Do ‘excessive’ wage rises lead to rising inflation and thus drive economies into a wage-price spiral? Back in 1865, at the International Working Men’s Association, Marx debated with IWMA Council member Thomas Weston. Weston, a leader of the carpenter’s union, argued that asking for increased wages was futile because all that would happen would be that employers would put up their prices to maintain their profits and so inflation would quickly eat into purchasing power; real wages would stagnate and workers would be back to square one because of a wage-price spiral.
Marx responded to Weston’s argument firmly. His reply, which was eventually published as a pamphlet, Value, Price and Profit, was basically as follows. First, “wage rises generally happen in the track of previous price rises” – it’s a catch-up response, not due to ‘excessive’ and unrealistic demands for higher wages by workers. Second, it is not wage rises that cause rising inflation. Many other things affect price changes, Marx argued: namely “the amount of production (growth rates – MR), the productive powers of labour (productivity growth – MR), the value of money (money supply growth – MR), fluctuations of market prices (price setting – MR), and different phases of the industrial cycle” (boom or slump – MR).
Moreover, “A general rise in the rate of wages will result in a fall of the general rate of profit, but not affect the prices of commodities.” In other words, wage rises are much more likely to lower the share of income going to profits and thus eventually lower the profitability of capital. And that is the reason capitalists and their economist prize-fighters oppose wage rises. The claim that there is a wage-price spiral and that wage rises cause price rises is an ideological smokescreen to protect profitability.
Was Marx right? Well, modern mainstream economics has continued to claim that ‘excessive’ wage rises will cause rising inflation and create a wage-price spital. Take these following views in the current inflation upsurge. First, there is the recent statement by Andrew Bailey, the Governor of the Bank of England. “I’m not saying nobody gets a pay rise, don’t get me wrong. But what I am saying is, we do need to see restraint in pay bargaining, otherwise it will get out of control”.
Or even more explicitly and following the argument of Thomas Weston over 150 years ago, Jason Furman, former economic adviser to US president Obama, put it this way. “When wages go up that leads prices to go up. If airline fuel or food ingredients go up in price, then airlines or restaurants raise their prices. Similarly, if wages for flight attendants or servers go up then they also raise prices. This follows from basic micro & common sense.”
Well, it may follow from “basic micro and commonsense” in mainstream economics. But it is just plain wrong. And this week, the IMF has compiled a comprehensive data analysis of the movement of wage and price rises that refutes Bailey and Furman. The IMF “address these questions by creating an empirical definition of a wage-price spiral and applying this on a cross-economy database of past episodes among advanced economies going back to the 1960s.” So over 60 years and in many countries.
What did the IMF find: “Wage-price spirals, at least defined as a sustained acceleration of prices and wages, are hard to find in the recent historical record. Of the 79 episodes identified with accelerating prices and wages going back to the 1960s, only a minority of them saw further acceleration after eight quarters. Moreover, sustained wage-price acceleration is even harder to find when looking at episodes similar to today, where real wages have significantly fallen. In those cases, nominal wages tended to catch-up to inflation to partially recover real wage losses, and growth rates tended to stabilize at a higher level than before the initial acceleration happened. Wage growth rates were eventually consistent with inflation and labor market tightness observed. This mechanism did not appear to lead to persistent acceleration dynamics that can be characterized as a wage-price spiral.”
And there’s more: “We define a wage-price spiral as an episode where at least three out of four consecutive quarters saw accelerating consumer prices and rising nominal wages.” And the IMF finds that “Perhaps surprisingly, only a small minority of such episodes were followed by sustained acceleration in wages and prices. Instead, inflation and nominal wage growth tended to stabilize, leaving real wage growth broadly unchanged. A decomposition of wage dynamics using a wage Phillips curve suggests that nominal wage growth normally stabilizes at levels that are consistent with observed inflation and labor market tightness. When focusing on episodes that mimic the recent pattern of falling real wages and tightening labor markets, declining inflation and nominal wage growth increases tended to follow – thus allowing real wages to catch up.“
What does the IMF conclude? “We conclude that an acceleration of nominal wages should not necessarily be seen as a sign that a wage-price spiral is taking hold.” In inflationary episodes, wages just try to catch up with prices. But even then, wage rises do not cause wage price spirals – thus Marx’s view is confirmed.
