The Left/Right distinction is as relevant as ever as corporations gouge profits out of pushing inflation

Apparently, the Left/Right Paradigm is dead. This narrative keeps coming back. In the 1980s, when governments, coopted by corporate lobby groups, went on a privatisation spree, which transferred billions of dollars worth of public assets into the hands of private wealth holders, and enriched lawyers, management consultants etc into the bargain, we were told that we are all capitalists now because our pension funds bought the assets. Joke. Anyway, I keep reading and being told that there is no longer any meaningful distinction between Left and Right, with both falling into the hands of totalitarian discourse. Even so-called progressives advocate that the traditional Left should partner up with the traditional Right (and far Right) to keep ‘centrists’ out of power or to stop governments taking basic actions to protect public health. It is the ultimate victory for the neoliberals to have persuaded the Left that they have more in common with the Right than ever before. This is another example of how duped the Left has become.

In response to last week’s Presidential election, a significant proportion of voters (17 per cent) who preferred Jean-Luc Mélenchon in the first-round, transferred their vote to Marine Le Pen (the Far Right candidate) in the second round.

Thankfully, 41 per cent of his vote abstained or turned in blank/invalid ballots, which almost certainly kept her out of the presidency.

Think back to the Brexit vote. Apparently, this was driven by the Right in the UK, but a significant group on the Left also supported the Yes vote.

And what about Covid. There has been a gathering of Left and Right forces opposing government restrictions.

Does all that mean there is no longer any meaningful distinction between these opposing ideological positions?

Or does it mean that after years of being captured by identity politics, many on the Left have forgotten what it mean?

Let’s begin with the Brexit issue, given I was strongly in favour of Britain exiting the European Union and knew full well that a cohort of Tories also supported the Yes vote.

And, note, I would never think that I would have anything in common with a Right-wing ideologue.

The point is not that the two poles of the political spectrum supported the Yes vote. That is a superficial observation that doesn’t get us very far.

The point is that the substance of that support was fundamentally different – with the Tories enraptured by a desire to return Britain back to its glory days (which were?) – a sort of colonial revisionist sentiment.

Perhaps they also thought they could be more neoliberal than the neoliberal EU and kill off workers’ rights etc, even though the EU is busily engaged in that pursuit.

For the Left, the motivation was to escape the neoliberal cabal that the EU has become and generate sufficient scope for a Left wing agenda to be pursued unfettered by European law.

Totally different outcomes sought. Diametrically different.

So in fact the coalescence of the Left and Right on Brexit really highlights how different these opposites are.

I am writing this after reviewing the latest wage data from Europe and also reading a report about American corporations.

The wage data first.

Here is the latest negotiated wages growth up to the December-quarter 2021 in both nominal (blue) and real terms (orange).

There is no upward trend in nominal wages growth and as inflation rises in the last several quarters, real wages are in sharp decline.

Conclusion: wages growth is not driving the inflation.

Profit and price gouging in the UK

I read a Report from the UK Competition and Markets Authority (CMA) – The State of UK Competition – April 2022 (published April 29, 2022) – over the weekend.

It provides updated “indicators of the state of competition, including concentration, profitability and markups, and entry and exit.”

And it provides “Improved estimates of concentration that adjust for the effects of international trade and the effects of competing firms having the same owners”.

Why is that important?

It is important because it can help us understand the evolution of inflation and the reason real wages are in decline in the UK.

The Report notes that “The Covid-19 pandemic, the UK’s changing trade relationship with the EU, disruption to supply chains and shipping, and rising energy costs have all brought significant change and upheaval to the UK economy over the past few years.”

But it argues that these disruptions are magnified if industry is not competitive and can exploit the chaos to advance their own interests.

When firms have no threats from competitors they:

… do not face the same pressures to keep prices down; to keep quality up; to operate efficiently; or to innovate.

Who loses?

1. Consumers – “higher prices, lower quality and less innovation”.

2. Business – pay higher input prices and can be driven out of markets by predatory firms.

The Report found that:

1. “here was a marked increase in concentration in the years after the 2008 financial crisis … remains above levels seen prior to 2008.”

2. “profitability is higher than before the 2008 crisis.”

3. “average markups have increased since 2008 from just over 20% to about 35%. It also shows that the increase in markup has been higher for the 10% most profitable firms.”

4. “there is evidence that the largest and most profitable firms are able to sustain their strong position for longer than they used to.”

5. “accounting for common ownership materially increases measured concentration in some sectors.”

6. There is also a distributional element – “households on lower incomes are significantly more likely to consume goods and services produced in more concentrated industries.”

So with a limited number of firms dominating markets, the Report found that the “difference between their prices and the costs of producing their goods and services” has risen “from 58% to 82% over the past 20 years”.

This is important when we are trying to understand the current inflationary trajectory.

Concentration in industry makes it easier for firms to gouge profits out of markets via price rises.

The increased concentration of corporate Britain is a significant reason for the current cost of living crisis.

Profit and price gouging in the US

But, of course, this phenomenon is not a British peculiarity.

It is a manifestation of the capitalist system worldwide.

Last week (April 27, 2022), the UK Guardian released a special analysis – Revealed: top US corporations raising prices on Americans even as profits surge – which documented a similar trend across the Atlantic from Britain.

The Report documents how “many of the US’s largest companies” have been:

… enjoying profit increases even as they pass on costs to customers, many of whom are struggling to afford gas, food, clothing, housing and other basics.

1. “filings for 100 US corporations found net profits up by a median of 49%, and in one case by as much as 111,000%.”

