Governments around the world must orchestrate attacks on the working class by slashing spending on critical social services, following the direction of financial capital transmitted through bond markets that trade debt. not.
This is the message conveyed in the message of the International Monetary Fund. Fiscal Monitor Report It was published this week at the semi-annual conference in Washington.
Of course, the Directive was not written in such blunt terms. It was written in a style characteristic of such reports and was intended to obscure the content of the essential class.
of financial times The report is summarized as follows.
He noted that the decision reversed the IMF’s previous position calling on governments to increase spending in response to the economic devastation brought on by the COVID-19 pandemic. This switch is a result of the high interest rate regime imposed by the US Federal Reserve (Fed) and other central banks.
As the foreword to the report written by the IMF’s head of fiscal policy, Vitor Gaspar, put it, it was more of a “caution” than a directive.
“In the context of high inflation, high debt, rising interest rates and heightened uncertainty, coherence between monetary and fiscal policies is paramount. For most countries, this means keeping budgets tight. he said.
In other words, if the central bank is raising interest rates with the aim of triggering an economic contraction, or even a recession, in order to stifle working-class wage growth in response to inflation, the government will not provide stimulus. cannot be provided. In this class struggle, her two powers in the capitalist state must pursue a unified strategy.
If they deviate, as Gaspar made clear, there will be big consequences.
“With inflation rising and funding conditions tightening, policymakers should prioritize macroeconomic and financial stability above all else,” he wrote.
“This is particularly important as recent bond market developments demonstrate increased market sensitivity to deterioration (or deterioration) in fundamentals. It’s more likely.”
Gaspar wasn’t specific, but he did refer to the UK’s financial crisis in response to the Trust Story government’s mini-budget on 23 September, which promised £45 billion in tax cuts for businesses and the ultra-rich.
The pound fell to record lows against the US dollar, and at one point almost par, while the price of long-term government bonds, the so-called gold coins, plummeted, pushing yields up sharply. (The two are going in opposite directions.) The crisis has never been resolved and threatens to bankrupt pension funds.
Financial markets reacted violently not because they were opposed to more money being pumped into businesses and the wealthy, but because tax cuts were unfunded. So they weren’t funded by drastic cuts in government spending aimed at making the working class even poorer.
This crisis, as alluded to in Gaspar’s remarks about the “sensitivity” of bond markets, was a directive by financial capital to the UK government and governments around the world.
Your message has been received and understood. In the UK, the Truss government has created a targeted list of cuts in spending on critical services that have already been cut to the bone.
Whether these attacks are Truss going down with her sword or the realigned Tory government following yesterday’s dismissal of Prime Minister Kwasi Kwarten set to be fired in another intra-party coup It will proceed no matter what government comes into power. Labor government led by Kiel Sturmer.
In Australia, where the Labor government is preparing a budget that will be cut on 25 October, Treasury Secretary Jim Chalmers continues to speak out about the deteriorating global economic and financial situation and lessons learned from the UK experience. increase. He cites three major areas where government spending appears to have been blown: health care, elderly care, and the disability insurance system.
For both Britain and Australia, like other governments, military spending will increase in line with the move to World War III.
The IMF report has revealed that employment support measures introduced to a limited extent due to the pandemic cannot continue in response to the contraction and recession of the economy.
“Public guarantees and employment support systems can lead to market distortions and, if left unchecked, can hinder economic growth,” he said.
Gaspard was clearer in his preface.
“We face changing circumstances,” he wrote. Long-term commitments are just a pretense of certainty and can quickly become out of reach. ”
Maintaining “agile” means governments must be ready to respond quickly to financial market dictates and wield the ax on basic services that have come to be seen as part of the necessary social infrastructure. means that it will not In the new economic and financial environment, such “long-term commitments” are a thing of the past.
The government’s task is to meet the demands of the financial masters, but this also includes ensuring that class struggle is suppressed, for no greater danger than that posed by independent movements of the working class.
The first paragraph of the report’s executive summary points to this problem, noting that “households are suffering from rising food and energy prices, increasing the risk of social unrest.”
Then I explained how to handle this. As governments try to blame Russia for inflation, analysis of a recent report by the United Nations Conference on Trade and Development, for example, reveals that hedge fund speculation in commodities and profit margins by large corporations are the main drivers. It has become. But don’t touch even a single hair on your head.
“We are facing a prolonged supply shock and widespread inflation,” the IMF report said, adding that “attempts to limit price increases through price controls, subsidies, or tax cuts are costly and costly to the budget. Ultimately, it will be ineffective.”
The government “must allow price adjustments and provide temporary targeted cash transfers to the most vulnerable”, he said.
In other words, just as policy against COVID-19 was ‘let’s rip,’ this same theory must apply to inflation. Among other things, the food and energy giants must be allowed to continue to be super profitable while a wholly inadequate and temporary amount of cash is being distributed to prevent a social explosion.
As the working class engages in the battle currently being waged, it is necessary to delve into the political economy of what is involved.
In the world of finance, it seems that money can simply create money. Ultimately, however, the enormous profits accumulated in this field are drawn from the working class. Financial capital is not an independent source of wealth. It is a claim to the total amount of surplus value drawn from the working class under capitalist production, to which it is appropriated fictitious capital.
Financial capital has two basic benefits. Reductions in social spending will be subtracted from the pool of available surpluses in the final analysis. Both of these processes are working now.
The first became apparent with the outbreak of the pandemic. The concern in ruling the financial world was that meaningful public health measures to eliminate the virus would adversely affect the streams of surplus value on which they depend.
This was the basis of the ‘open’ and ‘tear apart’ agenda. No means should be allowed to stop surplus value from flowing into the coffers of financial capital.
As central banks try to quell the working-class wage struggle, the drive to increase exploitation intensifies. These were offset by inflation as a result of capitalist governments’ refusal to act to eliminate the virus.
At present, not only will wages have to be further restrained to sustain the fictitious capital gains created by central banks injecting trillions of dollars into the financial system over the course of the pandemic, but social spending will have to A full-scale attack must be made against it.
In the financial realm, the ruling classes and their advocates are spinning a web of illusion. And it’s the same in politics. The great illusion is that the masses, the working class, control the running of society through voting and parliamentary democracy.
But, as has been pointed out many times, the value of any crisis is to reveal real social and political relationships. The bond market and financial crisis have revealed where the real power lies, as the IMF report has shown. A parliamentary democracy is a screen for the dictatorship of financial capital.
These lessons must form the basis of the working-class political struggle. It faces the challenge of taking power into its own hands.
This requires workers to build general committees independent of the trade unions that acted to suppress the working class as an immediate response to the class wars unleashed by financial capital. Their establishment is an important step towards the establishment of a workers’ government to end capitalist interests and financial dictatorships and reorganize the economy on socialist foundations. This requires building a working-class revolutionary party to lead this struggle.
