May 26, 2003
Deflation – it's the new buzz word being bandied about to explain the mess the economy is in. When Alan Greenspan, head of the government's Federal Reserve Banking System, referred to a "possible risk" of deflation, all the economists stepped up to debate the question: will Germany go the way of Japan and fall into a deflationary spiral, and will the United States follow soon afterwards – with greater unemployment and more cutbacks in government services and programs?
If what's meant by deflation is a decrease in the prices we pay for goods and services, then there's no deflation. That's for sure. The government's own Consumer Price Index demonstrates this – even with the multitude of tricks it uses to understate what's happening to prices. Prices are still going up, and we continue to feel it in our pocketbooks.
But the question should be raised: why should "deflation" pose any risk to the economy? Deflation – which is nothing but a generalized decrease in the prices of goods and services – would simply mean we could buy more goods and services. In other words, we could be benefitting from the big increases in the productivity of our labor.
Year after year, we have been producing more goods and services in the same amount of time. Our labor has become more productive. Prices should have been going down; the time we have to work should have been reduced – in both cases, with no cut in pay.
If the benefits of increasing productivity were shared out equally, this is what would have happened.
But it's not. And when government economists begin to speak about "deflation," they're throwing the word around to hide the reality of today's economy. Having lived through a vast speculative period – a so-called bubble, when prices on stocks, land, etc. all skyrocketed – the economy has since been stagnating, when it wasn't declining. The bubble has burst. In a vain attempt to repair that damage, government authorities have been throwing money into the hands of the wealthy in every way they can.
Greenspan has dropped interest rates, month after month. Bush has cut taxes, several times over. None of this created new jobs. Just the opposite. Unemployment has gone up. Greenspan's interest rate cuts and Bush's tax cuts haven't brought about new investment in the production of goods and services. Of course not, the aim of these measures was to insulate the wealthy from the consequences of the economic crisis that their own system produced.
The danger is not "deflation," as such. The danger is the mess which the bosses have made of their own economy. The risk is the still greater mess caused by every measure the government takes to prop up the bosses.
We are living through a period when the attacks are coming at us from every direction. Lost jobs, cuts in wages and benefits. Pensions destroyed in the stock market or the bankruptcy courts. The current attempt to "privatize" Social Security – that is, to turn it over to the same stock market which has eaten up workers' private pension funds. Medical insurance taken away from us and medical care priced out of our reach. Declining public services and cutbacks in education. When the bosses' flunkies start talking about "deflation" this is nothing but an announcement that they intend to cut back still further on our standard of living.
Those of us who work for our living have to prepare ourselves to fight against the real danger which exists – the intention of the bosses and their government to keep squeezing every bit of wealth out of our labor that they can. They won't stop until we are convinced that we have to make a stand to stop them – and then start to do it.