The rising cost of living under the Biden-Harris administration has cut into the buying power of the working class. On their watch, overall prices have increased by more than 20%. What used to cost $100 in January 2021, now costs $120.34 as of August 2024! Going a little further back, a hundred dollar item in 2019 now costs $125.06. In some sectors, like housing, price increases have been even steeper.
The wages of most workers haven’t kept pace with these high prices, and inflation is largely responsible for Biden’s negative approval rating. It’s no surprise that his sidekick, Kamala Harris, is trying to assure voters that she will combat inflation. Her campaign claims that as president, Harris will prosecute price gougers. Will this really help workers?
What causes prices to increase?
In Capital, Marx explained the real sources of price increases. A commodity’s value is determined by the average socially necessary labor time needed to replace it. The market price of a commodity hovers around this value, but at any given time may rise above or fall below it, due to fluctuating supply and demand. The pandemic caused sudden shocks to supply and demand, which caused some of the recent inflation.
Protectionist trade policies, pursued by both the Trump and Biden-Harris administrations, have also played a role. Tariffs—taxes on foreign-made goods—necessarily increase the prices of imports. This has an effect on supply and demand, also raising the price of domestic goods. In addition, some commodities are imported because, on average, they can be produced abroad using less socially necessary labor time than if they were produced at home. If protectionist policies drive these imports off the market and replace them with domestically-made alternatives which, on average, require more socially necessary labor time to produce, then this will increase both their value and price.
In Capital, Marx explained the real sources of price increases. / Image: Socialist Appeal
Marx also explained that devaluation of a nation’s currency leads to rising prices. The injection of massive amounts of fictitious capital, including arms expenditures, into the system set the stage for big price increases. As Ted Grant explained in 1971,
The workers in the Forces and armaments industry have to eat, live in houses, procreate, have recreation, and all the normal activities of the working class. The capitalists in these industries have to make the average rate of profit, if not more. The expenditure is entirely unproductive, producing neither consumer nor capital goods. Consequently, it has to come out of the production of society as a whole. Hence the undermining of the currency.
In response to the 2008 capitalist slump, the three successive presidents—George W. Bush, Obama, and Trump—supported the Federal Reserve’s “quantitative easing” policy. The Fed was monetizing the debt and propping up the financial markets with massive asset purchases. The pandemic only accelerated this. Between February 2020 and November 2021 alone, the Fed and the big banks injected over $8.4 trillion into the economy. Over that same period, GDP increased by only $4 trillion. With commodity production falling so far behind the increasing supply of money, inflation was inevitable.
Neither Harris nor Trump have any way of tackling the issue of fictitious capital. They could raise the value of the dollar with “tight money” monetarism, but this would kick away one of the few remaining props preventing the sick and decaying capitalist system from falling into a deep slump. In fact, the Fed’s recent rate cut shows they are moving in the opposite direction.
Is Harris’s proposal “communist”?
Trump and his henchmen accuse Harris of advocating price controls, which they denounce as a “communist” measure. There are two problems with the Trumpist line. First, Harris has never publicly advocated for government price controls which, under capitalism, always cause shortages. Second, price controls are in no way a communist measure. As long as the capitalist system remains, communists demand not price controls, but increases in wages and benefits which, at the very least, match the full amount of price increases. This can be achieved and maintained only through militant class struggle.
But communists don’t stop at the limits of what can be achieved under capitalism. A workers’ government would freeze the prices of goods and services and nationalize the top 500 corporations. These companies would be integrated into a socialist plan of production, which would work to increase output and relieve shortages. Resources and labor used to produce wasteful trinkets and instruments of death, i.e., armaments, would be redirected towards socially useful production. In this planned economy, some services like mass transit, education, and healthcare would be free of charge and paid for out of the national surplus. Rent would be no more than 10% of a person’s income. The working class would no longer be faced with the prospect of prices increasing faster than wages and declining living standards.
Trump and his henchmen accuse Harris of advocating price controls, which they denounce as a “communist” measure. / Image: MAGADevilDog. X (formerly Twitter)
What is Harris’s policy on price gouging?
Rather than price controls, Harris’s campaign says she supports a federal ban on corporate price gouging in the food and grocery industries. This would do absolutely nothing about the costs of housing, healthcare, college education, or anything else. Harris has never explained what this “ban” would mean in practice. Any enforcement would involve the bourgeois legal system, which defends private ownership of the means of production above all else!
Legislation against price gouging would need to provide a legal definition of price gouging and define how much profit is legal. Even if this were to pass Congress, never mind how long it would take, the US Supreme Court could easily turn such a law into Swiss cheese with many legal loopholes and escape routes for the corporations. Harris, a lawyer, certainly knows all of this. Her proposal is just more empty rhetoric to dupe workers into voting Democrat.
Even if the government prosecuted some corporations and won in court, how long would this take? Would consumers get a refund? When? The legal system functions at a snail’s pace—except when persecuting workers on strike.
Sick American Capitalism
The capitalist system is in decline worldwide and American capitalism is no exception. There is no way Biden, Harris, Trump, or any other bourgeois politician will be able to solve the dilemma of inflation. Another capitalist slump is inevitable. It alone will solve the inflation problem with the prospect of a depression—a cure worse than the illness. There is no prospect of a decent life for workers under the market system. The only solution is to build a mass communist party and fight for a workers’ government, which can usher in prosperity for all through a planned economy.