Stagflation and struggle capitalisms new era

Marxist Analysis · 2026-05-13

Core Argument

The article argues that the world capitalist economy has entered a qualitatively new era of intensified crisis, characterised by the return of stagflation — the toxic combination of rising inflation and stagnant or contracting output — which the ruling class can no longer manage through the conventional tools of monetary and fiscal policy. The central claim is that this is not a temporary disruption but a structural shift: the very mechanisms that sustained capitalist expansion over the last three decades — globalised supply chains, cheap credit, and the integration of world trade — have turned into their opposites, becoming vectors of crisis and fragmentation. The conjuncture of pandemic, war, and protectionism is not an accidental pile-up of shocks but the concentrated expression of capitalism's deepening contradictions. The article concludes that this economic turbulence will inevitably translate into a major upswing in class struggle, potentially on a scale exceeding the 1970s.

Theoretical Grounding

The analysis is rooted in the Marxist theory of capitalist crisis, drawing on the tradition's understanding of the boom-slump cycle as an inherent feature of the system, not an aberration. The article implicitly deploys the concept of overaccumulation — the idea that capital has been unable to find sufficient profitable outlets for investment, requiring artificial stimulus to stave off collapse. The reference to cheap money and historically low interest rates since 2008 points toward the Marxist category of fictitious capital: credit and financial instruments that temporarily mask the underlying crisis of profitability but ultimately intensify it. The argument that "all the factors that contributed to the impetus of capitalism in the past are now the factors that are preparing the way for social and economic catastrophe" is a dialectical formulation consistent with Marx's analysis of how capitalism's own developmental achievements become barriers to its further progress. The article also draws on Trotsky's insight, cited directly, that the cost of living is "the mightiest factor of revolutionary ferment" — a materialist explanation of how economic crisis translates into political consciousness. The broader tradition invoked is that of revolutionary Marxism as opposed to reformist or Keynesian perspectives, which the article treats as incapable of grasping the systemic nature of the crisis.

Conjunctural Relevance

The article was written in May 2022, at a moment when the post-pandemic recovery had stalled and the war in Ukraine was driving energy and food prices sharply upward. The analysis is anchored in specific data: global inflation forecast at 6.2 percent, US inflation at 8.3 percent, the FTSE All-World index on its longest losing streak since 2008, and the US economy contracting in the first quarter of 2022. The article identifies the war in Ukraine as a "multiplier of disruption" that has shattered any hope of a smooth recovery, with Western sanctions weaponising finance and trade in ways that are fracturing the world economy into blocs. The reference to the interwar period as a historical parallel is deliberate: the article sees the present as analogous to the breakdown of the first era of globalisation in the 1910s-1930s, with economic nationalism, protectionism, and geopolitical rivalry replacing the liberal international order. The specific forces named include the Federal Reserve and Bank of England (forced to raise interest rates despite the risk of recession), the IMF (whose chief economist is quoted warning about the costs of de-globalisation), and key strategists of capital like Martin Wolf and Warren Buffett, whose pessimistic assessments are used to demonstrate that even the ruling class recognises the gravity of the situation.

Where the Argument Continues

The article is a conjunctural analysis that opens onto several lines of argument developed elsewhere in the Marxist.com corpus. The question of how inflation and the cost-of-living crisis will actually translate into working-class struggle — the mechanisms of consciousness, organisation, and leadership — is gestured at but not developed here. The article states that "millions of workers and youth are going to be thrown into the class struggle" but does not examine the concrete forms this might take, the obstacles posed by reformist leaderships, or the strategic tasks facing revolutionaries. These questions are taken up in other IDOM articles on the strikes wave, the cost-of-living crisis, and the political situation in specific countries. The historical parallel with the 1970s — a period of stagflation, militant trade unionism, and revolutionary upsurge — is invoked but not elaborated; a fuller treatment can be found in IDOM's historical analyses of that period. The geopolitical dimension — the fracture of the world economy into blocs, the implications of the war in Ukraine for the global balance of forces — is also a theme that recurs across multiple articles and Against the Stream episodes, where the RCI's position on the war and the nature of NATO imperialism is developed in greater detail.

Connections

The article should be read alongside Marx's analysis of the tendency of the rate of profit to fall and the theory of crisis in Volume III of Capital, as well as Engels's writings on the "40 years of sleep" of the British working class and the rise of New Unionism. Trotsky's The War and the International and his writings on the cost of living and revolutionary ferment are directly relevant. Within the contemporary Marxist literature, the article connects to analyses of the 2008 crisis and its aftermath, particularly the concept of "permanent stagflation" developed by some Marxist economists. For readers seeking a deeper theoretical treatment of the relationship between economic crisis and class struggle, the works of Ernest Mandel — especially Late Capitalism and The Second Slump — provide a useful framework. The article's treatment of globalisation as a contradictory process that has turned into its opposite echoes themes in David Harvey's The Condition of Postmodernity and The New Imperialism, though from a more explicitly revolutionary perspective.

Key Quotes

1. "Rather than a 'once-in-a-century event', crises are becoming more frequent and more serious. This is the new rhythm of the boom-and-slump cycle."

2. "All the factors that contributed to the impetus of capitalism in the past are now the factors that are preparing the way for social and economic catastrophe."

3. "The very integration of world trade, which was a colossal boost in the past, has turned into its opposite. A single event in one country can have a massive knock-on effect elsewhere."

4. "It is not boom or slump that engenders revolution, but the shifts between one and the other, shaking up consciousness in the process."

5. "Following the First World War, Leon Trotsky explained that 'the cost of living is the mightiest factor of revolutionary ferment in all countries'. It was this question that again served to raise the class struggle to new heights in the 1970s, placing revolutionary events on the agenda. This is about to be repeated — but on a far higher level."

6. "What he [Martin Wolf] is talking about, but dare not say by name, is revolution. For those who have eyes to see, this is exactly the nature of the period we have entered."