And if you want immediate proof of this, take this week’s wage settlement between German manufacturing employers and IG Metall union, Germany’s biggest. Workers will get pay rises well below Germany’s inflation rate, currently at a 70-year high of 11.6 per cent, receiving 5.2 per cent next year and 3.3 per cent in 2024, plus two €1,500 lump sum payments. Jörg Krämer, chief economist at Commerzbank, said unions and employers had “found a compromise on how to deal with the income losses caused by the sharp rise in the costs of energy imports”. He added: “I would not yet call this a wage-price spiral.” Indeed not, as even the best organized workers in Germany will have to accept reductions in their purchasing power over the next two years.
The IMF analysis only confirms plenty of other empirical work previously done. Indeed, wages as a share of GDP in all the major economies have been falling since the 1980s. Instead, profit share has risen. And over the period until 2019, inflation rates remained no more than 2-3% a year.
Also, there appears to be no inverse correlation between changes in wages, prices and unemployment – this classic Keynesian Phillips curve that claimed this relation has been shown to be false. Indeed, this was noted in the 1970s when unemployment and prices rose together. And the latest empirical estimates show the Phillips curve to be broadly flat – in other words, there is no correlation between wages, prices and unemployment. No wage-price spiral.
Despite this evidence refuting the wage-price spiral, mainstream economics and the official authorities continue to claim that this is the key risk to sustained inflation. The reason for doing so is not really because the economic prize-fighters for capitalism believe that wage rises cause inflation. It is because they want ‘wage restraint’ in the face of spiralling inflation in order to protect and sustain profits. To this aim they support central bank interest rate hikes that will accelerate economies into a slump – coming in the next year.
As Jay Powell, head of the US Federal Reserve put it: “in principle …, by moderating demand, we could … get wages down and then get inflation down without having to slow the economy and have a recession and have unemployment rise materially. So there’s a path to that.” Even more blatantly, Keynesian guru and FT columnist, Martin Wolf demanded: “What [central bankers] have to do is prevent a wage-price spiral, which would destabilise inflation expectations. Monetary policy must be tight enough to achieve this. In other words, it must create/preserve some slack in the labour market.
So the real aim of interest-rate hikes is not to stop a wage-price spiral but to raise unemployment and weaken the bargaining power of labour. I am reminded of the comment of Alan Budd, then chief economic adviser to British PM Margaret Thatcher in the 1980s: “There may have been people making the actual policy decisions… who never believed for a moment that this was the correct way to bring down inflation. They did, however, see that [monetarism] would be a very, very good way to raise unemployment, and raising unemployment was an extremely desirable way of reducing the strength of the working classes.”
26 thoughts on “The wage price spiral refuted”
Thatcher might have used monetarism as a tool in her political agenda. Nevertheless, inflation came down in the 1980s after central banks raised interest rates and wage increases were limited. The logic is that lower wages reduce cost as well as demand, so it works on both sides to lower inflation. Whether or not there is a causal relationship remains a matter of debate, but it makes sense and the evidence from the 1970s and 1980s suggests that it can work like so.
Lowering consumption – specially of the working classes – will always have a deflationary effect, not question about that. It is pure logic: if you have two cakes and deprive another human being from eating one of those cakes, you’ll immediately have two cakes for yourself, immediately (i.e. with the resources you already have), which would halve inflation by doubling your own personal purchasing power.
The real question is this: will it lower inflation enough so that the central bankers, politicians, economists, experts, gurus, etc. and their capitalist overlords’ target is met? Just because it worked in 1980-1982 (and only in the First World; inflation was exported to the Third World, which broke down in the 1990s) doesn’t mean it will work in 2022-2023.
The 1970s were different, so whether it will work now remains to be seen. I was a child in the 1970s, and remember that many businesses were struggling. The government supported unprofitable businesses (in the Netherlands, where I live, it was a conglomerate called RSV). And that money was paid for via taxes by all of us, including profitable businesses.
