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What has caused the unfolding chaos in the world economy

Marxist Analysis · 2026-05-13

Core Argument

The article argues that the post-pandemic chaos in the world economy — supply chain breakdowns, inflation, bottlenecks — is not a temporary disruption but the surface expression of a deep structural crisis of capitalism that has been suppressed but not resolved since 2008. The central claim is that the ruling class, terrified of the social consequences of allowing capitalism's periodic crises to function as they must, has spent over a decade preventing the necessary destruction of overaccumulated capital through ever-larger injections of debt and printed money. The pandemic stimulus was merely the most extreme instalment of this policy. The result is a system that can no longer function without its crutches, yet the crutches themselves are generating inflation, distortion, and fragility that will eventually force a reckoning — one the working class will be made to pay for.

Theoretical Grounding

The analysis is grounded in Marx's theory of crisis, specifically the contradiction between the drive to develop productive forces without limit and the restricted consumption of the masses. The article explicitly invokes Marx's formulation from Volume III of Capital: "The ultimate reason for all real crises always remains the poverty and restricted consumption of the masses as opposed to the drive of capitalist production to develop the productive forces as though only the absolute consuming power of society constituted their limit."

The argument also draws on the Marxist understanding of the business cycle and the function of crises within capitalism. Crises are not malfunctions but the system's brutal mechanism for destroying overaccumulated capital, overcapacity, and bad debt, thereby resetting the conditions for renewed accumulation. The article's key theoretical move is to argue that the post-2008 period represents a departure from this logic: the state intervened not to let the crisis do its work but to prevent it entirely, creating a system of "zombie companies" and distorted price signals that has only postponed and compounded the contradictions.

The analysis of just-in-time production and the bullwhip effect is not presented as a technical aside but as an illustration of how capitalism's drive to minimise the turnover time of capital — to reduce the period during which capital sits idle in circulation — creates extreme fragility at the systemic level. This is a concrete application of Marx's analysis of the circulation of capital and the distinction between production time and circulation time.

The article sits firmly within the Marxist tradition that rejects the notion that capitalism has overcome its crisis tendency through state intervention or financial engineering. It is closer in spirit to the work of political economists like Ernest Mandel and the later writings of the International Marxist Tendency (now the RCI) on the long downturn and the structural crisis of the 1970s, updated for the post-2008 and post-pandemic conjuncture.

Conjunctural Relevance

The article was written in November 2021, at a moment when the post-pandemic "reopening" was generating visible chaos rather than a smooth return to normal. The specific data points are:

  • $10 trillion pumped into the US economy alone in the first two months of the pandemic — three times the amount deployed in the two years after 2008.
  • US M2 money supply increased by 16% in a single quarter, compared to a previous annual rate of 3-4%. The annualised rate stabilised at around 13% by August 2021.
  • US inflation had reached over 6% at the time of writing.
  • German PPI (October 2021) showed a 14.2% annualised increase — a level last seen in 1974.
  • US government debt stood at 125% of GDP, with a budget deficit of $2.769 trillion for 2021 alone (13% of GDP). In the 1970s stagflation, US debt was around 30% of GDP.

The article identifies the supply crisis as the product of a specific conjuncture: a tidal wave of "artificial" demand (created by helicopter money) colliding with disrupted production and logistics, with the bullwhip effect operating simultaneously across the entire world economy. It also situates the chaos within the longer-term trend of deglobalisation and rising imperialist rivalry — the failure of the WTO's Doha Round, the 2008 crisis accelerating centrifugal forces, Trump's tariff war with China, and Biden's continuation of the same policy.

The political relevance is direct: the article warns that the ruling class will eventually be forced to raise interest rates to combat inflation, triggering a financial crash and recession, and that the entire accumulated burden will be passed onto the working class. The conjuncture is thus one of intensifying class struggle, with the system's contradictions reaching a point where they can no longer be managed through monetary and fiscal stimulus alone.

Where the Argument Continues

The article is a broad survey of the post-pandemic conjuncture and does not develop several lines of argument in depth. The following are areas where the analysis opens onto other texts and debates within the Marxist tradition and the RCI's output:

  • The theory of the tendency of the rate of profit to fall (TRPF) is not deployed here, though the article's reference to "downward pressure on profit rates" and the need for the ruling class to "squeeze wages" points toward it. The argument would be deepened by engaging with the TRPF as the underlying law of motion driving the long-term crisis, as developed in Marx's Capital Volume III and in later Marxist debates (e.g., between Mandel, Shaikh, and Brenner). The RCI's own theoretical output on this question — particularly articles on the long downturn and the structural crisis of profitability — would be the natural continuation.

