First, take a quick look at our Graph of the Week. Then, let’s talk about stability, chaos, malnutrition, psychopaths, fake politicians and rage.
The red line in the graph is the ‘scientific’ rate of inflation calculated by the egg heads; the green line is the actual rate of inflation in food costs. As you will see, food prices both rise and fall significantly more than general inflation. For a market purist, this is fine, because what a consumer loses on bread and milk they gain on 4K televisions. The system works.
So what does that system look like when it is working? Thousands of children and babies treated for malnutrition in Glasgow. They must not have shopped around enough for deals on 4K tellies, I guess.
So what are the politicians doing about this? Cynically faking it. First John Swinney announces a compulsory food price cap (illegal in Scotland) which suddenly turns into a voluntary scheme no-one is signing up for. This was mocked by Westminster (mostly correctly) which then went on to propose precisely the same thing.
This is an orgy of stupidity that needs explaining because it is policy-making by people who clearly have virtually no understanding of the issue they are creating policy for. You don’t get me defending supermarkets often but one thing you cannot accuse them of is gouging on price. Their business model isn’t to maximise prices, it is to expand the volume of sales.
Supermarkets do not price products high, they use a series of psychological marketing techniques to get you to buy a lot more than you need. That is why the UK throws out about a third of the food it buys. Supermarkets genuinely compete on price for essentials, sometimes as a loss leader. Come for cheap milk (saved ten pence), leave with some crap made out of pistachios you didn’t come for (cost you £7).
Margins in food retail are wafer-thin, particularly on big-ticket staples like bread or cheese or pasta. So you can cap the prices but all you’re doing is asking supermarkets to operate below cost. You’d be much better taxing their profits more and using that to increase benefits.
So what is actually going on here? Why is food spiking in price? It occurs right through the supply chain – and this is where the supermarkets are culpable. Ironically, exactly because they have crushed down on the price of staples, the producers of those staples are under financial duress. Unilever makes the junk food in a factory in Poland (or wherever) which is very profitable.
But milk, vegetables, meat, grains and so on? They are made by farmers who are in a monopsony situation – supermarkets have created a monopoly and are now the only people farmers can sell to. Agricultural production is really, really vulnerable. So are the producers of imported rice or beans or coffee.
Real food production is also very cost-sensitive. It is labour-intensive so increasing payroll taxes hits producers hard. It is energy-intensive, reliant on the price of diesel for farm machinery and electricity for all kinds of processing. And so on. This is all true in the distribution sector as well – low-pay delivery drivers, energy-intensive warehousing.
When producers face financial difficulties they do what vulnerable people do – they panic and overcompensate. Producers generally work in annual cycles and if they lose out on this cycle, they struggle to invest into the next. It is existential; they can’t take a chance. They have to put their prices up by more than their input costs. And that cascades up through the system.
Why? Because demand for food is inelastic. Come an inflationary crisis, you stop buying those 4K tellies but you still need food. Basic economics says that increasing cost in an inelastic market means one thing – big price rises. That is what is happening; in that context, price caps can actually make things worse by making producers even more vulnerable.
What is so egregiously rage-inducing about all of this is that the very people who demand absolute stability for themselves also demand the right to impose chaos on you
Now why is this all happening in the first place? What I’ve described is a market system which exaggerates the impact of cost inputs and hits the consumer on a life-essential good. So what is causing the cost inputs to rise? Here’s the irony – the volatility you are facing is a result of government providing stability and predictability for the very rich.
Why are payroll taxes rocketing? Because Rachel Reeves promised stability for financial markets in the face of a fiscal ‘black hole’. The whole strategy Reeves has been following is to placate financial markets to bring interest rates down and thereby stimulate a borrowing-fuelled economic stimulus. Which is to say she is trying to carbon-copy Labour from 1997 to 2003.
In this instance placating financial markets meant not taxing things financial markets care about (profits). So instead she taxed people (whom financial markets do not care about at all). Tax humans, costs go up, the consumer suffers and the rich make even more profit, but tax profits and costs do not go up, the consumer is protected and the rich get a little bit less rich. She made her choice.
That is also how energy works. To privatise the system they had to offer ‘predictability’ for investors and so they created a ‘you can’t lose, guaranteed profits forever’ system of payments which are linked to oil and gas and so very volatile. This was sold to us on the basis of efficiency but has resulted in the UK having the most expensive electricity and the highest private profits extracted from its energy system of any European country.
