If market mechanisms are threatening to starve people, and/or make them live in unheated homes during the winter, then we can’t allow this.
On a recent day trip I happened to pass a couple of people talking. “How are we going to get through the winter?” asked one of them. This is the question that millions of people are asking and not all of them poor. The debate on what a new PM might do has focused on whether or not the assistance already handed out should be increased. There is an alternative which would be a simple means of preventing inflation increasing even further. That is an energy price freeze.
If the huge increase in energy prices due in October and January are an “unexploded time bomb” then the thing to do would be to stop it exploding. Stopping the increases taking place would be a certain means of dampening down inflation, since energy price increases are estimated to be responsible for nearly half of the expected 13% inflation rate.
If market mechanisms are threatening to starve people, and/or make them live in unheated homes during the winter, then we can’t allow this. Whilst there are factors which could not have been predicted, such as the impact of the war in Ukraine on the energy market, there are fundamental problems with the market itself which is rigged to support the profits and dividends of the energy companies. Wholesale prices are not just determined by the ebb and flow of supply and demand but by speculation in futures markets. Just as the great crash of 2007/8 was in large part the result of securitisation of mortgages, the global economy in many sectors is dominated by a parasitic practice of using financial instruments to make money, at the expense of the those who buy commodities or services.
Do I hear the cry of heresy? Interfere in the sacred market mechanisms? In fact the mysterious workings of the law of supply and demand do not really exist in the way they are supposed to in 21st century capitalism. Great swathes of the economy are controlled by private monopolies or near monopolies. Much investment isn’t directed at producing commodities but at making money by gambling on futures and other derivatives. That’s one of the factors in energy price increases rather than just supply and demand.
The privatisation of the public utilities in the 1980s has had disastrous results. Instead of providing the predicted private investment to improve the utilities and the services they provide, tens of billions of pounds have been paid out in dividends, the service has worsened and the companies loaded up with debt to pay for their acquisitions. For instance the water industry is poisoning our rivers and seas whilst the leakage of this precious resource without which life in impossible, is allowed to continue on a massive scale. According to the Times the private companies have extracted £72 billion from the ‘industry’. Water should not be a commodity from which to extract profit, especially in the context of the climate crisis.
Ultimately these utilities which are owned by private monopolies should be in the public sector so that surpluses are invested in the infrastructure rather than lining the pockets of shareholders and being sent off to tax havens.
For the moment the urgency of the situation in the energy markets requires emergency action by the government to freeze prices and prevent the social disaster which we are facing as a result of the expected tripling of prices. Tax cuts will not help those who don’t pay tax and rely on benefits which are so parsimonious. They are insufficient to provide the means of life without a stressful and wearing constant struggle to get by.
The October and January increases must be stopped by government action. Let the companies pay the price not the millions of people who do not have the resources to pay outrageous inflated prices.