 Recession. That word is back in newspapers, on TV shows, especially on business news channels across the world. Why? They're saying that this is being caused by inflation. Inflation is so high that people have stopped buying things. Demand has dropped sharply and because when demand drops, what happens? Companies are unable to sell goods and services. So what happens? They cut back. They cut back on their output. They cut back on the number of people they employ. And because of that, the total output shrinks and the economy shrinks. That is what recession is. And mainstream economists and mainstream policymakers, they say that the only way to get out of this is to bring inflation down. But that process actually creates a bigger problem because when you try to bring inflation down by increasing interest rates and reducing the money supply, what happens? Companies stop investing. They stop hiring people. And because people now have less income, they buy less. This pushes the economy further into a recession. Some people argue that it's increased government spending which causes inflation or the printing of notes which causes inflation. And they say that governments must stop spending. They must go into an austere mode, spend less. And what happens? Investment reduces. Government spending reduces. And that is why the total income pie in the economy shrinks further causing further recession. All this is based on the way in which inflation is targeted across the world by neoliberal governments. Because the argument given for inflation is that inflation is caused by high wages. When wages go up, what happens? There's more money in the hands of people and they want to buy more and their demand increases. And when demand increases and supplies don't, prices go up. Another reason they give for high wages causing inflation is that corporates and companies, owners of companies, they have to pay more wages. The wage cost goes up and everywhere, input costs also go up and that pushes up costs. And what can these poor company owners do? The only thing they can do is increase prices. So the entire logic given to us is that it's increased wages and input costs which raises costs and pushes prices up. No one talks about corporate profits. Of course, there is one more reason why we are being told inflation is taking place which is disruptions caused by COVID and the disruptions caused by Russia's war in Ukraine which supposedly has completely destroyed key supply chains. There is no doubt that these have caused supply problems and this has raised the price of input and that increased inputs have raised costs. There's no doubt about that. But across the world, this has been used as a cover for corporates to increase their profits. Let us understand this. Let us assume that at the starting point, a company which produces shirts has an input cost of 50 rupees and a labor cost of 50 rupees. The total cost is 100. The company owner says, okay, I'm going to sell it for 120 rupees and make a profit of 20 rupees. Now, labor cost has risen to 70 rupees and input costs have also risen to 70 rupees. What happens? The total cost has gone to 140 rupees. Now, the company owner can no longer sell those shirts for 120 rupees because then they would make a 20 rupee loss. So what do they do? They say, okay, I will take a 10 rupee profit and increase this to 150. So prices have gone up from 120 to 150 even though the company owner has taken a hit on profits. That is what the argument is given that when costs go up, there's a limit beyond which company owners, corporates, capitalists cannot take the hit on profits and after a point, they start making losses. So at that point, they just withdraw from the business and that is what causes a problem. But wait a minute, is that what has happened? In reality, as I said, COVID disruptions, the disruptions caused by the Russian war has been used as a cover for increased profits. I said this is happening all over the world. There's a study in the US which says 60% of the increase in prices in the last one year in the US and you know there's been record inflation of there is because of markup by corporates because of the increased profits of corporates. This is what they've done. As I told you, input costs have gone to 70, labor costs have gone to 70 and the total cost has gone to 140. Instead of keeping their margins and 20 and selling something at 160, what they've done is that they've sold it at 180. They've increased their profits and for a long time because of the media propaganda because of a certain amount of truth that input costs are up, that labor costs are up, people have accepted that prices are going up because there's a shortage. Prices are going up because there's a lot of demand and there's a shortage. No, there is only one part and actually probably just one third of the reason for the rise in prices, rise in inflation. Higher profits has caused higher inflation and that is what is causing recession now. Not higher wages, not higher demand, not higher money supply. This is not just true for the US or Europe. Look at India. There have been record profits in India in the COVID year and even last quarter we've had record profits. So, corporate profits are increasing at the time of inflation. Corporate profits are increasing dramatically while others are earning less. That is the cause for the drop in demand. That is the reason why there's not enough demand in the market and that is why we are going to face the danger of another recession. The answer to that is to limit corporate profits, to put a limit on the margins that corporates can get, to put price controls. But will that happen? Hold your breath but don't hold it for too long because you want to live. That's the show today. 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