Cooking the Books: Must prices rise? (2021)

The Cooking the Books column from the December 2021 issue of the Socialist Standard

The Times (22 October) reported Alan Jope, the CEO of Unilever, warning that the price of many household goods would have to go up:

‘He highlighted how the cost of palm oil – the Anglo-Dutch company uses a million tonnes a year in its Dove soap and moisturisers – had increased by 82 per cent in two years due to labour shortages in Indonesia. Soya bean oil, used in its Hellmann’s mayonnaise, had risen by two thirds due to poor crop production in Brazil.’

To say that in such circumstances sellers are ‘forced’ to put up their price is misleading. Faced with an increase in the cost of producing their product, a seller cannot simply decide to increase its price to compensate. They could try but, if they misjudged the market, they would end up losing sales and profits. If the market won’t take an increase, they have to lump it and take a cut in profit margins.

As the Times went on to report, the supermarkets selling Unilever products won’t necessarily be able to pass on any price increase to buyers:

‘A retail source said that the intensely competitive food retail market meant it was hard for supermarkets to pass on higher prices, as shoppers might desert them for the likes of Aldi or Lidl.’

In short, when costs go up, it is the law of supply and demand that will bring about any price increase, but only as long as demand is maintained. Businesses do not have a free hand when it comes to fixing prices; it is the market that decides.

There is, however, one circumstance in which prices must go up. As long as it is government policy to depreciate the currency, the general price level has to increase. The reason is simple. Prices are expressed in a unit of currency and, if that unit depreciates, then more units will be needed to express a price.

It is government policy, not just in Britain but co-ordinated with the other members of the G7 (USA, Japan, Germany, France, Italy and Canada), that their currencies should depreciate by around 2 percent a year. They don’t put it that way but that is what it is. They present it as keeping prices from rising above or falling below this figure.

The justification for this is that a slowly rising price level is the best situation to encourage firms to invest and consumers to spend. Falling prices (which, due to increasing productivity, would otherwise be the case) would mean that firms and people would tend to hold off spending in the hope of a lower price. This is not always necessarily true as capitalism can, and did until the outbreak of WW2, function with falling as well as rising prices.

But Keynes noted another advantage for employers:

‘Keynes expressed, in numerous passages in The General Theory, the view that wages were “sticky” in terms of money. He noted, for example, that workers and unions tended to fight tooth-and-nail against any attempts by employers to reduce money wages (the actual sum of money workers receive, as opposed to the real purchasing power of these wages, taking account of changes in the cost of living), even by a little bit, in a way they did not fight for increases in wages every time there was a small rise in the cost of living eroding their “real wages”’ (bit.ly/3qBbVbD).

It’s not workers that cause rising prices. That’s another problem they have to face, forcing them to run fast to try to catch up. Keynes’s other policies have been discredited and abandoned but not this one.

So, must prices go up? Yes, in the case of currency depreciation. Not necessarily, in the case of the cost of supplies going up.

Proper Gander: Palmed Off (2019)

The Proper Gander column from the October 2019 issue of the Socialist Standard

One of capitalism’s booming industries over the last few decades has been palm oil production. In the early 1960s, less than a million tonnes were being processed each year, compared with well over sixty million yearly more recently. The negative impact this has on the environment is now being reported more widely, and BBC3 has joined in the debate with a short-but-sweet documentary focusing on palm oil’s use in the cosmetics trade.

Unmasked: Make-Up’s Big Secret is presented by Emmy Burbidge, who runs her own beauty salon in Somerset. She says that more of her clients are asking about the make-up of the make-up she uses, especially whether it contains palm oil. Finding this out can be tricky, as it’s often hidden under less-than-glamorous names like ‘sodium kernalate’ and ‘octyl palmitate’. But as palm oil is used in 70 percent of cosmetics, especially oilier products such as lipsticks and foundations, there’s a reasonable chance that your slap contains extracts from palm trees grown thousands of miles away.

The oil comes from the fruit which grows in bunches on the trees’ branches. The flesh in the kernel is used for cosmetics, being more saturated than the rest of the fruit, whose oil is used as an ingredient in many foods. Being solid at room temperature, it’s useful for making in-front-of-the-telly grub such as biscuits, instant noodles and peanut butter. It’s also used in biofuels, which are gaining traction as an alternative to relying on ever-dwindling fossil fuels. In 2018, half of all the palm oil in Europe was used to fuel cars and lorries (Reuters, 14 June 2018). Unfortunately, though, palm oil-based biodiesel generates three times as much carbon emissions as fossil fuels (dw.com, 22 June 2018), so it’s less environmentally friendly than we might assume.

