Inflation, economic crisis and more money for “defense”

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The federal government will spend $48.6 billion on the military over the coming year. This, we are told, is to keep us safe. Defense Minister Richard Marles has promised that $575 billion over the next decade will not be affected by inflation, but will continue to grow in real terms.

Despite this, many feel decidedly in danger. The fear is real: how can we stay warm, pay the bills, stay healthy, keep a roof over our heads, and feed our families while the economy is collapsing around our ears?

Treasurer Jim Chalmers warned that the future will be difficult. There is already a health and housing crisis. Austerity policies mean wages continue to fall relative to inflation and interest rate hikes push people to the wall. Despite this, Chalmers said the government would not be making any major announcements on cost-of-living support anytime soon.

Australia is facing a severe economic crisis – a crisis it shares with the rest of the capitalist world. Things look more than difficult.

When interest rates started to rise, the voices of Pollyannaish were heard. Financial comparison site Canstar casually advised homebuyers to “prepare and do the sums for their specific situation… The trick is to move on now – pay more if you can afford it.” allow”.

Senior Economics Writer with age and Sydney Morning Herald Jessica Irvine said there was really nothing to worry about and there was “very little chance” that interest rate hikes would tip us into a recession. Either way, she says, we should all find ways to adapt.

For many people, the adjustment will mean finding an extra $1,000 a month by this time next year to pay their mortgage. Salaries hardly move. Less reassuringly, Irvine said, “If we hit a recession, the Reserve Bank won’t raise rates yet.”

It’s a fantastic view of the world. Those who have mortgages are stressed.

Home ownership remains high, although according to the Australian Housing and Urban Research Institute only 50% of 25-55 year olds will be in the housing market by 2040. As home ownership becomes a option in decline, there is another rental crisis. People just can’t get decent housing.

The health care system is collapsing before our eyes: food banks have never been busier, charities are being pushed to the limit and impossible new “mutual obligation” conditions are being imposed on welfare recipients.

This was the grim reality many faced before the onslaught of rising inflation and interest rates added to the mix. Wages have fallen and even though the minimum wage is increased by a pitiful 5.1%, inflation is still expected to rise by 6% by the end of the year.

Long-term wage stagnation

A prolonged period of high inflation, coupled with low wages, lies ahead. Wages, regardless of the political hype that accompanies election campaigns, have stagnated since the 2008 financial crisis and before.

The economic crisis has been brewing for years as global economies never fully recovered from the crash of 2008. This is not a localized problem.

The overall picture is bleak. A global recession seems not only likely, but almost inevitable. World Bank President David Malpass described how the war in Ukraine, COVID-19 lockdowns in China, supply chain issues and rising global energy prices are “hammering growth” and that “for many countries, recession will be difficult to avoid”.

The World Bank has just revised downwards its forecasts for global growth. This figure is expected to increase by only 2.9%, compared to 5.7% last year. This puts the growth rate even lower than the International Monetary Fund’s revised growth estimates from April of just 3.6%.

United States Treasury Secretary Janet Yellen, among many world economists, speaks of a period of stagflation, where prices continue to soar while the rate of increase in the production of goods and services s is collapsing, with high inflation coinciding with weak economic growth.

His words echo the reality of many developed economies. “The global economic outlook is challenging and uncertain,” with “higher food and energy prices having stagflationary effects, namely lower output and spending and rising inflation across the world. world”.

The limits of capitalism

Workers and global economies face structural problems derived from the limits of capitalism. Despite the optimism of some, the IMF, World Bank and US Treasury all agree that the crisis is real.

Logic suggests that the last thing the world needs is to commit a global budget of $2 trillion to increase military spending. Logic would suggest that Australia‘s interests would be better served by not spending billions of dollars on nuclear submarines or, as Marles put it, by spending more on more submarines and missiles as a measure” temporary” while the new ones are made. However, the logic is not evident.

The deeper the crisis of the economy and of capitalism, the more bellicose the capitalist states become. Inflationary increases do not prevent the militarization of the world. The economy could collapse but, for capitalism, new profitable opportunities present themselves. War and the march towards war are a means of ensuring the survival of the “fittest” capitalist regimes.

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