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April 28th, 2007 by Ret Marut
A guide to the language of economics and recession as it relates to workers, as opposed to abstract mystifying jargon.
A redefining of some economic terms.
A PROLE’S GUIDE TO THE RECESSION
– Economics With The Truth

Bored rigid by talk of exchange rates, interest rates and PSBR’s? So you should be! The capitalists are always moaning about their figures not adding up but, unfortunately, their system isn’t about to become mathematically impossible. Behind this dialogue of figures, though, is a real discussion within the ruling class about our struggles and how to defeat them. The following glossary will hopefully prove useful in deciphering the bullshit spouted by politicians and economists.
Inflation
A means of attacking real wages (as stated by J. M. Keynes in his “General Theory…”). A common means of making the working class pay for wars, for example. It can also be a concession to the working class since it tends to keep inefficient businesses functioning – every wage slave with a grain of class consciousness knows that these are the best ones to work for! Inflation tends to undermine debts (by reducing the value of repayments) and so favours industry relative to finance capital, creating more employment so as to maintain social peace. This was why the post-war boom (a sort of productivity deal on the level of society) needed a few percent inflation per year. High inflation, then, is generally a sign that the bourgeoisie is weak since it has to buy social peace. This is why the Thatchers of this world are always going on about fighting inflation. At the G7 conference in July when they were talking about restructuring the CIS (even more!) John Major described hyperinflation as the “seedcorn for revolution”.
Anti-inflation policies
Another means of attacking wages, this time by means of mass unemployment. This can be a risky business though. In Germany in 1930 a political commission, the Braun Committee, proposed to combat the depression by means of expanding credit (a classic inflationary measure). Hayek (the guru of anti-inflation measures, much praised by Thatcher) sent an article to his friend Professor Röpke, who was on the committee, attacking such measures. However, he enclosed a covering letter saying:
“…But if the political situation is so serious that continuing unemployment would lead to a political revolution, please do not publish my article…”
The article was not published!
Devaluation
An important strategy in countries where most wage goods are imported (Britain being the prime example). By reducing the value of the currency the real value of the wage is reduced. It is a means of carrying out a short term attack on wages. The disadvantage is that although it filches money from workers pockets it doesn’t actually attack them directly through restructuring in the way that the 1981 recession did. Just taking money from us proles without restructuring society can sometimes be a positively bad idea – as the example of the poll tax clearly showed! Nowhere is the class nature of devaluation better understood than in the Lebanon. In early May 1992 the Central Bank announced it would no longer support the currency (the lira). As soon as it fell to 2000 per dollar there were widespread strikes and riotous demos resulting in the burning of the finance ministers home, an attack on the St George’s Yacht Club in Beirut (where ministers were swanking it up with other Arab bourgeois) and the collapse of the Syrian-backed government.
ERM (Exchange Rate Mechanism)
Exchange rates between EC states are now more or less fixed (rather like the old Gold Standard). The individual governments of the EC can no longer use short term measures such as devaluation against us so bosses are obliged to restructure. The mechanism for doing this will be increased national competition. Thus single European money needs petty nationalisms to function properly. The ERM also imposes relatively uniform interest rates since interest rates affect the relative strengths of currencies. This is why German interest rates have suddenly become such a big issue. The German bosses had to put up interest rates (the classic Anti-Inflation Policy) in order to counter-attack against all those stroppy proles going on strike for more wages.
PSBR (Public Sector Borrowing Requirement)
The amount a government will have to borrow in a given year to pay for its expenditure. It is a means of putting off an immediate attack on the working class. Though it will later be used as a justification for such an attack (“we must pay our debts”). This is another area where the EC is forcing the bosses to adopt a Europe-wide strategy of restructuring. It’s planned “convergence zone”, agreed at the Maastricht summit, requires national debt to be no more than 3% of GDP (Gross Domestic Product – roughly total commodity production within a state’s borders per year). For poorer EC countries this will mean a massive acceleration in austerity measures. Italy’s debt to GDP ratio is 10.5%. In Spain last year it was 4.2% but after the summit in April the government recently announced its intention to cut it to 1% by means of cuts in health care, public sector bale-outs and unemployment provision. The proportion of unemployed people entitled to dole is to drop from 50% to 25%.
