What inflation means to workers
On a very basic level this is very clear. Inflation means prices rising, and your salary buying less stuff. To put it very simply inflation means workers being poorer. However, in a period where inflation seem to be making a return on a world scale, and one of our neighbouring countries is being wracked by hyperinflation we believe this question needs a deeper discussion.
Over the past few months we’ve seen the media start talking about a return of inflation. More importantly for us, it’s something that workers are beginning to discuss today. Basically inflation means that the cost of everything is going up, and in effect your salary is worth less money than it was. Workers in Bulgaria are beginning to feel this now, especially with the January electricity bills. In effect, it’s a generalised pay cut for everyone.
Inflation today in America is officially 6.8%. Of course official figures tend not to be concentrated on how inflation hits workers. The reality that workers experience is often worse. Nevertheless, 6.8% is high. In fact, it’s inflation’s highest point for four decades, and according to media economists, it shows no signs of letting up immediately.
In the 1970s inflation was high on a global scale. Even the strongest western economies experienced double figure inflation rates, with the peak occurring over 20% in 1975. Since the start of the 1980s, with the onset of new right wing monetarist policy, exemplified by Thatcher and Reagan in England, and America, inflation has been brought under control. With rare exceptions, the stable economies have kept inflation below 5%, just occasionally rising above it. Of course though, not every economy is stable.
Less stable economies are prone to uncontrollable inflation. At the moment, we can see this in Turkey. With each passing day, the lira seems to be worth fewer, and fewer stotinki. Those old enough to remember will have experienced the terrible inflation that we had here in the period of reconstruction in the early 1990s, and then later in the winter of 1997. The countries of old Yugoslavia suffered through these sort of problems in the aftermath of the wars, and if we step outside the region for a moment various examples can be found across the world. Argentina was a major country that suffered through more than one inflationary crisis, and Zimbabwe was the country where it reached its highest extremes, with a one hundred trillion dollar bank note.
Turkey is being ravaged by inflation at the moment. Their monthly consumer inflation is now running over 15%, which will push last years annual inflation figure of 35% even higher, and the price of bread, on which a great many Turkish workers depend is increasing at twice that rate. Things certainly haven’t reached that level here in Bulgaria yet, but people are beginning to notice. Europe as a whole has a lower level of inflation than the US. It hit 5% per year in December, the highest level since the Euro was introduced. Bulgaria is far from the highest level in Europe. The places with the highest annual inflation are the Baltic states, where it is about 10%. Still December’s electricity bills were shocking for many people. Consumer prices are now increasing at over 10% here too, which is the highest level for over a decade. At a time when people were finding it hard enough to make ends meet, this just makes things even worse.
According to most economists this is all a temporary phenomenon. There is no need to worry about it as it will eventually pass. Most professional economists though earn the sort of salaries where they don’t have to worry about paying the electricity bill every month. What they think is causing it is basically the Covid crisis. To put it in very basic terms, the lockdowns caused a ‘supply chain crisis’. What this means is that there were disruptions in getting products to the market. This was caused by factories closing down due to lockdowns in China, ships being stuck in ports, migrant workers staying at home instead of going to work abroad, and a whole host of other things. When you add this to the increase in demand caused by the end of the lockdown, it’s caused this sharp increase in inflation. As the economy returns to normal, they argue inflation will start to decrease. They don’t seem entirely to know when this will happen though.
This is what is causing inflation everywhere. There are two additional reasons why it is so bad in Turkey. Firstly Turkey has an unstable economy anyway, which is over burdened by debt. Secondly the Turkish government is committed to a policy of a weak Lira. The reason for this is that a weak Lira makes Turkish exports cheaper, and more competitive, and Turkish holidays cheaper, and more attractive for foreign tourists. Everyone has heard about people who live near the border going over to Turkey to go shopping. This gives a minuscule picture of what the bosses in Turkey actually want. While the poor in Turkey are struggling to buy bread, and even workers in good jobs are having to make cutbacks, Turkish exports are increasing, and Turkish companies profits are soaring. They earn dollars and Euros for the products that they export, and pay their workers in an increasingly worthless Lira.
Inflation is not a crisis for the economy. We need to be clear about this. The major companies are all posting increased profits. Of course they are. They are all increasing their prices. Meanwhile, whilst some of their costs are going up, their main costs, which are workers wages, are remaining the same. The people being hit by this crisis are workers. With salaries remaining the same as prices increase, every point on the inflationary scale is a direct cut on workers’ salaries. All workers need pay rises just to maintain the same standard of living.
When people start to talk of pay rises though, it sends the bosses, their media, and political parties into fits of apoplexy. The line pushed by right wing political parties, and all political parties in Bulgaria are right wing political parties is that pay rises increase inflation. Since the start of the 1980s, the mantra repeated by the bosses, and their lackeys, has been that wages must be kept down to stop a return to the inflation of the 1970s, so at a time when prices are increasing, and companies are increasing profits, workers are being told that their salaries, in real terms have to decrease.
There are two things that can happen here. The first is that workers accept this massive cut in wages that has already happened, and that it seems will continue for the foreseeable future as long as this inflationary cycle continues. The second option is that they start to do something about it. The very first thing that this means is starting to talk to our workmates and colleagues about how we all need pay rises just to keep up. Of course bosses will object that there can’t be pay rises because of inflation despite the fact that it is precisely because of this inflation that we need pay rises.
To think about what comes next, we can also learn from Turkey. Just as we can see an extreme example of inflation there, we can also see that Turkish workers are fighting to maintain their salaries. December saw demonstrations in cities all across Turkey with the slogan “we can’t make ends meet”. Already the government has increased the minimum wage by 50%, and according to Turkish government statistics 40% of workers are on minimum wage. This though is not enough. At the start of last year minimum wage in Turkey was the equivalent of $380 US. Currently it is about $185 US, and declining by the day. At the end of December workers held major demonstrations in all major cities in Turkey.
Of course Bulgaria is not about to slip into the same sort of inflationary crisis as Turkey. Nevertheless, inflation will continue eating away at our wages for at least the next year. Whilst this is all going on and the subject that workers need to focus on is the attacks upon their wages, and living conditions various right wing forces are trying to divert their attention. The demonstration organised by Vazrazhdane is a good example of this. The real crisis facing workers is the constant eroding of living standards. Not having to wear a mask will not give people reductions in their electricity bills.
Workers in Bulgaria do not have the same traditions of militancy as workers in Turkey. For too long workers have been passive. The result is one that we all know. Bulgaria has the lowest wages, and lowest pensions in Europe. When workers don’t fight to maintain living standards, they invariably get worse. What workers here need to do now is to look to examples in other countries, not just next door in Turkey, but also the increasing militancy of American workers that we recently featured on this site. The first step forward is to discuss with our workmates and colleagues about why we need a pay increase. The second is to discuss how to get one. As a major Turkish construction boss recently said “When people are impoverished, eventually they will go and ask the person who made them poor to pay for it”. That’s what we need to be talking about doing now.