Supermarket prices in Britain surged by an alarming average of 25% over the last two years. Overall, the rise in food prices for the 12 months to May 2023 was a staggering 16.4%, the highest level on record. Large corporations are amassing colossal profits at the expense of the working class, who are being forced to allocate a growing portion of their wages to absolute essentials. Now more than 57% of British workers grapple with food insecurity, exposing the raw truth of capitalist exploitation. Bruno Antonio reports.
Sky-high profits
In March 2023, the trade union Unite challenged the stock explanation from the bourgeoisie that the rising wages of workers is the primary driving force behind inflation. By analysing the top 350 companies quoted on the London Stock Exchange, Unite showed that their average profits had skyrocketed from 5.7% in 2019 to an astounding 10.7% in 2022. Its conclusion was that rising profits was the motor of current inflation. This is the understandable conclusion shared by the tabloid press, but it conceals a fundamental error. By looking at only the final share of profits and comparing it to the final share of real wages, the result of growing exploitation is mistaken for the cause. The implication is that some sort of redistribution back to an unstated ‘normal’ or previously acceptable profit mass will bring us back to some happy and ‘fair’ balance in incomes, for example ‘windfall taxes’. The fundamental objective contradiction within the process of the accumulation of capital, which is behind all of this, is left unexplained.
It is obviously true that large British supermarkets like Tesco, Sainsbury’s, ASDA, and Morrisons have unashamedly profited from their own rising prices. Together, they hold a combined market share of 65.5% in the British grocery sector and reported a collective profit of £4.08bn during the fiscal year 2021-22. Tesco and Sainsbury’s alone account for 43% of the market and are projected to amass profits of £2.5bn and £700m respectively this year – a stark increase from their 2019-20 figures of £971m and £152m.
Multinational food manufacturing and processing conglomerates have also pushed up food prices to bolster their already large absolute profits. The top 10 British food manufacturers or their parent companies, including Unilever, Nestle, and Mondelez, recorded a combined profit of £21.9bn in 2021, marking a 21% surge from 2019.
At the centre of global monopoly capital are the most glaring beneficiaries of food price inflation, the food commodity traders. Just four corporations control the world food commodity wholesale market, commanding an astounding 90% of the global grain supply. Archer-Daniels-Midland (ADM), Bunge, Cargill and Louis Dreyfus are the world’s preeminent agricultural commodity traders, dealing in a diverse array of crops and agricultural inputs. They have seen their profits soar since 2019. ADM posted profits of $4.34bn in 2022 and Cargill had made its most profitable year in its 156-year history.
The United Nations Food and Agriculture Organisation Food Price Index, which tracks global prices of essential food commodities such as meat, dairy, cereals, vegetable oils, and sugar, has recorded a rise of over 60% since 2020. While some prices have slightly receded since reaching their peaks in June 2022, they still hover near historic highs. The price of sugar continues its relentless ascent, nearly doubling since 2020.
British companies have profited immensely in recent years. Palm oil producer MP Evans witnessed a net profit increase from $7.5m in 2019 to $91.8m in 2021, primarily propelled by the high prices of palm oil. Nationwide Produce PLC, one of Britain’s most prominent fruit and vegetable traders, has exploited the volatile spot market prices and curtailed supply to manipulate the prices paid to farmers. Wholesale prices for certain crops like onions, peppers and lettuce have surged by as much as 500% over the past two years. However, these increases are not passed on to farmers. Turnover for Nationwide Produce PLC rose from £121m in 2020-21 to £144m in 2021-22, and it anticipates reaching £180m in 2022-23.
The crisis of profitability
So how is this rising profit wave related to rising prices? Defenders of the private ownership of the means of production point to the short-lived Truss government and the Ukraine war, preceded by the Covid-19 disruption and finally preceded by Brexit. These disruptions absorb the political establishment and the chatterbox press, for they certainly have serious consequences for the many self-interests at stake. The underlying problem however is far more serious than these ‘shocks’.
As capitalists continue to compete by investing in new technology to increase productivity, thereby reducing their relative labour costs, they unwittingly drive down the rate of profit. This paradox arises because the source of capital’s profit is the labour employed, which provides surplus value. The expulsion of labour reduces the only real source of value added. As the money invested in machines and raw materials rises, and relatively less labour is employed the rate of profit thus tends to decline. Profit rates in Britain have staggered up and down in a long but clearly persistent decline for the last 70 years. Despite the huge theft of public property to create more private profit, the mass export of capital in search of profitable ‘green fields’, along with stagnant real wages over long periods, the bourgeoisie have become even more desperate in their ‘search for yield’. Capitalists are under increasingly urgent pressure to increase their profits in any way they can, and try to do so by raising the prices they charge.
To accommodate this, buyers, earning only low rates of profit, have to borrow to pay their suppliers. The financiers seize the opportunity to provide more loans to take more interest from them. Credit is also liberally granted to desperate consumers. The stress of declining profit margins thus provokes a wave of credit which permits higher prices to be paid. This tale has to end when the loans themselves are undermined by inflation and the financiers call it a day as their real returns collapse. Now the whole system stagnates and a political storm intensifies. Banks fail, companies cannot sell, bankruptcies amongst the small and medium sized businesses increase, and workers lose their jobs and remain victims of the past wave of inflation.
The dominance of a few major corporations in the food industry, as exemplified by the handful of global grain supply controllers, is actually deepened by this process. With less competition these corporate giants are able to invest heavily in machinery and technology, reducing labour costs, and to engage in practices that further exploit their workers through the suppression of wages and more intense work days, and in addition, to further rob the workers by raising food prices. Global hunger is no accident, it is driven by the accumulation of private producers’ wealth.
Farmers trapped
The challenges faced by British farmers also express the contradictions within capitalism. The escalating costs of production, driven by rising input costs place tremendous pressure on them. Diesel prices have doubled within the past year, fertiliser prices have tripled and gas prices have increased tenfold. To maintain profitability, farmers commonly resort to paying their workers below the value of labour power, as well as mechanising their operation and mindlessly applying mass chemicals and antibiotics. Mechanisation plus bio-technology decreases jobs for agricultural workers and intensifies work for who remains.
Global commodity prices are controlled by a handful of powerful corporations, which subject farmers to unpredictable fluctuations. This leads to financial instability and bankruptcy for many small-scale, notoriously ‘under-banked’ tenant farmers who, squeezed by rents, rising input prices and low prices paid by food companies, are driven out of farming.
The land owning farmers often sell their land for non-agricultural purposes, such as housing developments or industrial facilities. This further concentrates land ownership and exacerbates the monopolistic tendencies within capitalism. Large agricultural conglomerates continue to dominate the sector. Across Britain greenhouses are being shuttered, farmers hesitate to sow new crops or uproot established fruit orchards, while ready-to-harvest crops languish uncollected in the fields. Meanwhile, over half of British working-class families remain food insecure. Only the common ownership of land and production for need can end this tragedy.
FIGHT RACISM! FIGHT IMPERIALISM! 296 October/November 2023
