Hawks hikes and hard-landings new chapter in the crisis of capitalism

Marxist Analysis · 2026-05-13

Core Argument

The article argues that the global economy has entered a new, more acute phase of the crisis of capitalism, characterised by the impossibility of resolving inflation without provoking recession. Central banks, having abandoned their earlier dismissal of inflation as "transitory," are now deliberately raising interest rates to engineer a "hard landing" — a recession that will crush workers' wages and living standards. However, this strategy cannot succeed because the inflationary pressures are structural: the breakdown of global supply chains, the energy shock from the Ukraine war, the legacy of pandemic-era money printing, and monopoly pricing power. The ruling class is therefore caught between two impossible options — monetarist austerity or Keynesian stimulus — both of which deepen the crisis. The article's central thesis is that there is no capitalist solution to stagflation, and that the intensifying class war this produces will lead to revolutionary explosions.

Theoretical Grounding

The analysis is grounded in the Marxist theory of crisis, drawing on the tradition's understanding that capitalism's contradictions periodically erupt as the productive forces rebel against the fetters of private ownership and the nation-state. The article explicitly invokes Trotsky's insight that every attempt by the bourgeoisie to restore economic equilibrium disrupts social and political equilibrium, updating this for the present conjuncture: efforts to stabilise inflation destabilise growth, and vice versa.

The piece situates itself within the Marxist critique of both Keynesianism and monetarism as rival bourgeois strategies that share the same goal — defending capitalist profits — and that both end in disaster for the working class. The concept of fictitious capital is deployed to explain how pandemic-era money printing laid the groundwork for today's inflation, while the analysis of monopoly "pricing power" draws on the Marxist understanding that inflation under monopoly capitalism is not a monetary phenomenon but a class struggle over the distribution of value. The article rejects the "wage-price spiral" narrative, counterposing a "profit-price spiral" — a position consistent with the Marxist tradition's insistence that inflation is a form of class struggle from above.

Conjunctural Relevance

The article is written in September 2022, at a specific conjuncture: inflation at 8.3% in the US, 9.1% in the eurozone, and 9.9% in the UK; the Federal Reserve, ECB, and Bank of England all raising rates sharply; and the war in Ukraine driving energy prices. The piece names key actors — Jerome Powell, Isabel Schnabel, Liz Truss, Xi Jinping — and identifies concrete tensions: the "tug of war" between central bankers and elected politicians, the collision course between Truss's fiscal expansion and the Bank of England's monetary tightening, and the simmering conflict in China between growth concerns and Xi's stability-obsessed zero-COVID policy.

The article's conjunctural claim is that the "soft landing" narrative has collapsed, and that the ruling class is now consciously choosing recession. It identifies the specific mechanisms through which this will hit workers: fuel poverty in Europe and Britain, bankruptcy for small businesses, and the destruction of German industry through gas shortages. The piece also connects the immediate crisis to longer-term structural trends: the retreat of globalisation, protectionist measures, and the climate catastrophe's impact on energy infrastructure.

Where the Argument Continues

The article is a snapshot of a particular moment in the unfolding crisis, and its argument is developed across the broader IDOM corpus in several directions. The analysis of the "profit-price spiral" and monopoly pricing power is elaborated in other articles on inflation and corporate profits. The critique of Liz Truss's mini-budget and the subsequent market turmoil is taken up in subsequent pieces as the crisis unfolds. The theoretical framework — Trotsky's equilibrium thesis applied to stagflation — is developed further in articles on the political economy of the 2020s.

The argument connects to the broader Marxist tradition's analysis of the long downturn and the tendency of the rate of profit to fall, though the article itself does not deploy these concepts explicitly. Readers should look to IDOM articles on the structural crisis of capitalism and the decline of the rate of profit for the deeper theoretical underpinning of the claim that capitalism is in "senile decline."

Connections

The article should be read alongside: - Trotsky's writings on the equilibrium of class forces, particularly in The Transitional Program and his analyses of the 1920s crisis - Marx's discussion of fictitious capital in Capital Volume III, which underlies the critique of pandemic-era money printing - IDOM articles on the 2008 crash and its aftermath, which the piece explicitly references as the previous chapter in the same crisis - Against the Stream episodes from late 2022 and 2023 that track the unfolding stagflation and the political responses to it - The Marxist tradition's critique of both Keynesianism (as managing crisis through debt) and monetarism (as managing crisis through unemployment)

Key Quotes

1. "Every effort by the bourgeoisie to restore one economic equilibrium — i.e. on the monetary plane, with inflation — inescapably disrupts another — i.e. demand and growth — and vice-versa. And both serve to undermine the social and political equilibrium, including in world relations, feeding back to create yet further economic instability, and leading to revolutionary upheavals across society."

2. "Far from seeing a 'wage-price spiral', it is a case of a 'profit-price spiral', as big businesses push higher prices onto consumers, in order to protect their profits, at the expense of workers' purchasing power."

3. "Taken together, however, we can see that all these 'accidents' reflect an underlying necessity: the contradictions of the capitalist system, which inherently lead to chaos and crisis; a rebellion of the productive forces against the straitjacket of private ownership and the nation state."

4. "The monetarists and Keynesians are both right — and they are both wrong. Whatever decision the ruling class takes will end in disaster."

5. "What we are seeing is a veritable tug of war taking place between hawkish (unelected) central bankers, looking to spark a recession and subdue inflation, and anxious (elected) politicians, fearful of the social and political impacts of going down this path."

6. "A vibrant, virile system would be able to withstand these knocks and shocks. But capitalism — a system in the midst of senile decline and decay — is instead thrown from pillar to post by these hammer blows."