First phase This crisis situation first forced the Tory GoveInment to take drastic action in 1972. Asthe first phase of a "counter inflation programme" they slapped a total freeze on wages and on many prices. The wages side of the programme since the freeze is only too well known: the Infamous El + 4% of Phase Il, and undoubtedly more of the same for Phase Ill. But the prices policy is of equal importance, and requires close and serious study.
The Tory scheme for prices has been to place a series of restrictions on the power of companies to raise their prices, under the control and supervision of the Price Commission. Firms are allowed to pass on certain of their costs to the consumer in the form of higher prices. These 'allowable costs include almost all those essential to the production process:
transport charges, maintenance expenses, etc. Increased labour costs, however, can only be passed on in higher prices if they are due to wage rises awarded within the limits of Government pay policy. Even then, only half the increased wage bill can he passed on - the other half is supposed to be met out of increased productivity.
The purposes of this system are quite straightforward: to force capitalist businesses to take a tough line with their workers and apply the government pay norms; to encourage Lite steps required to ensure growing productivity. exempt the capitalist class from the burden of the rise in world commodity prices. But at the same time, by restraining the prices and profit margins of the most profitable sectors, whilst allowing those firms which are doing badly to come up to certain minimun levels of profit-making, the policy brings about some redistribution of potential growth within the capitalist class.
In theory, when all of British capitalism is back on a firm footine, when profits are ticking over nicely, and when businesses have completed all their new investment proprammes, rising productivity should be sufficient to off. set rising raw muterial and labour costs. Then prices are supposed to settle down and inflation end. But all this is actually pie in the sky British capitalism is part of a world system, a system that is in crisis. Over the past year the world prices of besic raw materials bave risen by 85%. No national capikilist state can control international prices, and the Price Commission allows fims to pass on rises in the costs of imported fuels and raw materials as 'allowable costs.
While the prices of industrial raw materialss have been soaring. so bave the prices of fresh toods: vegetables, dairy products, meat ete. The world producers prices of these items have risen by approximately 15% over the I past year. Althouch Britain is one of the most