To make sure that life is stable and predictable for the super-rich, it is necessary that life is made chaotic and unstable for the rest of us. To make sure they never, ever lose their enormous profits, we have to pay unnecessarily high energy bills and have our labour taxed to disincentivise hiring us. And what is volatile for the middle classes is fatal for the poor.
What is so egregiously rage-inducing about all of this is that the very people who demand absolute stability for themselves also demand the right to impose chaos on you. This is the era of surveillance pricing, surge pricing and AI. Neither prices nor wages exist in that system. It is a system of barter between sellers and algorithms. You're just the victims.
With surveillance pricing the seller uses data gathered about you to find out how affluent you are and so what is the maximum they can charge. Nothing has a price; you are the product. With surge pricing an algorithm watches where demand for something is ‘surging’ and so charges you more in real time, sometimes over the course of seconds. Nothing has a price; you are the product.
You live in chaos so that they can live in tranquility
Now let’s go back for a second. Another recent occasion when the Scottish Government misunderstood how the world works was with its National Energy Company. The then-First Minister ‘just thought in her head’ that she could sell electricity cheaper than the private sector. But Common Weal had actually talked to people in the electricity retail sector and knew differently.
Like supermarkets, energy retailers operate on vanishingly thin margins (the humungous profits are in generation). They don’t even operate on a ‘expand volume of sales’ model, they just work on the basis that since they don’t have to do much other than check your meter and send you bills, small margins are still money. That’s why they all went bankrupt in the energy crisis and why Sturgeon’s National Energy Company became another farce.
The retailer we spoke to was Our Power, a mutual energy company. And it did not try to compete on price, because it couldn’t. Part of capitalism is about trapping you with discounts to get you in and then assuming you don’t have the energy to switch as they fleece you. If you really wanted you could get cheaper electricity by changing supplier annually to get hold of introductory deals.
The Our Power model was different. It competed on stability. It was targetted at lower income households who were unable to cope with sudden spikes in bills. Not ‘cheapest on the market’ but ‘over the long term, cheapest because it is most stable’.
That is the opposite of the official position of the Scottish (or Westminster) Government. For them the very rich must be granted maximum stability and predictability and guaranteed profits. When the First Minister says ‘make Scotland the best country for investors’ that is precisely what he means.
But the world isn’t a predictable place (and a world with Trump in it even less so). Which means there will be constant disruption in human affairs. That in turn means that the impact of volatility has to go somewhere. If there is chaos, someone will experience it. What the politicians simply will not say is that they have decided that the person who will suffer chaos is…. you.
Your energy supplier needs stability. So does your banker. And the retailers you use. And the wealth fund manager who manages your pension. When oil prices spike because someone invaded somewhere a long, long way away from you, and if public policy is that everyone above you in the chain is protected from that shock, the shock has to go somewhere.
You live in chaos so that they can live in tranquility. None of them will say that but that is the truth. The pursuit of GDP in modern capitalism thrives on the instability of others. Unstable employment, unstable nutrition, unstable geopolitics, unstable household finances. And capitalists actually think this is their right. Have a look at the incoherent fury of the super-rich.
And now have a look at this. This is what a revolution looks like before it is a revolution. This is a billionaire lecturing a graduation class about the merits of AI and the graduates going full-on fucking mental. He looks blankly (‘but it is the disruption we all want’), they scream angrily (‘we don’t want disruption’). This is the behaviour of a psychopath, someone who cannot trace a line from their actions to the harm it does others.
And that is what is driving me so mad about this whole crisis that we’re being plunged into. The politicians are pathetic and give the psychopaths everything want. When the psychopaths start to starve children, the politicians want to look like the good guys, so they fake it by inventing a fairytale in which they are the good guys and not the henchmen. They are calling it price caps, but in reality they do nothing for anyone but themselves.
It has no chance of working. It wasn’t meant to. They forced chaos on us on behalf of the rich – they just didn’t like that it worked as it was meant to during an election, so they made up fibs. But listen carefully politicians; that booing, that rage? It is coming for you. You have been sacrificing our interests to those of the rich and you have been lying to us about it.
You are the chaos-merchants promising that we will live lives of volatility and risk so that you can make promises to lobbyists. You are not the good guys. The strong do what they can, the weak suffer what they must – and you sided with the strong. Yet somehow you don’t think you deserve to be the most hated politicians in the history of modern democracy, even though you already are.
This shit could only get more insultingly patronising if some senior politician was to tell a child in an ambulance on their way to the hospital for treatment for acute malnutrition that VAT on theme parks would be cut for the summer. That would be truly stomach-churning. [Checks evening news.] Fuck. Anyone got a pitchfork I could borrow?