Skip to main content

The new era of the robber barons

The Morning Star reprints MARY DAVIS’s political report to the July 2022 executive committee of the Communist Party of Britain

“Now alas, we are again on a downhill path to a world of division, disruption and danger.” (Martin Wolf, economics editor FT, 26/4/22)

IN THIS new era of the robber barons, a Marxist analysis of the current crisis and our response to it is vital. So, what are the issues to which we must respond and what is the real nature of the current crisis — universally described as a “cost-of-living crisis” exacerbated by inflation.

Cost-of-living crisis? This is a misnomer. What we are experiencing is a crisis in rate of profit precipitated by a hike in the price of energy supplies (gas and oil).

Marx says in volume III of Capital there is a tendency for the rate of profit to fall, but says this is only a tendency and that capitalism will do its utmost to prevent it.

One of the most important factors affecting the rate of profit is the price fluctuations of raw materials — today this centres on gas as the most important raw material in that it is the source of motive power to operationalise means of production (fixed capital).

Marx outlines two mechanisms used by capitalism to mitigate the fall in the rate of profit, both of which are present today: 

• “Wage reduction is one of the most important factors in stemming the tendency of the rate of profit to fall…” and that “the general tendency of capitalist production is not to raise, but to sink the average standard of wages.”
• Increase in share capital “as capitalist production advances … one portion of capital is considered simply to be interest bearing capital and is invested as such.”

Thus the essence of the problem of “cost of living” is from a Marxist perspective the issue of real wages, and this is particularly acute in period of high inflation because of its deleterious impact of workers’ living standards.

Marx puts it thus: “That if wages did not rise, or not sufficiently rise, to compensate for the increased values of necessaries, the price of labour would sink below the value of labour, and the labourer’s standard of life would deteriorate.”


This is capitalism’s response to the crisis in the rate of profit. The “vulgar economists” of Marx’s day are echoed by today’s bourgeois economists informing the well-rehearsed Treasury mantra that wage rises cause inflation.

Marx demolished this falsehood in Wages, Price & Profit. Today, the stupidity of this fiction is clearly exposed by the fact that wages are static and yet inflation stands at 9.1 per cent and will rise to 11 per cent, according to the Bank of England, the highest for 40 years.

The situation is bad everywhere, but Britain is facing the worst inflation in western Europe. The massive expansion of military expenditure will only make inflation worse.

Instead of using resources to raise education standards, or invest in new machinery, better public transport or even roads, the government will be spending tax revenue to produce very expensive weapons.

How does the ruling class respond to the crisis it has created? Clearly their solution, as evidenced by the government’s record and the Tory leadership race, is to heap yet more misery on those most impacted by the crisis.

Their policies of tax cuts, wage restraint, fire and rehire and drastic cuts in the public sector, (much of which is privatised and is creaming off vast profits), ensures that the working class pays for capitalism’s rapacious follies.  

The 160,000 predominantly white male, middle-class, middle-aged members of the Tory Party will undoubtedly confirm the most extreme right version of these policies when they elect their leader to replace the odious Boris Johnson.

The role of gas

The war in Ukraine is cited by the Establishment as the excuse for massive gas price rises.

However, oil and gas from Russia account for only 4 per cent of the fuel products imported to the UK.

About half of the UK’s gas comes from the North Sea. The remainder comes from imports of liquefied natural gas (LNG), which is transported to the UK by sea from countries such as Qatar and the US and Norway.

British Gas expects its 2022 operating profits to rise to £1.4bn. Apart from such obscene profit, the clear madness of privatisation was shown in September 2021 when 12 gas suppliers failed and monopoly control tightened.

Another reason for massive price hike in addition to profits of suppliers is “fictitious capital.” This refers to the role of financial participants in the gas markets — ie, traders that do not form part of the gas supply chain that have no intention of ever taking physical delivery of gas but may also invest in, hedge or seek financial exposures to gas contracts either by trading in cash settled derivatives or closing out their trades in physically delivered derivatives before the final settlement date.

Their crisis, our opportunity?

Echoing the 1978-9 “Winter of Discontent,” the current heightened class struggle in the form of this summer’s big strike wave is now dubbed the “Summer of Discontent.” Is there a historical parallel? Certainly there are many similarities.

The 1970s as a whole witnessed periods of exceptionally high inflation and weak overall growth. Labour was in power, but had to cope with ongoing high rates of inflation (an astronomical 25 per cent by 1975) fed by the growth of credit.

Then, as now, there was an attempt to resolve the attendant “cost-of-living crisis” at the expense of workers via wage restraint and cuts in the public spending, prompting, as now, a massive strike wave.

In other words, the Labour government abandoned Keynesianism and sought monetarist and neoliberal solutions to the crisis — policies which Keir Starmer seems to favour today.

In 1979 James Callaghan’s abandonment of the working class had a disastrous result. Campaigning under the slogan “Labour isn’t working,” the Tories won a massive majority in the 1979 general election.

However, blaming union militancy for the Tory victory buys in to the Thatcherite mantra of “overmighty unions holding the country to ransom.”

It thus exonerates the Healey/Callaghan leadership’s espousal of policies which damaged working-class wages and living standards, thus contributing to Labour’s election defeat. Starmer should take heed.

One important difference between the 1970s and now must be noted. Fifty years ago the trade union movement was at its strongest and its militancy was underpinned by a powerful broad left movement operating across and within most unions.

This was the Liaison Committee for the Defence of Trade Unions in which communists played a leading role.

At that time the Communist Party had many industrial workplace branches, some of which (eg Rolls-Royce, Shardlows and British Leyland) had over 100 members.

It is the strategy and principles of the militants of the 1970s, rather than the organisational form they espoused that we should seek to replicate today.

This means that the demands underpinning our fight must raise the level of class consciousness in order to win an understanding that it is the capitalist system as a whole rather than a few greedy individuals which lies at the root of the current crisis.

Our demands must echo this and hence reflect the need to progress from a “war of manoeuvre to a war of position” (Gramsci) in which we project the alternative to capitalist plunder.

Meanwhile, we demand the renationalisation of all public utilities including gas, electricity, rail, mail, the reversal of all privatisation and creeping privatisation of public sector, including the NHS, education, social care and a cap on profits not wages. 

We dare to struggle and we dare to win!


We're a reader-owned co-operative, which means you can become part of the paper too by buying shares in the People’s Press Printing Society.

Become a supporter

Fighting fund

You've Raised:£ 4,473
We need:£ 13,527
23 Days remaining
Donate today