“Housing market faces big slowdown” reports the Financial Times, while today’s Daily Telegraph main headline is “Fastest rise in food prices for 14 years”. These are not unrelated stories but are further indications of the great unravelling that is occurring in the major capitalist economies and financial system.
In ten years, house prices in Britain have gone through the roof (pardon the pun), rising by 300-400% depending on the region. This unsustainable inflation was fuelled by low interest rates, mortgage loans five, six or more times annual income, a shortage of new affordable home both to buy and rent and, in general, a belief that the sky was the limit. In this dream-like world, vast numbers of people remortgaged against the increased “value” of their property to buy consumer goods and thus keep the global economy ticking over.
This process was an expression at a personal level of what was taking place at macro-economic level. For 30 years, global corporations have borrowed heavily to finance their expansion/mergers/takeovers. In turn, this gave rise to a new global financial system where money could apparently beget even greater sums of money by sheer electronic manipulation. It was as if the Middle Ages alchemist’s promise of turning common metals into gold had at last become possible. The “share” that fell to ordinary people came in the form of credit (meaning debt) to buy more of the goods that the corporations were turning out.
Which brings us to the Daily Telegraph story about food prices. They are increasing at their highest rate for more than a decade, according to official figures released yesterday. Food factories are having to pay 6% more for their raw ingredients than a year ago - the highest annual rate since 1993, says the government’s National Statistics office.
A survey by the website mysupermarket.com, which compares prices across online supermarket chains, found that the three biggest - Tesco, Asda and Sainsbury's - are charging their shoppers 12% more on average for a basket of 25 staple goods compared with last year. That equates to an annual increase for most families of about £750. A kilo of peas has gone up from £1.19 to £1.79 at Tesco, a dozen eggs at Sainsbury's has leapt from £1.62 to £2.35, while Asda has increased the price of its orange juice from 73p a litre to 88p. The cost of a pint of milk has reached an all-time high of 33½p and sliced bread costs a record £1.20 in big stores.
Driving food price inflation is climate change – itself a product of unsustainable capitalist growth - combined with rising fuel prices. Global warming has produced a drought in some key crop growing areas, notably in Australia and the United States. Adding to grain shortages is the turning over of crop land from growing for food to production of raw material for ethanol and other biofuels. In addition, whole areas of former farmland in China and India are being given over to manufacturing and service industries, leading to greater pressure on world supply. Fuel costs have soared as the price of oil reaches nearly $100 a barrel. This in turn is a reflection of the falling value of the dollar, in which oil is priced. The dollar’s devaluation is absolutely connected to the fact that the United States has lived on borrowed money for several decades.
The impending collapse of the housing market combined with rampant inflation will devastate millions of lives. Alternatives to the crazed world of the market economy are urgently required. A House of Cards – from fantasy finance to global crash has some viable proposals. Why don’t you check them out?
AWTW communications editor