Balance of payments deficits
A measure of the imbalance between imports and exports. It’s a way of talking about the “uncompetitiveness” of a nations industry (much used by the rulers of Britain and the USA). In the case of the EC, fixed exchange rates mean that for a big deficit interest rates must go up to protect the currency. This means inefficient businesses are chopped leading to more unemployment and, the bosses hope, restructuring of industry and society.
Supply side economics
A whole school of economics dedicated to cutting the social wage – this is the part of our income which we receive without having to work for it (welfare, health care, subsidised housing etc.). They refer to the social wage as “rigidities”. Related terms: “dependency”, “dependency culture”, “flexible working”.
Keynesianism
Originally the ideas of Keynes, formulated in the 1920’s, were presented as a way of saving capital from communism (or “chaos” as it was sometimes described). After 1945 Keynesianism became the ideology of overall political management of the economy (e.g. “fine tuning”). What it actually was was a productivity deal on the level of the society based on the welfare state and full employment. It needed strong unions to police productivity and wage agreements. It also needed the Cold War to depoliticise the working class – revolution being presented as something foreign, paid by Moscow etc.. Keynesianism is not something likely to be revived in the near future.
Monetarism
A monetarist is someone who wants to restrain the money supply. It was a reaction to Keynesianism. Friedman (a Chicago economist who advised the Chilean junta) frankly stated that inflation no longer worked as a means of holding down wages. On the contrary, it had acted as a political focus for organising the struggle for higher wages. In the British context, think of the battles over “Incomes Policy” under Heath’s government in the early ’70’s or the “Social Contract” under the last (ever?) Labour government. For this reason, according to Friedman, there was no point in the government trying to restrain unemployment. It should be allowed to gravitate to its “natural” level and then be reduced by means of supply side measures. For monetarists, defeating inflation is the central obsession.
Minford
Professor of Economics at Liverpool University. Had a lot of influence on Thatcher. Has been known to visit pubs in Liverpool and try to convince proles of the virtues of the free market, cutting welfare etc.. Has also been known to preach on the streets in the East End of London. A nutter.
Recession
A slow down in the growth of total commodity production. We are supposed to regard this as a disaster. A formulation which completely ignores the relation between wages and profits. Funny that.
Depression
Like a recession but worse. Mostly used on the level of propaganda – “if we don’t make the painful changes now, the recession could turn into a depression”. Related terms: “slump”, “double blip”.
Economic collapse
This is something that never happens but is always threatened – e.g. “Bosnia on the verge of economic collapse”. What is usually meant is that working class living standards are collapsing. As long as capitalist social relations exist so will the economy – the only thing that can cause real economic collapse is the dictatorship of the proletariat.
Recovery
This is what we’re all supposed to be praying for, commodity production increasing at the rate it used to. This doesn’t necessarily mean that us proles will be any better off, even in capitalist terms. It doesn’t even have to mean a reduction in unemployment. During the “recovery” in the mid-80’s in Britain it continued to rise. What it definitely would mean is more traffic on the roads to run us over, more new roads to disfigure the landscape, more yuppie wine bars to get thrown out of, more “toytown” houses to get depressed in, higher housing costs… They can keep it!
A excellent critique of recovery can be found in the 2nd issue of Armchair, a fraternal communist organ produced in Reading. It is a humorous, cheaply produced, anarcho-type rag with lots of good illustrations. It shamelessly calls for the dictatorship of the proletariat for the abolition of work. It can be obtained from Erik the Vandal at ARMCHAIR, BM MAKHNO, LONDON WC1N 3XX.
It should be clear from the above that if an economist says something you don’t understand what they probably mean is “Work harder for less!”.
FromWildcat (UK), no. 16. Early 1990’s.