Inflation Con-trick in Full Swing

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of incomes policy.

Labour Ministers are vying with each other to make the most optimistic forecasts about the future prospects for the economy.

The euphoria has been fuelled by the rise in the Retail Price Index in July of 0.1%, hailed as the downturn towards single figure inflation, but all forecasts centre on the warning that the only thing which can stop this is wage increases substantially over six per cent.

So what is the state of capitalism?

FRESH VEGETABLES

Part of the smallness of the rise in July is directly due to the sharp drop in the price of fresh vegetables (down by 11%). If the price of fresh food is excluded then the inflation rate for the month jumps from 0.1% to 0.65%, not that much lower than the similar figures for May and June.

The figures also include part of the excess profit refund which the Post Office has been ordered to make to telephone subscribers.

Reductions of this nature have a once-only impact and no effect at all on the underlying trend. Next month's figures will also show a similar once-off effect: the cut in the price of petrol.

RAW MATERIALS

The cost of goods leaving British factories-that is the wholesale price index-went up last month by 14% leaving the annual rate unchanged at 21%.

This is despite a fall in the cost of raw materials from abroad. Since manufacturers are paying out less in real wages, becuase of Phases I and II it is clear that the effect of the wage curbs has been to do nothing for prices but everything for profits.

The lower costs material commodities on the world market is determined almost exclusively by speculation.

FOREIGN CAPITAL

The other leg of the so-called recovery has been the influx of foreign capital.

This is what used to be more accurately called 'hot footloose money' by the government in the days before they needed it.

It slops around the world looking for the best short term reward and will leave with as little compunction as it arrived.

Since the pound is being allowed to rise, the cost of imports drops and exports become more expensive destroying the 'export led boom' we are told to expect and sacrifice for.

WRONG Imports last month were the wrong sort for any recover Manufactured goods are bought at very high levels,

OUTPUT FELL

The most important fact emerging from last month's figures is that industrial output fell in Britain by the largest amount for over two years. Production is now well below the level of the three day week. So much for "booming Britain'.

The balance of trade was tar worse than the government had predicted and only North Sea Oil prevented the figures from being appalling.

The result of the low output has been to make projections about unemployment still more gloomy.

The 1.4 million 'hard core' unemployed excluding schoolleavers is now expected to rise to 1.7 or 1.8 million by the end of the year. The two million mark cannot be ruled out.

all being vital PHOTO: Chris Davies, Report.

imports for industry are not being increased.

The death throes of British capitalism as part of a crisis ridden world system will take more than a bedside manner from Healey to cure. The vital necessity for wage rises to match inflation is with us lies and distortions more than ever before.

Far from prompting a new wave of inflation, such a policy is the only • means of combatting an inevitable rush of massive price increases in the autumn and winter this year.