Canada’s spiralling cost of living crisis

Apr. 1, 2022

The latest inflation shock is yet another confirmation of the need for militant social resistance in the post-pandemic period

As we purportedly emerge from the pandemic, one of the immediate challenges that confronts us is a global cost of living crisis. There has been a sharp round of inflation which, even if we optimistically imagine it will be rapidly contained, has already had a very serious impact on the living standards of masses of people.

As the Food and Agriculture Organization (FAO) reports, global food prices reached an all-time high in February. They have risen by an astounding 24.1 percent over the last year and by nearly four percent in the last month. This is an absolutely devastating development for people in poor countries, where the effects of pandemic-induced “economic scarring” are already having a terrible impact. Even those of us in the richest countries, however, are facing a grim reckoning.

According to the Australian Bureau of Statistics, consumer prices rose 3.5 percent last year, while wages rose just 2.3 percent. In that country, workers earning an average wage took an effective pay cut of $832 when the impact of inflation is taken into account. In the United Kingdom, workers’ wage increases are being wiped out by the surge in prices.” Moreover, next month, a new energy price cap could see costs for millions of households hiked by 50 percent. In the United States, despite an average wage increase of 3.3 percent, real wages are being pushed down by the highest rate of inflation in 40 years.

Here in Canada, the annual rate of inflation has surpassed five percent for the first time in 30 years and has outpaced wage growth. A recent survey conducted by the Angus Reid Institute found that 70 percent of those they questioned were “stressed about money” as the pressure of inflation weighs on their daily lives. “Canadians’ household budgets are becoming squeezed from all angles as the price of goods rises,” the report concluded. Just over half of respondents indicated that an unexpected $1,000 bill would put an impossible strain on their finances. Rising housing, gasoline and food prices are the key driving forces and the impacts of this are being felt very unevenly. For example, the average rental price of an apartment in Vancouver has increased by an astounding 23 percent over the course of the last year.

Supply shocks

If, as is plausibly argued, the present inflationary crisis is largely attributable to “supply shocks” caused by the economic disruption that has been generated by the pandemic, this may not be the good news that some suppose. Indeed, ruptures in the fragile supply chain, which was constructed along with the neoliberal reordering of the global workforce, may be considered another emerging feature of the multi-layered crisis of capitalism. First of all, the assumption that the impacts of the pandemic will now recede may well be decidedly premature. As the Chair of the Federal Reserve, Jerome Powell, put it, “…contrary to expectations, COVID has not gone away with the arrival of vaccines. In fact, we are now headed once again into more COVID-related supply disruptions from China.”

The lingering effects of the pandemic are, however, but one part of a much wider problem, and the present economic impact of the Russian invasion of Ukraine are chief among these. When it comes to this new disruptive inflationary pressure, Goldman Sachs analyst Philipp Hilderbrand suggests that, “We are looking at a supply shock layered on top of a supply shock. And the nature of the new supply shock centred on energy suggests not only that inflation will move even higher and likely prove more persistent moving forward, but also that growth will take a hit.”

The inflationary pressures resulting from the Ukraine conflict will not be limited to energy costs but will also produce serious consequences when it comes to food prices. In the poorer countries this takes on the dimensions of a complete disaster, with the head of the World Trade Organization, Ngozi Okonjo-Iweala, raising the possibility of major riots being triggered by the ensuing acute hardship. “It is poor countries and poor people within poor countries that will suffer the most,” she observed.

Obviously, the intensifying climate crisis looms large when it comes to supply shocks and economic disruption. Global Trade magazine, a publication that modestly describes itself as “the authority for US companies doing business globally,” warns that the climate crisis means that “transporting parts and products across the world will become an increasingly challenging and even dangerous task” It also very plausibly identifies climate change as the key threat to global supply chains. This worsening situation will cause problems that go well beyond the balance sheets of US companies engaged in global trade, and it speaks to economic shocks and inflationary pressures stretching well into the future.

As with any crisis of capitalism, the question of who will pay for it becomes a crucial issue. One potential ‘supply chain disruption’ that the major employers would like to prevent is any effort by workers to defend their rights and living standards. Following a 48-hour work stoppage by Canadian Pacific Railway workers, calls have gone out for rail to be declared an essential service. We may be sure that the profit-driven fragility of the supply chain will be addressed to the least degree possible but that any effort by workers to take advantage of the choke holds that this creates will be met with loud employer demands to criminalize such actions.

Class war

Capitalists, mainstream economists and central banks have long put forward the claim that workers’ wage demands fuel an inflationary spiral. It is hard to see how, in the present situation, workers are driving an inflationary process that they are unable to keep up with but interest rate hikes are nevertheless being considered. To be sure, the faltering global recovery and the deep uncertainties it brings with it are raising doubts in high places about the risks of going too far, but the interest rate hawks are gaining ground. The use of this method by central banks is a standard weapon of class war and even a modest set of increases would have serious adverse effects in this period of economic fragility.

Workers and communities face the dire impact of the inflationary surge, with unions that are far weaker than they were during the spiralling inflation that marked the 1970s. The struggle to win cost of living protections in collective agreements will be an uphill one and a greatly increased proportion of the workforce is now subjected to low-wage and precarious forms of employment. Income support systems are also far less robust than they were 40 or 50 years ago.

The people in Ontario who live on wretched sub-poverty social assistance income have had their benefits frozen for the last three years. This was already a serious situation before the present cost of living crisis struck but it is now an actual threat to survival. The recent death of a man in Barrie, who perished in an uninsulated trailer, attests to the inadequacy of the provincial government’s social assistance rates, which force many recipients to choose between dangerous housing conditions and homelessness.

A concerted working class response is imperative in this situation. Certainly, bold demands around workers’ rights, housing and social provision must be made but, there is also going to have to be a determined social mobilization. In Britain, Unite’s general secretary, Sharon Graham, has indicated that her union will fight for wage increases that match real increases in the cost of living: “Today’s rise in inflation reflects a growing crisis in the cost of living for ordinary families. So, workers’ wages will have to at least match the inflation rate because otherwise they will be facing a calamitous drop in their standard of living.”

Protests were recently held across the UK in an attempt to galvanize a movement to fight back in these conditions of crisis. We must follow suit here in Canada. The present inflationary shock is one more confirmation of the need for militant and powerful social resistance in the post-pandemic period. Working class people didn’t cause the pandemic, nor did they provoke the crises that are emerging in its wake. But to foil the attempts to impose the burden on us we must be prepared to organize resistance in our workplaces and communities.

John Clarke is a writer and retired organizer for the Ontario Coalition Against Poverty (OCAP). Follow his tweets at @JohnOCAP and blog at johnclarkeblog.com.

[Top photo: by Andrei Tselichtchev/Dreamstime]