to limit access to it. The US has also tried to control the platforms from which its allies can deliver such weapons, though, here again, the separate interests of EU imperialism posit European Aerospace industry to that of the US. The US, via its dominance of computer and communications technology, and space/satellite technology, also asserts control over sophisticated targeting systems of cruise missiles and so on.

“In this sphere it is most palpably evident that the "direct political force" which, according to Herr Dühring, is the “decisive cause of the economic situation”, is on the contrary completely subordinate to the economic situation, that not only the construction but also the manipulation of the marine instrument of force, the battleship, has itself become a branch of modern large-scale industry.” (p 221)

The large battleship, now, cost the state as much as previously it paid for a whole small fleet. Why did they do it? Not, as the military Keynesians believe, because it stimulates economic growth, or resolves crises of overproduction, but because, as with the spinning machine replacing the spinning wheel, this greater absolute cost represents a smaller relative cost. However, as with all such other instances, the technological development soon makes existing technologies redundant. The development of torpedoes meant that large battleships could be sunk by small, rapid torpedo boats, or submarines. As I have noted elsewhere, and as Marx sets out in Theories of Surplus Value, Chapter 23, this is an example of the fact that, when technology develops particularly rapidly, it is not only the relative cost of the machines that falls, but also the absolute cost.

“Here, too, therefore we see absolutely clearly that it is in no wise true that “the primary factor must be sought in direct political force and not in any indirect economic power”. On the contrary. For what precisely does “the primary factor” in force itself prove to be? Economic power, the disposal over the means of power of large-scale industry. Naval political force, which reposes on modern battleships, proves to be not “direct” at all but on the contrary mediated by economic power, highly developed metallurgy, command of skilled technicians and productive coal-mines.” (p 222)

Today, it is control of global telecommunications, computer systems, space and satellite technology, that is decisive, as seen in the increasing amounts spent on cyber warfare, and, also, the concern of US imperialism to prevent the spread of Chinese telecommunications hardware and software systems, across the globe, as China increases its relations and influence, in Asia, Africa, the Middle-East, Latin America, and Europe.  As I wrote more than a quarter of a century ago, and appears in my novel 2017, a state could win a war, today, theoretically, with no military hardware of its own.  All it needs is to be able to take control of the computer systems controlling the military hardware of its enemies, and turn it against them, a sort of cyber Aikido, as also seen at the start of Mission Impossible, Dead Reckoning.

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Anti-Duhring, Part II Political, Economy, III – The Force Theory (Continued) - Part 9 of 10

Engels' analysis, also echoed by Lenin and Trotsky, in relation to WWI and II, that such an increasing militarisation would lead to a class conscious proletariat, so mobilised, overthrowing the ruling-class, has been superseded by the continued development of imperialism. The principle outlined that “The Main Enemy Is At Home”, remains, but imperialism, now, using relatively small numbers of soldiers, but large masses of technology and equipment, no longer requires the large, mass mobilisation of the proletariat as infantry. It requires only a small number, who, much as with the police, are recruited from amongst those with the kinds of ideological beliefs that make them willing instruments of the ruling-class. Even in the case of WWIII, that is likely to be true, because the ultimate expression of that labour-saving, military technology is the thermonuclear arsenals, which will rapidly be resorted to, as a result of the dialectics of war, resulting in the destruction of humanity.

As Engels notes,

“... the armies of the princes become transformed into armies of the people; the machine refuses to work and militarism collapses by the dialectics of its own development.” (p 218)

To implement the principle that “The Main Enemy Is At Home”, today, it is only by the industrial proletariat opposing war credits, i.e. opposing any increase in military spending, by securing control of production, and blacking war supplies to imperialism and its professional armies that such a drive to war can be stopped. But, the ruling-class, in each state, will not allow such action to continue, as it would use those same professional armies, alongside the fascist gangs, against them. Only by, now, taking on the task of independently organising workers in democratically controlled defence squads and militia can we prepare for and counter such reaction.

“Nowadays any go ahead NCO could explain to Herr Dühring how greatly, the conduct of a war depends on the productivity and means of communication of the army's own hinterland as well as of the theatre of war. In short, always and everywhere it is the economic conditions and instruments of power which help “force” to victory, and without which force ceases to be force, and anyone who tried to reform methods of warfare from the opposite standpoint, according to Dühringian principles, would certainly earn nothing but a beating.” (p 219)

Engels continues this analysis, moving from the land army to the navy, making the point that wooden sailing ships had been replaced by iron-clads, and, then, steel ships, continually increasing in size, replacing sail by steam, which powered the turrets upon which stood ever larger guns.

“The battleship of the present day is a gigantic armoured screw-driven steamer of 8,000 to 9,000 tons displacement and 6,000 to 8,000 horse power, with revolving turrets and four or at most six heavy guns, the bow being extended under water line into a ram for running down enemy vessels. It is a single colossal machine, in which steam not only drives the ship at a high speed, but also works the steering-gear, raises the anchor, swings the turrets, changes the elevation of the guns and loads them, pumps out water, hoists and lowers the boats—some of which are themselves also steam-driven—and so forth.” (p 220-1)

In other words, the point made earlier that, as in industry, there are economies of scale, and labour-saving technologies.

“The modern battleship is not only a product, but at the same time a specimen of modern large-scale industry, a floating factory mainly producing - a lavish waste of money. The country in which large-scale industry is most highly developed has almost a monopoly of the construction of these ships. All Turkish, almost all Russian and most German armoured vessels have been built in England; armour-plates that are at all serviceable are made almost solely in Sheffield; of the three steelworks in Europe which alone are able to make the heaviest guns, two (Woolwich and Elswick) are in England, and the third (Krupp) in Germany.” (p 221)

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