In the Netherlands, coal mining operations were discontinued in the 1960s because natural gas was much cheaper. But in the UK, they continued until the 1980s, and like RSV, they were unprofitable. And I remember the bitter fight between Margret Thatcher and Arthur Scargill, two bitter opponents who were not inclined to compromise.
In the current situation, there is less energy available, so you could combat inflation by taxing luxury (for instance, air travel and energy use above a certain level) to bring down demand from wealthy consumers to combat inflation.
Of course, we can safely assume that the prices are the sum of wages, business profits, interest and rent, and not that the price is divided into the mentioned types of income. In this way we postpone forever the determination of the origin of the distributive variables. Who the hell needs economic theory to study the development of capitalism anyway?
The problem with your reasoning is that the real interest rate in the UK was indeed higher in the 1980s than it was in the 1970s. In fact, it tended to be negative during the 1970s and positive during the 1980s. But from the recession of 1974-5 to 1982 the economy grew on average less than 1%. From 1982 to 1989 it grows between 3 and 4%. I do not see that the increase in the interest rate, or the change from negative to positive interest rates, has negatively affected the accumulation of capital and the growth of the product and the general productivity of the economy. Why? Well, because that period coincides with the so-called “neoliberal recovery” of profitability. That is the big problem of the bourgeois economists, they reduce the business profit to the interest and for that reason they assume that the increase (reduction) of the interest rate supposes the reduction (increase) of the economic growth. But the determining factor is profitability. If the return on capital is high, positive interest rates can be accommodated without problems. Which brings us to one of the causes of reduced inflation: the increased output and productivity mentioned in this article that you overlooked. Of course, to the extent that the bourgeoisie manages to impose real wages that are falling, or rising but well below productivity, the recovery of profitability can logically have a positive impact on investment, production and productivity, and generate, in turn, downward pressure on inflation. But that is not the same as the vulgar theory of the cost of production. If capital competition governs, wage increases impact distribution and relative production prices, but not the general level. The only context in which a price-wage spiral can occur is under the assumption of oligopolistic concentration and monopolistic union of prices, or in a dysfunctional capitalist economy where the law of value loses force, like Argentina’s.
It is important to highlight that the unions in the First World countries – specially those of the UK and Germany – are, historically (specially the British ones, who actually predate socialism itself), pro-capitalist institutions, that is, they historically act pro-cyclically: we can observe this in the strikes rate, which spike up when capitalism is prospering, and plummeting (sometimes to zero) when capitalism is in crisis.
This is specially the case of the German unions, who, after crushing the revolution of 1918, consolidated themselves as the gatekeepers of capitalism in the West (against the socialist wave from the East, i.e. the Soviet Union). Many people get it backwards: the German unions do not have a seat at the shareholders’ table because they’re strong, but because they’re complicit to the system.
I’ve already mentioned in comments here before that unions cannot be revolutionary, let alone socialist institutions or instruments, because they have leviathanic properties, i.e. they’re an integral part of the (capitalist) State. Evidence of that is the aforementioned case of the British unions, who founded the Labour Party, who predate the rise of (scientific) socialism. Trade-Unionism, therefore, arose in capitalism independently of scientific socialism and does not depend on socialism to exist.
Jay Powell’s quote (penultimate paragraph of the post) is very important because it illustrates the descendant phase of capitalism: it has a well established and mature fiat currency system, but now it has to behave like the old gold standard (i.e. suppress consumption in order to keep its purchasing power afloat/stable).
This means that the capitalist people has to endure the worst of both worlds: the suppression of consumption of the gold standard and the inflationary spiral of the fiat currency. Without enjoying the best of both worlds.
If this isn’t a clear illustration of the structural (historical) decline of capitalism, I don’t know what is.
This shows strike spikes correlate exactly with slump/depression – after ww1 when wartime govt. expenditure halted and after 1929 crash and end of 1970’s
Your data measures strikes by labor days lost, not by number of strikes. The number of days lost is irrelevant: I can get what I want with a one day strike and not get what I want with a one month strike.