The main reason that palm oil has been cited as bad for the environment, however, is that to make room for its plantations, millions of hectares of rainforest have been bulldozed. In the jungles of Indonesia, Malaysia and Nigeria, complex, lively ecosystems have been destroyed, with the added disadvantage of losing plants which soak up carbon from the atmosphere (including that which comes from palm oil-based biofuel). The programme shows sad footage of an orangutan trying to hit back at a bulldozer driving through churned up soil and tree stumps. For the documentary, Burbidge flies to Papua New Guinea, home to the world’s third largest rainforest, and sees through the plane window what some of this forest has been turned into by palm oil producers.

She visits an indigenous community who leased their land to a large developer company after being promised money and improved homes and schooling, most of which hasn’t materialised. Maybe one reason why the school was never built is that it would pull children away from being used as labourers in palm harvesting. Many of the people she meets are upset and even ashamed that they’ve had to sacrifice some of the forest they live in for not enough money to manage. Some producers aim for more sustainable methods by avoiding ploughing up more rainforestsand treating their workers less harshly than the more unscrupulous companies. The workers Burbidge meets don’t know what happens to the palm fruits once they leave the plantation for processing or what their oil is used for, so she introduces them to lip gloss. It’s not clear whether they think that the shiny pink goo is worth their long hours and the loss of the rainforests.

It does feel worth it, though, to the corporations behind palm oil production. The industry has become such a profit-magnet not just through exploiting workers and the environment, but because palm oil has several advantages over similar products. As well as its versatility, the palms used have a much higher yield than other oil crops. To produce one tonne of oil from sunflowers or coconuts uses up to ten times as much land than is needed to produce the same amount of palm oil. This efficiency means that it can be produced at lower costs, leaving more money to end up in the company owners’ coffers. The profitability of palm oil production is the reason behind its growth in the market, with environmental damage being a consequence which has only recently become controversial, or even noticed. But what is to be done?

Boycotting products made from less environmentally-friendly palm oil would only have a limited effect, even assuming people would know which products to avoid. As Burbidge discovered, finding palm oil’s pseudonyms on an ingredients list isn’t always straightforward, and there’s no widely accepted certification for more sustainably-produced palm oil, unlike for ‘Fairtrade’ products, for example. And how many people worldwide would bother, or even be in a position to pick-and-choose? Even if a mass boycott dented the profits of the dodgier production firms, it wouldn’t remove the profit motive which leads companies to find the most cost-effective methods, regardless of the harm to the environment. Nor would it prevent the workers harvesting palm oil from being exploited both through their labour and selling off their land whether or not they want to get dragged further into the capitalist economy.The downsides with how palm oil is produced are symptoms of wider problems with the system itself, and so it must be the system which is changed.

Mike Foster

Pathfinders: Plastic not so fantastic (2018)

The Pathfinders Column from the September 2018 issue of the Socialist Standard

On 10 July 1940 war-time Britain saw the launch of the Great Aluminium Scare and a Beaverbrook campaign to ‘turn your pots and pans into Spitfires and Hurricanes, Blenheims and Wellingtons’. Patriotic citizens responded by sacrificing useful metal kitchenware and bathroom fittings which created mountains all over the country. Scrap metal mania even extended to tearing up the railings round municipal parks, though cast iron scrap had little practical value. Indeed most of these scrap mountains went into landfill or post-war scrap metal shops since, as RAF Museum curator Rob Skitmore pointed out in 2005, ‘in fact we had lots of aluminium, what we needed more of were pilots’ (see Link).

The point of course was to give the population something practical to do so they could feel like part of the war effort. In short, a propaganda exercise. After all Lord Beaverbrook, aside from being Churchill’s minister of aircraft production, was also owner of the Daily Express, the world’s largest circulation newspaper at that time.

Is something similar happening today with the Great Plastic Scare? It seems to have started with the BBC Blue Planet II documentary earlier this year, which highlighted the problem of plastic ocean waste and resurrected 2016 World Economic Forum predictions that by 2050 there will be more plastic in the oceans than fish. Now the rush is on to ditch the use of plastic cups, cotton buds, plastic straws, wet wipes, plastic bags, plastic food wrappings, in short, plastic anything. The UK government is now compiling a list of plastic items to ban and a plastic tax is being considered by the Treasury (‘Public ‘back’ taxes to tackle single-use plastic waste’, BBC, 18 August). Practically overnight, plastic has become the new demon.

