Crisis protectionism and inflation war prepares the way for revolution

Marxist Analysis · 2026-05-13

Core Argument

The central thesis is that the world capitalist economy is entering a structural crisis of a severity not seen since the 1970s, driven by the simultaneous breakdown of the globalisation regime that had suppressed inflation for decades. The article argues that the war in Ukraine is not the cause of this crisis but the catalyst that has shattered the post-1970s equilibrium of cheap commodities, integrated supply chains, and stable prices. The concatenation of pandemic disruption, war, sanctions, protectionist retaliation, and climate-induced supply shocks has created an inflationary spiral that central banks cannot control without triggering recession. This "stagflationary" trap — rising prices combined with stagnant or falling output — is objectively preparing the ground for intensified class struggle, as workers are forced to defend living standards while the ruling class demands sacrifice in the name of geopolitical competition.

The article's distinctive claim is that the reversal of globalisation is not a policy error but a structural necessity driven by inter-imperialist rivalry, particularly between the US and China. The attempt to "decouple" supply chains, reshore production, and build domestic capacity in semiconductors, batteries, and energy will permanently raise the cost base of capitalism, locking in higher inflation for years. This is not a temporary shock but the "new normal" of a system entering its most turbulent phase since the interwar period.

Theoretical Grounding

The analysis draws on the Marxist theory of imperialism and the political economy of the nation state under capitalism. It explicitly invokes Lenin and Trotsky's argument that private property and the nation state are the two barriers to the development of the productive forces under capitalism. Globalisation is understood here not as a benign process of integration but as a historically specific phase in which the nation-state barrier was partially — and temporarily — overcome through the international division of labour, lowering costs and suppressing inflation. The current reversal is therefore not a cyclical fluctuation but a manifestation of the intensifying contradictions between the global character of production and the national form of accumulation.

The article also deploys a Marxist understanding of inflation as a transfer of value from labour to capital. Inflation is not a monetary phenomenon in the vulgar sense but a mechanism by which the purchasing power of wages is eroded, shifting resources from workers to monopolies that can control prices at both ends of the supply chain. This is grounded in the classical Marxist insight that inflation expresses a crisis of overaccumulation — capital cannot find profitable outlets, so it devalues labour through rising prices rather than through open unemployment alone.

The analysis of central bank impotence reflects the Marxist critique of bourgeois economic management. Central banks are caught between the need to defend the currency (raising rates) and the need to sustain accumulation (keeping rates low). The article shows that this contradiction is insoluble within capitalism: raising rates risks recession, but failing to raise rates entrenches inflation. This is a concrete expression of the tendency of the rate of profit to fall, though the article does not use that terminology explicitly — the mechanism operates through the rising organic composition of capital as reshoring and protectionism raise the cost of constant capital.

Conjunctural Relevance

The article was written in May 2022, at the height of the initial shock from the Ukraine war, but its analysis has proven prescient. The specific data points remain relevant: wheat prices up one-third, fertiliser prices doubled, vegetable oil supplies cut by 40 percent, UK inflation heading toward 10 percent, German producer prices rising at the fastest rate since 1949. The prediction that central banks would be unable to control inflation without causing recession has been borne out by the subsequent tightening cycles in the US, UK, and Eurozone, which have indeed slowed growth without returning inflation to target.

The article's focus on the crisis in China — the Evergrande collapse, the Shanghai lockdowns, the drop in industrial production and retail sales — anticipated the deeper property crisis and deflationary pressures that have characterised the Chinese economy in 2023-24. The argument that China's slowdown would reverberate globally, removing supply and putting upward pressure on world prices, has been confirmed by the persistent weakness in global manufacturing.

The geopolitical dimension is equally sharp. The article identifies the US-China rivalry as the real driver of protectionism, with the Ukraine war serving as a dress rehearsal for a potential confrontation over Taiwan. The specific examples — lithium refining (80 percent in China), semiconductor production (90 percent of advanced chips in Taiwan), the Chips Act, Intel's plan to rebuild supply chains on US soil — have all become central to the policy debate. The prediction that "decoupling" would be "neither easy nor cheap" has been confirmed by the slow, costly, and incomplete nature of reshoring efforts.

The article's warning about military expenditure driving inflation is now a mainstream concern. The US defence budget has continued to rise, European NATO members are committed to 2 percent of GDP, and the war economy logic identified by Martin Sandbu — that workers will be asked to accept lower living standards as the "price of freedom" — has become the explicit discourse of Western leaders.