During crises (at least when they erupt), some strikes may happen and they happen for a long time; that doesn’t mean they’re many, let alone that they get what they want or create class consciousness of the working class (see e.g. Thatcher crushing the British unionist movement decisively in the 1980s).
Your understanding of Trade Union history is incomplete. Your theoretical conclusions reflect this. What make Trade Unions revolutionary are circumstances.
If a revolution through unions are possible, they’re yet to be seen: that’s why parties exist. The instrument of socialist revolution, historically, is the party, not the union.
You’re probably referring to non-Western unions when you’re speaking of “revolutionary unions”. In the Russian Empire, unions were formally banned by the Tsar, so they were essentially clandestine cells that organized insurrections. That was the Bolshevik understanding of union, hence, e.g. they couldn’t understand when the general strike of 1926 was suddenly called off and nothing revolutionary happened: the goal of the miners’ union was to negotiate better wages and working conditions, not to do a communist revolution.
Historically, communist revolutions happened in places where the unions were either non-existent, existent only on paper or extremely weak. Well organized, socially accepted unions are a huge factor of absorption of the revolutionary pull of the working class. Hence the historical success of Marxism-Leninism (Stalinism, by the Trotskyite terminology) up to this day, to the dismay of the Western socialists.
The solution is to socialize profits. I’m attracted to the Parecon economy as set forth by Hahnel and Alpert.; they propose establishing worker managed businesses that are coordinated into an overall production council that follows the directions of an overarching consumer council. In the U.S. 60% of income goes to the top-earning 20% of households. The Joint Committee on Taxation, (Overview 2022, page 36), shows 22.7% of all income going to 1.5% of tax payers, all earning more than $500,000/year. That’s more income collectively than the 20.3% going to 60% of earners (often filing joint tax returns) earning less than $75,000/year. So 1.5% earn more than 60%. Such a system is going to have skewed consumption profiles, as well as insane wealth profiles. Socializing profits in 1865 would be difficult, but not so today. This economy needs guidance not by price signals but by reasonable human choices. The price of housing rentals has jumped by 32% in two years, and no new rental housing is being built to counteract the price increase. We take our dictates from the market not from reasonable human goal-setting. — Good article, as usual.
The socialization of profit implies in the self-abolition of capital, i.e. socialism.
Why are we always on the defensive? Given that in the USA between 1973 and 2018 real median wages fell shouldn’t we be entitled to say that if wages affect prices then falling wages should have caused prices to fall or at least stagnate. Conversely what did rise in real terms were undivided profits. Therefore would we not be more entitled to say it was these rising profits which caused prices to rise by an average of 1.8% p.a. Should we not be entitled to prepare an alternative Phillip’s Curve aptly named the Parasite Curve.Except of course it was neither wages nor profits on either side that caused price to rise but the depreciation of money on the back of the issuance of credit money and fiscal deficits.
“Given that in the USA between 1973 and 2018 real median wages fell shouldn’t we be entitled to say that if wages affect prices then falling wages should have caused prices to fail or at least stagnate.”
But the reality is that the increase in wages does NOT affect the general level of prices, if we assume a long-term scenario dominated by capital competition. Sharing the assumption that prices are the sum of wages and profits (not distributed) is equivalent to fertilizing the ground of vulgar economics. Therefore, what goes for wages also goes for profits. For example, in the scenario that you proposed, what must be said, imho, is that profits increased more than prices, wages and productivity. And that the function of the bourgeois economy is to provide the ideological justification that capital needs to increase the rate of exploitation. Already since Chapter 1 of Volume 1 of Capital, it is clear that prices are directly proportional to values and inversely proportional to the value of money and labor productivity. This is obviously what you have in mind when you correctly say: “Except of course it was neither wages nor profits on either side that caused price to rise but the depreciation of money on the back of the issuance of credit money and fiscal deficits.”
Honestly, I don’t see what advantages can be obtained, from the point of view of the interests of the working class, by standing on the ground of the bourgeois economy. On the contrary, sustaining the notion of prices as the sum of parts hides the relations of labor exploitation.