The problem is, things are always more complicated than news headlines make them out to be. While there’s no doubt that global capitalism is using the planet like a giant dustbin, the solutions aren’t always so obvious. Whatever you do is going to have an environmental impact. If you swap single-use plastic bags for a cotton tote bag, you’ll have to use it 131 times before reaching impact parity, because of the high environmental cost of cotton production (New Scientist, 13 June). If you avoid food containing palm oil but drive with the latest ‘green’ biofuels, you’ll be burning palm oil instead of eating it and thus still contributing to the devastation of Madagascar. In theory one could use different vegetable oils in fuel, but they would require massively more land than oil palms need. If you decide to avoid fossil gas central heating in favour of a trendy and ‘clean’ wood burning stove, you’ll be treating your neighbours to the equivalent of eight trucks parked in the street with their engines on all night (New Scientist, 2 June).

People during the war probably didn’t need or want to know that they were making pointless sacrifices. What they craved was the feelgood factor. So today people don’t perhaps want to know that most of the contents of their recycle bins is likely to end up incinerated or in landfill, or sent abroad. According to the National Audit Office, the government doesn’t have any idea whether or what percentage of ‘recyclables’ is being recycled, has ‘turned a blind eye’ to known problems in the waste stream, has only carried out 40 percent of the recycling checks it was supposed to, and has been exporting over 50 percent of the waste it claims as ‘recycled’ (‘Recycled packaging ‘may end up in landfill’, warns watchdog’, BBC, 23 July).

You’d be excused for thinking that the whole recycling programme is a bit of a con. Most of the plastic we rinse and put in recycle bins is not actually recyclable, largely because manufacturers use cheap, low-grade and non-biodegradable industrial polymers. Well of course they do, but other reasons are more trivial. Fresh food containers are very often carbon black because food products apparently look good on black, but recycling machines can’t detect black (‘Plastic food pots and trays are often unrecyclable, say councils’, BBC, 4 August). Plastic cups don’t get recycled, not because they couldn’t be, but because there is no regional collection infrastructure for them. And if there was, would the road haulage fleet required then cancel out the carbon benefits of the recycling?

It’s not that we shouldn’t bother making any individual efforts. Of course we should, and many of us do, because a future socialist society wouldn’t last five minutes without a strong and abiding sense of personal responsibility. But too much focus on little things like cotton buds and wet wipes – which apparently cause giant ‘fatbergs’ in London’s sewage system – can become a seductive invitation to forget the big picture, to kid yourself you’re doing something when you’re really not.

Some young activists, too young even to vote, are making bold attempts to take their governments, or international corporations to court over climate change (New Scientist, 18 August). How much success these ‘climate kids’ are going to have suing capitalist institutions inside capitalist courts is something socialists can hazard a cynical guess at. But at least they’re trying to raise the climate stakes to match the rising temperature.

What really needs putting in the dock of course is capitalism itself, and the total control and squandering of Earth’s resources by less than 1 percent of its population. If the public scare about plastic is viewed as an indicator of a growing sense of communal outrage on behalf of the planet, we might be encouraged, but only if this outrage starts to take an explicit and political form. If however people are happy to settle for tokenistic efforts for the sake of a quiet life, the class war will continue indefinitely, and socialists will have to battle on alone.

Genoa Bridge Collapse

As we go to press the cause of this collapse is not yet known, but metal corrosion in the steel cables reinforcing the concrete structure is suspected. Acoustic sensors are a new technology which can ‘hear’ internal corrosion, and recently resulted in London’s Hammersmith Flyover being urgently refurbished, but most bridges don’t have them, as the cost would be huge. Globally bridges are often in a poor state. 7 percent of French bridges are at risk of collapse, 12 percent of Germany’s are in bad condition, and 54,000 US bridges are ‘structurally deficient’ (New Scientist, 17 August). No doubt a 10-year recession and government cutbacks in every country have done nothing to improve matters. Whatever the state of road bridges in socialism might be, at least we can say that saving money wouldn’t be a factor.

