Bank interest rate rise deepens capitalist crisis
rab
Friday, 4 August 2006
Bank interest rate rise deepens capitalist crisis
THE Bank of England Monetary Policy Committee raised its base rate by
0.25 per cent to 4.75 per cent yesterday. This was the first change for
11 months and the first increase for two years.
The decision was taken amid fears over growing inflation. The Consumer
Price Index (CPI) went up by 2.5 per cent in June, up from the 2.2 per
cent increase in May. The Retail Price Index (RPI) rose by 3.3 per
cent, up from the three per cent rise in May.
The increase in the CPI is the largest since this form of measurement
was introduced in 1997.
The decision by the Bank of England drove share prices down in London
by one per cent and led to a sharp rise in the exchange rate of the
pound against the dollar.
The leap in inflation is attributed largely to rising oil and energy
costs, which have led to bigger gas and utility bills. House prices are
continuing to spiral upwards and mortgage repayments are rising.
While retail sales are holding up, sustained by cheap credit, output by
manufacturing industries is plummeting.
Raising interest rates will worsen this situation and the employers'
group, the Confederation of British Industry (CBI), said yesterday
businesses would be disappointed by the move to increase rates.
The Engineering Employers Federation (EEF) criticised the decision to
raise interest rates as premature. Martin Temple, the Director General
of the EEF said: 'The Bank has jumped the gun with today's
decision.'
Already the official unemployment rate is 5.4 per cent. This figure in
May was the highest for six years. There were officially 1.65 million
people classed as unemployed, an increase of 90,000 on the previous
quarter.
In particular, the Office of National Statistics (ONS) reported that
there were 112,000 fewer jobs between March and May this year compared
with the same three-month period in 2005.
British capitalism is being battered by the world crisis at a time when
the largest capitalist economy, the United States, is stagnating. The
Goldman Sachs Confidence Index, published yesterday, revealed that
business leaders are the most pessimistic for three years.
The imperialist wars against the peoples of the Middle East - in
Afghanistan, Iraq, Palestine and Lebanon - that have provoked
enormous resistance from the masses, are having a direct impact on the
capitalist crisis. It is sending shudders through stock markets,
driving oil prices up to more than $75 and gold has hit $655 an ounce.
In this situation, the move by the Bank of England is no cure for the
crisis of British imperialism, the weakest of the major imperialist
powers. This medicine may kill the patient.
Raising interests rates is another nail in the coffin of British
manufacturing industries, driving up unemployment even more.
It threatens to burst the bubble of credit-fuelled speculation which
has driven up property prices and maintained retail sales. Mortgage
debts run into trillions and personal indebtedness is more than one
trillion pounds.
Prime Minister Blair and the Labour government are engulfed in
political crises as a result of huge opposition from the working class
over the occupation of Afghanistan and Iraq, supporting Israel's
onslaught against Lebanon, and the drive to privatise and smash up the
NHS, education and council housing.
The economic catastrophe that threatens to throw millions out of work,
produce an epidemic of home repossessions and pauperise those with
credit debts, will drive forward the revolutionary movement of millions
of workers, youth and middle-class people. They are already up in arms
against the Labour government.
To answer this threatening catastrophe of capitalism, the trade unions
must organise mass strike action, culminating in a general strike, to
bring down the Blair government.
It has to be replaced with a workers' government that will withdraw
all British troops from overseas, defend the Welfare State and carry
out socialist policies.
The Workers Revolutionary Party is building a new leadership within the
working class for this, to put an end to British imperialism. Join the
WRP today!