(But I like the idea of “Parasite Curve” as a parody of Philip’s curve)
Dear Mr Roberts
Many thanks for this excellent look at the state of play. I wonder if
the “Martin” referred to in the penultimate paragraph would be Martin
Wolfe or some other Martin at the FT ?
(I don’t have time to read the FT regularly so am out of touch.)
With best wishes, adj
Yes martin Wolf
Marxist theory needs to analytically distinguish between the Price-Wage Spiral – flipping the terms around to indicate the real dynamic per Roberts – and the intensification of the rate of exploitation by productive capitals in order to rase the rate of enterprise profit, all other market prices being equal.
The Price-Wage Spiral should be seen as a commercial arbitrage of the labor market by collective oligopolistic capital exercising its market leverage over that labor market, and not *directly* as an increase in the rate of exploitation that can take place at *any* particular *market* – not production – price-point for wages and commodity prices. IOW, additional profits are realized as measures are taken to ensure wages lag – like with coordinated mass layoffs as we’ve just seen in the “Big Tech” sector, as well as by the State undermining the legality of trade union actions. These are to be seen as a form of Marxian *surplus profit*, and not as Marxian profit of enterprise.
Of course, this surplus profit could eventually be transformed into profits of enterprise as capitalists can then increase the rate of exploitation, given success in imposing the above worsening market conditions for workers – a success that is not guaranteed, BTW, and is a determinate of the course of class struggle. But the principal point is that under late decaying capitalism, the increase the rate of exploitation is obtained not micro-economically “from below” by individual capitals, but is imposed “from above” by collective oligopolistic/monopoly capital supported by their State. If this results in an increased rate of enterprise profits, this will also permit oligopolistic/monopoly capital to both increase their own productive output, drive smaller capitals to the wall, and further expand their collective class oligopolistic market leverage, which I would submit is more concentrated now than in the 1970’s.
@vk Well it was the Original Trotskite himself, Leon Trotsky, who developed the theory of Uneven and Combined Development, to explain why the first socialist revolution broke out in a semi-peripheral, but nevertheless secondary imperialist country, still developing on the capitalist road.
This is NOT a theory that “guarantees” socialist revolutions can “only” develop in semi-peripheral countries, nor that conversely “guarantees” they can “never” develop in the core imperialist countries. This kind of wooden mechanical thinking is however typical of the tendency you follow, and exemplifies its *real counterrevolutionary* nature. And never mind that this “strategy” failed miserably in the 1980’s-90’s and continues to do so today. It has, however, succeeded marvelously in the promotion of counterrevolutionary situations, as we see in Eastern Europe (including above all, Russia) today.
The reality is that revolutionary, internationalist, Marxian socialism has yet to solve the problem of how to conduct a proletarian socialist revolution in a so-called “advanced” capitalist country located in the old imperialist core. The fact is, revolutionary marxism must solve this problem in practice – if only to deal rationally with the climate emergency! Here in the “quasi-Tsarist” USA, not a democracy, much of what trade unions could take as actions has been rendered effectively “illegal”, regardless of class collaboration by the union bureaucracy, see for current example the negotiations with the US commercial transcontinental rail workers, likely to have a settlement shoved down their throats by Congress, ie the Capitalist State.
Everything you point out in your three first paragraphs are related to the superstructure of capital, not its material base.
The relation between interest rate and profit of enterprise is a simple zero sum game: the higher the interest rate, the lower the profit of enterprise.
Such situation does trigger a thirst of the capitalist to rise the rate of exploitation because the capitalist is disciplined to a certain profit rate when he/she is indebted to the financial capitalist, but it doesn’t change the fact that the relation between the interest rate and the profit of enterprise is of simple reproduction, not amplified reproduction: it does not generate value, therefore doesn’t generate wealth.
Your concept of “Price-Wage Spiral” is not Marxist and doesn’t help explain anything in capitalism. Much less your concept of “surplus profit”. Surplus profit presupposes profit can generate, in itself, more profit, which violates the Law of Value.
Marx’s theory dispenses with the necessity of explaining the minor details of the historically specific modus operandi of exploitation. No matter if done from above or from below, through oligopolies or not, the process of exploitation of living labor is the same: the worker has to work beyond a certain amount of time.