Paddy Shannon

Pathfinders: The Only Way Is Ethics (Not) (2018)

Iceland's palm oil ad

The Pathfinders Column from the December 2018 issue of the Socialist Standard

Is there anything you do, eat, wear or travel in that isn’t bad for the environment? Palm oil, used in a zillion products, is now being demonised as the new plastic, and one frozen food company has taken the ‘ethical’ decision to stop buying in palm oil products, while astutely trying to capitalise on this strategy with a Christmas ad featuring a cutesie kid and baby orang utan who sadly shows her his forest utopia being charred and bulldozed for the sake of her hair products. The ad went viral on YouTube after it was banned from the TV by regulators because it was produced by Greenpeace, deemed a ‘political’ organisation although by our definition they’re not as they don’t stand candidates for parliament. At the time of writing there is a heart-warming online campaign to overturn the ban (‘Iceland Christmas ad: Petition to show it on TV hits 670k’, BBC Online, 13 November). No doubt the firm’s marketing director can expect a stuffed bonus in their Christmas stocking for this crafty coup.

Christmas is always the perfect time for guilt-trips which invite you to pause and reflect, during your orgiastic overspending, on your ethical profile, that thing about which you feel least certain and most guilty. But what do we understand by the word ‘ethics’ and how useful is it? Dogs, elephants and other animals are known to have a moral sense, and we humans regard the absence of a moral compass as a clinical defect. We devise moral frameworks, often hi-jacked by religions as the work of some deity, to codify our values, our social concepts and our politics. This is probably a form of evolutionary heuristic, or short-hand guide, since we don’t have smart enough brains to calculate good survival strategies on demand. Instead we feel them as right or wrong, through some obscure associative process nobody really understands.

But there are inevitable problems with allowing your moral compass to do the driving. What if you have the wrong information? Have you corrected for your internal biases? If your morality doesn’t square with other people’s, who is to say who’s right?

A group of programmers currently grappling with the complexities of moral codes are those trying to design the AI systems in self-driving cars. What has them perplexed is the nightmare no-win crash scenario known as the ‘Trolley problem’, in which you can only avoid killing one lot of people by diverting your runaway tram (‘trolley’) down a different track and killing a different bunch of people. You can tweak this problem any way you like, by varying the characteristics of your two groups of ‘victims’, to see what difference this makes to people’s ethical choices.

Being good scientists of course, they approached this scientifically and conducted a numbers exercise to see if they could derive a baseline consensus. What would most people want a self-driving car to do in such a situation? Unfortunately it depends who you ask. The Moral Machine survey collected 40 million decisions from across 233 countries, and found that while on average humans were prioritised over animals and younger people over older (unless the humans were criminals, in which case they rated lower than cats), the regional differences were strikingly hard to integrate into a viable framework. For instance, the young-over-old ethic was much less apparent in Asiatic and Islamic countries, as was the high-status-over-low. South America and French colonies were less inclined to save humans over animals, unless they were specifically women or non-disabled people.

The problem for the programmers is that computer code relies on absolutes, and with morality there are no absolutes, only relatives. No wonder one ethicist describes the task of giving morals to motor vehicles as ‘finding the right comedic parabola, or the right colour of dance, or the right frequency for spaghetti’ (New Scientist, 27 October).

As soon as you start asking ethical questions you get contradictory answers, and there is no objective yardstick, upon which all can agree, by which to judge them. So is it possible to use such a subjective approach to arrive at a consensual programme of action for the planet?

No, it isn’t. That’s why when we’re making the case for socialism we prefer to stick to the facts. If the world is going to steer its way to a sustainable future instead of destruction it’s going to need a practical and accurate roadmap more than it needs gods or cutesie ads or an impassioned polemic.

Place Your Bets Please

If you prefer gas to electric cookers it’s probably because of the zero-response time when you adjust the heat settings. Cooking with electric involves too much thinking ahead, and an adjustment that’s fractionally too high can result in milk boiling over the stove. A similar problem exists in long-latency industries like oil, where adjustments today ‘feed through’ to supply or price levels years down the line. This gives rise to a volatile futures market, which speculates on supply and price in the future. Today’s US sanctions against Iran have caused large producers to pump at full capacity, but fears of future oversupply are depressing the futures market, in turn causing rampant selling and falling stock prices today, which of course will have knock-on effects on industry including food production (‘Oil rally faces tidal wave of supply’, Reuters, 4 November). So today’s activities are not determined by today’s objective and demonstrable necessities, but by some people’s guesses at what the price of these things will be in a few years’ time. If you think that sounds like reckless fast-buck gambling instead of responsible resource management, you’ve just hit on one essential difference between capitalism and socialism.

Paddy Shannon