2. “Those increases came as companies saddled customers with higher prices and all but ten executed massive stock buyback programs or bumped dividends to enrich investors.”

3. “executives detailed how even as demand and profits rose post-vaccine, they passed on most or all inflationary costs to customers via price increases, and some took the opportunity to add more on top. Margins – the share of sales converted into profits – also improved for the majority of the companies”.

So, while the top-end-of-town feast on improved post-pandemic conditions, they ensure the consumers who buy their products suffer increased material deprivation.

Modern day capitalism.

And the media companies that are similarly concentrated and linked have managed to run a narrative about the poor corporations who are facing massive supply-side disruptions and increased costs etc.

The Guardian investigation revealed quite a different story.

One company that was described as “the latest victim of ever-increasing inflation” actually enjoyed a 62 per cent increase in net profits “between the fourth quarters in 2019 and 2021, its margin widened, and it recently rewarded shareholders with $200m in stock buybacks”.

Meanwhile, they are continuing to hike prices to record even higher profits in 2022.

That is victim hood in the world of capital!

We also learn that:

… recent US commerce department data that shows corporate profits rose 35% during the last year and are at their highest level since 1950. Inflation, meanwhile, rose to 8.5% year over year in March.

The analysis provides many examples of companies using market power to gouge price rises and increased profits and then shifting blame onto the ‘inflationary pressures’.

The reality is that these corporations, in pursuit of their greed to record higher profits, are driving the inflationary pressures.

Economists, such as Larry Summers, are providing a smokescreen for these companies – see this Washington Post report (February 17, 2022) – White House economists push back against pressure to blame corporations for inflation.

It quotes Summers as saying “Business bashing is terrible economics and not very good politics in my view.”

He would say that of course.

What does this tell us?

It tells us that class – labour and capital – is still very much relevant in understand what goes on in the economy.

It also tells me that the interests of capital actively pursue strategies and outcomes that are fundamentally at odds with the material prosperity of workers.

A lowly-paid, precarious female cleaner in a firm run by a female boss on a high salary does not have more in common with her boss than she has with her fellow lowly-paid, precarious male cleaning colleagues.

And a worker who cares about solidarity should never see solace in a political movement or narrative that advocates pernicious treatment of other workers who for reasons beyond their control are forced to flee their country of birth and seek security elsewhere.

The true Left position doesn’t discriminate between the sexes or nationalities when defending the interests of all workers.

Marine Le Pen, for example, who some on the Left claim was championing the workers’ interests, sought to impose penury and worse on those she considered to be ‘immigrants’.

No Left person should allow that artificial segmentation of the working class.

What it also tells us is that there is much more to life than Modern Monetary Theory (MMT).

It almost becomes trite to keep insisting in every social media contribution that a currency-issuing government cannot run out of money.

That is obviously true and an important fact for all citizens to understand.

But we have to place the capacities of the state within the political power play and the massively unequal ownership of productive and financial capital.

That reality places serious limitations on what the state can achieve.

It is why I wrote the book (with T. Fazi) – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, September 2017).

There is more to progressive change than just reciting MMT.

We have to understand that the purpose of government in a capitalist society has changed dramatically over the last several decades.

The context – capitalism – (shifting from industrial to financial) is crucial because it introduces class conflict as an organising framework.

In the pre-Neoliberal era of true full employment – after WW2, the government mediated the class conflict.

It was neither pro-worker or pro-capital, and the will of the voters forced it to pursue policies that broadly benefited everyone (sort of).

There was a sense of nation building and a sense of the ‘public’ – in all things, education, transport, health, utilities, etc

The interests of capital (industrial first, then increasingly financial) were always pressuring the government to limit the income going to workers, to repress trade unions, to cut pensions and other income support mechanisms.

But the will of the people ensured the state mediated rather than undertook agency for capital.

Under the neoliberal reconfiguration of the state – agency shifted from mediation to support for capital and that then required a way to suppress the social disquiet that would have accompanied the deteriorating material position of workers.

So all sorts of narratives began to appear:

“we are all capitalists now!”

“There is no working class – just entrepreneurs”

“the unemployed are lazy bludgers”

“Corporations create employment not government”

“We cannot live beyond our means”

And all the rest of the ways in which the coopted forces of government and the media persuaded us that TINA.

Policies then became targeted at redistributing income to profits.

Everything was targeted as a surplus generating space whereas previously there was a clear division between work (generating surplus value) and non-work (our private lives).

For example, football was in the latter category now it in the former. Recreation, family life etc has all been penetrated.

The role of government policy changed.

The justification was couched in traditional ways – the burden on grandkids, etc.

But that was a smokescreen and we are now actively placing burdens on them not via deficits but via downgraded everything.

So the way government and society interact has changed.

That manifests in many ways:

– Unemployment
– Underemployment
– Gig economy
– Education degradation
– Training institutions degraded
– Public infrastructure degradation
– Health deterioration
– Energy price hikes
– Housing unaffordabiliy

And more.

And now we have an inflationary episode being strongly influenced by anti-competitive forces and economists are claiming it was because government support during the pandemic was too generous.

The point is that these manifestations are not random – they are all interconnected – and peoples’ attentions have been rendered myopic to avoid them understanding the causality and the functionality of all those crises in our lives (housing affordability, health etc).

They are functional because they reinforce the class divisions.

The Left used to understand that.

The Right typically sided with capital.


Abandoning that distinction has been suicidal for the traditional progressive political parties.

And I cannot understand so-called progressives that keep arguing that the Left and Right have a lot in common.

My view is that they have zero in common.

That is enough for today!

(c) Copyright 2022 William Mitchell. All Rights Reserved.