Thanks for your reply, as it usefully illustrates my point. It is historically true that merchant, or independent commercial capital, was an integral part the feudal superstructure, even as it also accumulated capital in merchant and merchant banking form – a certain street in The City in London is called “Lombard Street” for a reason. Indeed, even as late as on the cusp of the so-called Industrial Revolution in Britain in the late 18th century, a certain group of British-American colonial merchant capitalists, including the larger slave-owning planter-merchants, formed their own independent merchant-capitalist state, called the United States of America, if only to prove the point that commerce is invariably bound to the superstructure, even when that superstructure is no longer generally feudal but bourgeois. It did contain feudal relics, as an independent merchant bourgeoisie itself is to one degree or another a feudal relic precisely in its independent existence, even a colonial merchant bourgeoisie without an indigenous landlord aristocracy as with the British-Americans, who instead overthrew the rule of Parliament dominated by the British landlord gentry. From that moment on, the progress of commercial capital followed the Stars and Stripes in that state’s continental conquest and genocidal extermination of the actual lords of the land, the indigenous peoples of North America. In that historical role commercial capital, bound up with the State, led the vanguard behind which also developed industrial and financial capital in the mid and late 19th century.
So no disagreement here. What is often overlooked by too many claiming to follow Marx’s analysis of capital is that, in its “real subsumption” within the contemporary capitalist mode of production, Marx nevertheless clearly defines and analyzes, in Vol II, Part One, the commodity capital circuit as one of the three *necessary* circuits of capitalist *production as a whole*. This much is absolutely clear, and we need only add that the terms industrial, commercial, and financial are simply common social aliases for the productive, commodity and money circuits, and that Marx specifically analyzed the commodity capital circuit as neither productive, not a realizer, of surplus value. Yet at the same time the commodity capital circuit must be a “bearer” of produced, but not yet realized, surplus value in the process of commodity circulation/distribution, and even underlined its *productive forces*, the industrial transport system, as *a branch of productive capitalist industry* (Vol II, Part One, Cpt. 6, Section 3 “Transport Costs”: “The transport industry forms, on the one hand, an independent branch of production, and hence a particular sphere for the investment of productive capital. On the other hand it is distinguished by its appearance as a continuation of a production process *within* the circulation process and *for* the circulation process” (emphasis in the original).
It’s no accident that the US railroad workers, presently in very difficult “negotiations” with the transcontinental railroad monopolies over their working conditions, almost uniquely do so under the dictatorship of the US Congress, rather than the NLRB. Just as it was no accident that the first great rebellion of industrial workers took place with the insurrectionary Great Railway Strike of 1877. No accident at all in relation to the specific social nature of the North American State!
I could go on and on, but basically, how do we square the assertion that commercial markets are “entirely” a phenomenon of the superstructure, with Marx’s clear inclusion of commodity capital, the material basis of “commercial capital”, as a necessary and integral circuit of capitalist production as a whole? Where does superstructure end and base begin with Marx? Clearly it begins with a *dialectical concept of their unity and interrelation*, for which I will assert that both the social forms of the commodity and money circuits – commercial and financial capital – form the linchpins of that unity precisely as they – necessarily – overlap both the State and capitalist mode of production at its commodity and money circuits.
Indeed historically *all markets*, as apparatus of exchange, have “descended from the superstructure above” rather than from a trucking and bartering Homo Economicus “from below”. That includes money, originally coin of the Realm as anyone familiar with medieval English history can tell you. But we should not forget that, OTOH, Marx did have a concept of “market price” as distinct from production price. In Capital, Marx consistently abstracts from issues of variable market price for the purposes of a more fundamental analysis. Subsequentially many Marxists have failed to lift this arbitrary constraint for the further analysis appropriate to subjects like price inflation.
Further, Marx certainly did have a concept of surplus profits, see Vol III, Part VI, “Transformation of SURPLUS-PROFIT into Ground Rent”. Of course, eliminate the landlord and the agricultural capitalist realizes this, not as “rent”, but as a surplus profit over and above the profit of enterprise, as land is a variable use value. But more than money or markets, landed property, in either hereditary or commercial form, is a *pure* effect of the superstructure. But a general definition of surplus profit is found in the variance of production price with market price, for whatever superstructural reasons.