Where the Argument Continues

The article leaves several threads that are developed elsewhere in the IDOM corpus and broader Marxist literature. The relationship between inflation and class struggle is gestured at but not theorised in depth — the claim that inflation is a "finished recipe for class struggle" needs to be connected to the concrete experience of strike waves, wage negotiations, and the formation of workers' organisations. Later IDOM articles on the cost-of-living crisis in Britain, the French pension strikes, and the German transport strikes develop this dimension.

The analysis of the end of globalisation is a theme that recurs across multiple IDOM pieces, particularly those dealing with the trade war, the semiconductor shortage, and the energy transition. The specific question of whether the reversal of globalisation represents a permanent structural shift or a temporary disruption is left open — later articles on the fragmentation of the world market and the rise of regional blocs take this further.

The article does not develop a strategic perspective for revolutionaries in this conjuncture. It identifies the objective conditions for intensified class struggle but does not elaborate on the forms of organisation, the demands, or the political orientation required. This is addressed in other IDOM articles on the tasks of the revolutionary party, the united front, and the fight against reformism in the labour movement.

The analysis of the war in Ukraine is limited to its economic effects. The political and military dimensions — the nature of the Russian invasion, the role of NATO, the character of the Ukrainian state, the position of the international left — are treated in separate IDOM articles and Against the Current episodes.

Connections

The article should be read alongside Lenin's Imperialism, the Highest Stage of Capitalism for the theoretical framework on the nation state and the world market. Trotsky's writings on the relationship between the national and the international in The Permanent Revolution and The War and the International are directly relevant to the argument about the two barriers to the productive forces.

Within the IDOM corpus, the article connects to pieces on the trade war with China, the semiconductor crisis, the energy transition, and the cost-of-living crisis. The analysis of inflation as a transfer of value from labour to capital echoes Marx's discussion of relative and absolute surplus value in Capital Volume I, and the theory of crisis in Volume III.

The specific claim that central banks are "powerless" to control inflation without causing recession connects to the broader Marxist critique of Keynesianism and monetary policy. The article implicitly rejects the notion that inflation can be managed through technical adjustments to interest rates, aligning with the classical Marxist position that crises are inherent to capitalism and cannot be resolved through state intervention.

The discussion of protectionism and reshoring connects to the Marxist literature on the "new imperialism" and the transition from the neoliberal phase to a period of inter-imperialist rivalry. David Harvey's concept of "accumulation by dispossession" and Giovanni Arrighi's analysis of systemic cycles of accumulation provide useful frameworks for understanding the current conjuncture, though the article does not engage with them explicitly.

Key Quotes

1. "Ever since the 1970s, inflation has been kept at bay partly by globalisation, with the resultant increasing international division of labour bringing down costs. Lenin and Trotsky explained that there are two barriers to the development of the economy (productive forces) under capitalism: private property and the nation state. The latter was partially overcome precisely by globalisation."

2. "The prospect now is not for a quick return to inflation of 2 percent or so, but that this higher inflation will last for years and possibly decades. This has serious implications for the class struggle. 5-10 percent inflation will quickly eat away at wages, and depress real earnings. It will be a very quick transfer of money from the workers, who will get less for their wages, to companies, which will charge higher prices."

3. "The reality is that central banks are caught between a rock and a hard place. They can't let inflation spiral, but neither can they really curtail it, because they will cause a recession. And even a recession might be insufficient to bring inflation to heel."

4. "Refashioning supply chains will inevitably lead to higher prices in the long run. It is one of the consequences of the trade war with China that began under Trump, and which continues to this day. But it was amplified first by the pandemic and now by the Ukraine war and the resulting sanctions."

5. "The massive expansion of military expenditure will only make inflation worse. Instead of using resources to raise education standards, or invest in new machinery, better public transport or even roads, the government will be putting even more pressure on strained markets for raw materials to produce very expensive weapons."

6. "Persistent inflation is a sign that the capitalist system is in a deep crisis, that it can not find an equilibrium. Now, many countries are facing the unappealing prospect of both high inflation and recession. The western imperialists, so enthusiastic about making Russia bleed in Ukraine, will come to regret their actions. The continuation of the war is turning the situation from bad to worse. Inflation will act as the mole undermining the already unstable political systems all across the world."