The US Federal Reserve on Wednesday raised the levels of the federal funds rate by three-quarters of a point, i.e. 0.75 percent, continuing the fastest pace of rate hikes since the 1980s. The move would immediately raise the cost of mortgages, car loans and credit card debt for working-class and middle-class families already struggling with the highest inflation in four decades.
Fed Chairman Jerome Powell declared in his remarks on Wednesday that “economic pain” is necessary to reduce inflation. He went on to say that the members of the monetary policy governing body, the Federal Open Market Committee, expect unemployment in 2023 to rise from today’s 3.7 percent up to 4.4 percent, an increase that would mean the deletion of 1.3 million jobs. Powell made it clear that the Fed is prepared to plunge the economy into a recession, destroying millions more jobs.
Complaining that the Fed’s recent rate hikes had not been enough, Powell said: “Despite the slowdown in growth, the labor market has remained extremely tight, with the unemployment rate near 50-year lows, vacancies near historic highs, and wage growth elevated. »
By driving up unemployment, the Fed expects that “the labor market’s supply and demand conditions will come into better balance over time, and ease the upward pressure on wages and prices”.
It is worth noting that when Powell was asked by a reporter how long Americans would have to endure economic pain, he replied that it depends on “how long it will take for wages … to come down.”
In other words, when Powell and the ruling class talk about fighting inflation, they are not talking about stopping the companies’ unblue price hikes. No, they are talking about ensuring that real wages continue to fall, to drive up corporate profits.
The claim that wages drive up inflation is entirely a myth. Real average hourly wages for American workers fell by 2.8 percent over the past 12 months. According to the Economic Policy Institute, ublue price increases and record high company profits account for 53 percent of the inflationary price increases, while wages – which have fallen in real terms over the past year – amount to no more than 8 percent. But the American ruling class considers even a small, nominal wage increase to be completely unacceptable, and is determined to keep its foot on the neck of the working class.
The Fed’s moves are designed to deliberately drive up unemployment, and use the threat of economic distress as a scapegoat to suppress a wage movement by the working class, and impose even more brutal conditions of exploitation.
This was clarified in an opinion piece written by columnist Megan McArdle in Washington Post, which praises former Fed Chairman Paul Volcker for raising interest rates to nearly 20 percent in the early 1980s, when he provoked “the nation’s worst economic recession since the Great Depression” that forced “one-tenth of the workforce” out of work . Volcker sent a clear message, McArdle said: “Should inflation creep up, the institution would do whatever it takes to bring it back under control.”
Volcker resorted to these measures to beat back a wave of militant labor struggles against the ravages of inflation, including the 111-day coal miners’ strike of 1977 to 1978. The “Volcker shock” led to a wave of factory closings, mass layoffs, severe wage cuts and Reagan’s crushing of the air traffic controllers’ strike, which Democrat-appointed Fed chief Volcker called the single most important action “the administration took to help fight inflation” because it transformed “the climate of labor-management relations” both “profoundly” and “constructively.”
With the collapse in workers’ real wages, the American ruling class is terrified that the inflationary crisis will lead to a resurgence of class struggle. In recent months, workers in the United States and around the world have engaged in increasingly militant strikes, demanding significant wage increases and opposing brutal working conditions as companies strive to squeeze more out of fewer and fewer workers. In recent weeks, Minnesota nurses, Seattle teachers and other workers have gone on strike, and more than 110,000 railroad workers are pushing for strike action. According to a strike tracker maintained by Cornell University, during the first six months of 2022 in the United States, there were 180 strikes involving 78,000 workers, up from 102 strikes involving 26,500 workers in the same period the year before.
This is part of a global upsurge of class struggle, which has included workers on the railways, oil rigs, port facilities and in various transport sectors in the UK and other European countries. Financial newspaper The Wall Street Journal sounded the alarm in an article entitled “Unrest among cargo workers goes global, weighing on supply chains”, which warned: “From the port facilities of Los Angeles and Liverpool to rail depots in Chicago and warehouses in Europe and the US, clashes between cargo workers and corporate governance has increased this year, which has added complications and uncertainty to the flow of goods around the world.”
The capitalist governments and central banks in Europe are following the US Fed’s lead in carrying out pre-emptive strikes against this movement. British Prime Minister Liz Truss instructed the country’s rail workers to “get back to work” and end their strikes over pay, job security and working conditions. She works closely with the unions, who suspended the strikes out of respect for Queen Elizabeth.
In the United States, President Biden signed a last-minute deal with railroad unions to prevent a strike last week. But there is enormous opposition to the “agreement”, which turned out to be nothing more than a promise by the unions to block the strike, with the addition of a small modification to the agreement recommended by the presidential emergency board for the railways, the Presidential Emergency Board (PEB). , against which the workers were prepared to strike. This PEB agreement includes wage increases below the rate of inflation, a single paid sick day, and maintaining the hated attendance policy, which keeps workers on call 24/7.
Before the deal, Biden declared that a rail strike was unacceptable, because of the damage a work stoppage would do to families, farmers and companies. What utter hypocrisy, coming from a spokesman for the ruling class prepared to throw the economy into recession and ruin millions of families, farmers and companies to block workers from fighting for living wages.
When it comes to waging wars abroad, the United States is prepared to throw away hundreds of billions of dollars every year. There are simply no limits to how much money can be spent on tanks, warships and missiles. But workers’ demands for wage increases adjusted to rising prices, not to mention paid time off and an 8-hour workday, are treated as impossibilities. In the real world, there is a deep connection between America’s preparations for war against Russia and China, and the country’s war against the working class at home.
The growing resistance of the working class takes its most conscious form in the development of grassroots committees among railroad workers, nurses, teachers, and other workers, and in the election campaign of Will Lehman, a Mack Trucks worker and socialist, who is a candidate for the post of president of the United Auto Workers union ( UAW). Workers are increasingly organizing independently of the pro-capitalist and nationalist unions. The struggle to defend both the right to a job and the right to a decent standard of living involves a direct challenge to the capitalist system, and the socialist transformation of the economy, to meet human needs, not profit.