Finally, the idea that Marx figured everything out about actually existing capitalism is false. If one agrees, then one is obligated to continue to advance the development of Marxist theory. I have identified one area – commodity circuit, commerce, and markets – in bad need of further advancement. Refusal to do so is identical to the abuse of Trotsky’s UCD theory to negate any prospect for socialist revolution in an “advanced” – or as I prefer to call them – “undeveloping” capitalist countries. Both are expressions of *counterrevolution* in theory and practice.
@ Bradley L Mayer #2
On a material basis, commercial capital is merely the specialization and “independentization” of the storehouses of industrial capital. Marx is very clear about that in the same Capital book II.
Colonialism is a new mode of production, distinct from feudalism. It is the initial historical phase of capitalism, not a specific form of commercial capital.
Marx’s Capital explains all the possible and imaginable variations of capital and capitalism. It is a definitive theory. There is no possible form of capitalism that can transcend Marx’s theory.
“The reality is that revolutionary, internationalist and Marxist socialism has yet to solve the problem of how to carry out a proletarian socialist revolution in a so-called “advanced” capitalist country located in the old imperialist core.”
This is a deep and current question. Current because as a result of the Ukrainian War many illustrious Marxists (From Brian Green to Paul Cockshott and even a good number of Marxist parties) are convinced that a socialist revolution can be carried out in an advanced capitalist country (USA, EU basically) and, for this reason, they direct their criticism at the capitalist powers leaving aside, and even with some support, the lesser capitalist power such as Russia. I’ll tell you my point of view, from a socialist, for what it’s worth: it’s very difficult if not impossible for a revolution to succeed in one of the dominant countries at the time. It is not guaranteed but it almost is. The evidence: all the socialist revolutions, that we all remember, have been in secondary countries. From Russia, passing through Asian countries (China), Arabs and even Cuba. The same thing has happened in (liberal) capitalist revolutions. Neither England in 1688 nor France in 1789 was the dominant power. They were in 1688 the Holy Roman German Empire-Germany, Austria, Czech Republic- and in 1789 it was England. The argument: on the one hand, the ruling class offers much more resistance in the advanced country and on the other, the dominated classes (today the working classes) of an advanced country with a growing economy and superior to the rest of the countries: 1º.- They have no power whatsoever about their societies and 2º.- They know that although their ruling class exploits them, they also know that their own little economic position is superior to that of the workers of other countries: they will not start any revolution.
Conclusion: Revolutions do not occur in the best economic moments or…. in countries with more advanced and dominant economies.
Revolutions begin in the worst of times and at their weakest links. I am sure that I never said they had to begin in the most developed capitalist economies. I am sure that I said that to succeed they can only conclude as an international revolution which of course draws in the advanced capitalist economies.
Within the confines of capitalism, the only way to halt the post-covid inflationary boom is to allow interest rates to rise to meet the supply and demand for gold, triggering a recession. Wages have not caused the inflation, but supply shortages resulting from underproduction. It is the multiplier and accelerator effects as Sam Williams states in his blog. If the federal reserve attempts to hold down interest rates and avoid recession and mass unemployment, eventually the money capitalists will dump their United States Dollars and buy gold on a massive scale. The dollar price of gold would rise exponentially and the entire dollar system would likely collapse, bringing down the US empire. For this reason, the federal reserve MUST trigger a recession if it wants to preserve the US empire. Even if it means allowing credit to seize up and loan money to disappear worldwide, triggering Great Depression II. This would be the price the US empire would have to pay in order to maintain its empire. Such are the contradictions of capitalism.
Well, if Marx and the IMF are right, the question is: why IG Metall sign such wage settlement?
What is the source of the Budd quote?
Thanks. I also found this report: https://www.theguardian.com/politics/2010/jul/09/hugh-muir-diary-alan-budd and this clip: https://www.youtube.com/watch?v=sdZp5iw-UEo