  • The critique of Keynesian and state interventionist responses is implicit but not fully theorised. The article notes that the state has prevented crises from doing their "dirty work" but does not develop a systematic account of the limits of state intervention under capitalism. This connects to the broader Marxist debate on the "permanent arms economy" and the question of whether state spending can permanently offset the tendency to crisis — a debate associated with Mandel, Kidron, and the New Left Review tradition.

  • The political strategy for the working class is gestured at in the final paragraphs ("prepare for a bitter and protracted class struggle") but not elaborated. The article does not discuss the role of revolutionary leadership, the need for a transitional programme, or the concrete tasks of Marxists in the present conjuncture. These are developed in other IDOM articles and in the RCI's programme, particularly around the fight for a workers' government and the demand for social ownership of the supply chains.

  • The specific dynamics of the energy crisis and the climate crisis are mentioned but not analysed in depth. The article notes the energy crisis in Europe and Asia as part of the broader chaos but does not connect it to the Marxist analysis of ecological crisis under capitalism — a theme developed in other RCI texts on climate and capitalism.

  • The geopolitical dimension — particularly the rivalry between US and Chinese imperialism — is raised but not fully explored. The article notes that Biden has continued Trump's tariff war but does not analyse the deeper dynamics of interimperialist competition or the possibility of war. This connects to the RCI's analysis of the Ukraine war and the broader crisis of the world order.

Connections

  • Marx, Capital Volume III, especially the chapters on the law of the tendency of the rate of profit to fall and the chapter on crises (from which the article quotes directly).
  • Ernest Mandel, Late Capitalism and Mandel, The Second Slump — for the analysis of the long downturn, the role of state intervention, and the structural crisis of the 1970s as a precursor to the present.
  • Anwar Shaikh, Capitalism: Competition, Conflict, Crises — for a rigorous modern treatment of the TRPF and the theory of crisis, though Shaikh's framework is not identical to the one used here.
  • The RCI's own theoretical journal, In Defence of Marxism — particularly articles on the 2008 crisis, the long-term decline of profitability, and the political tasks of Marxists in the present conjuncture.
  • Against the Stream episodes dealing with the supply chain crisis, inflation, and the energy crisis — these would develop the conjunctural analysis in real time.
  • The work of the International Marxist Tendency (IMT) prior to the formation of the RCI — particularly the analysis of the 2008 crisis and the critique of "green capitalism" and "Keynesian" solutions.

Key Quotes

  1. "The ultimate reason for all real crises always remains the poverty and restricted consumption of the masses as opposed to the drive of capitalist production to develop the productive forces as though only the absolute consuming power of society constituted their limit."

  2. "In a sense, the crisis itself represents the temporary solution of this contradiction: it destroys overproduction, overcapacity, and bad debt. Through destruction, it lays the groundwork for a new recovery and a resetting of the business cycle. The working class pays the price, but such a price is unavoidable under capitalism and is indispensable to the system's functioning."

  3. "Everything that ought to have perished in an inferno of bankruptcy and social catastrophe, according to the logic of capitalism, was saved by the 'caring' hand of the bourgeois state. Mountains of debt grew higher and higher. Bankrupt 'zombie companies', banks and even countries could continue their existence as an economic 'living dead' so long as cheap credit could be had in abundance."

  4. "The present chaos is thus partly a product of capitalism's deep organic crisis, whilst also partly being the product of the ruling class' own political response — the latter no longer daring to let their own economic system function, 'as it should', for fear of it being toppled in the course of the social explosions that such a free-running crisis would cause."

  5. "The world economy has long since become something akin to a credit-junkie, and the ruling class has poured everything it could muster into feeding this addiction."

  6. "The world economy has entered a period that shares more in common with the beginning of the 20th century than with the previous two decades. This will have many consequences: lower productivity growth, a downward pressure on profit rates (which in the long run the ruling class will seek to counteract by squeezing wages) and higher prices as far as the eye can see. It's a recipe for class struggle."