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Inflation and interest rates ruling class prepares to impose pain

Marxist Analysis · 2026-05-13

Core Argument

The article argues that the persistence of inflation across advanced capitalist economies is not a temporary or monetary phenomenon, but a structural symptom of the anarchy of capitalism itself. Central bankers, having exhausted their only lever — interest rates — are now consciously preparing to provoke a recession in order to crush inflation by destroying demand and driving up unemployment. The ruling class is split between those willing to inflict the necessary pain and those fearing the social explosions this will trigger, but neither wing offers any solution for the working class. The only genuine way out is socialist revolution.

Theoretical Grounding

The analysis draws on the Marxist understanding of capitalism as an anarchic system of production for profit, in which the ruling class has only indirect and contradictory control over economic forces. It rejects both monetarist and Keynesian explanations of inflation as superficial, treating price rises instead as a symptom of deeper contradictions: the overaccumulation of fictitious capital (state stimulus and bailouts), supply-side disruptions caused by geopolitical conflict and climate change, and the reversal of globalisation's cost-reducing effects. The article situates the current crisis within the epoch of imperialist decay, arguing that Britain's particular vulnerability — its dependence on gas imports, Brexit-induced trade frictions, and massive fictitious capital overhang — represents the most acute expression of a general crisis of the system. The argument is consistent with the Marxist tradition's critique of reformism: proposals for price controls or windfall taxes are dismissed as attempts to "cure cancer with an aspirin."

Conjunctural Relevance

The article was published in July 2023, at a moment when core inflation in the US (4.7%), the eurozone (5%), and especially the UK (core inflation at 7.1%) had proven stubbornly resistant to repeated interest rate hikes. The Bank of England had just raised rates to 5%, with forecasts of a peak at 6.25% — the highest since 1998. The article names specific bourgeois commentators (Martin Wolf of the Financial Times, Torsten Slok of Apollo Global Management) who openly advocate a recession as the only means to restore price stability. It identifies concrete structural pressures: labour shortages from post-pandemic workforce exit, chronic illness and burnout, the Ukraine war's impact on energy and food prices, climate adaptation costs, and the rise of protectionism. The analysis of Britain's "special crisis" is grounded in specific data: the UK's pandemic stimulus of 23.1% of national income, far exceeding France's 13.3%, and the political fallout from the Truss mini-budget debacle. The article also connects inflation to the wave of strikes in Britain and France, and to insurrectionary movements in Sri Lanka and Lebanon, framing these as symptoms of the same systemic crisis.

Where the Argument Continues

The article leaves open several questions that are developed elsewhere in the IDOM corpus. The relationship between inflation and the tendency of the rate of profit to fall is gestured at but not elaborated — this is taken up in other IDOM articles on the long-term crisis of profitability. The analysis of the ruling class split between "pain" and "accommodation" wings is not fully theorised in terms of fractions of capital; this is explored in Against the Current episodes and articles on the internal contradictions of the bourgeoisie. The article's dismissal of "greedflation" as a reformist distraction could be deepened by reference to Marxist texts on the distinction between surface appearances and underlying laws of motion. The argument that inflation is a symptom of capitalism's inability to develop productive forces points toward the broader Marxist literature on the epoch of stagnation and decay, including Lenin's Imperialism, the Highest Stage of Capitalism and Trotsky's writings on the death agony of capitalism.

Connections

  • Marx, Capital Volume III: On the tendency of the rate of profit to fall and the counteracting factors, which underlies the analysis of why inflation persists despite interest rate hikes.
  • Lenin, Imperialism, the Highest Stage of Capitalism: On the epoch of decay and the parasitic character of finance capital, relevant to the analysis of Britain's fictitious capital overhang.
  • Trotsky, The Death Agony of Capitalism and the Tasks of the Fourth International: On the impossibility of stable capitalist recovery in the epoch of imperialist decay.
  • IDOM articles on the 2008 crisis and its aftermath: For the longer trajectory of fictitious capital accumulation and state bailouts that created the conditions for the current inflation.
  • IDOM articles on the cost-of-living crisis and strikes: For the working-class response to the ruling class's offensive.
  • Against the Current episodes on the ruling class split: For a more granular analysis of the fractions of capital and their competing strategies.

Key Quotes

  1. "The only weapon they have in their arsenal is interest rates. But this has proven to be a relatively blunt instrument, incapable of chopping back inflation without inflicting damage to the surrounding tissue of the wider economy."

  2. "The stated aim of the capitalist class and its representatives, in other words, is to consciously provoke a slump, in order to 'cool' the economy by driving unemployment up and wages down."

  3. "Under capitalism, where production is privately owned, and the economy operates according to the laws of the market, the ruling class has little control over the factors feeding inflation."

  4. "The problems in Britain, in other words, are merely the most acute expression of the global crisis of capitalism. The system is breaking at its weakest link."

  5. "If inflation continues to rage, it will mean death by slow strangulation, through real-terms attacks on wages and incomes. Action to crush inflation, meanwhile, means death by a thousand cuts."

  6. "At root, therefore, the scourge of inflation is not an issue of scarcity or overconsumption, but is yet another reflection of the impasse of the capitalist system; of capitalism's inability to develop and utilise the immense productive forces that it has conjured forth."