Crisis protectionism and inflation war prepares the way for revolution

Marxist Perspectives · 2022-05-17

Core Argument

The article argues that the world economy is entering a prolonged period of crisis defined by the simultaneous breakdown of globalisation, spiralling inflation, and the exhaustion of the policy tools available to capitalist states. The central claim is that the war in Ukraine and the resulting sanctions have acted as a catalyst, accelerating and deepening contradictions that were already present: the pandemic-induced crisis of logistics, rising commodity prices, supply chain fragility, and the growing rivalry between imperialist powers. The author contends that this concatenation of factors is not a temporary disruption but the emergence of a "new normal" — persistent inflation, stagflation, and the rolling back of the international division of labour that had kept prices low since the 1970s. The political consequence, the article asserts, is that the burden of this crisis will fall overwhelmingly on the working class, and that inflation will act as "a finished recipe for class struggle."

Theoretical Grounding

The analysis is rooted in the Marxist theory of imperialism and the contradictions of the nation-state under capitalism. The article draws explicitly on Lenin and Trotsky's argument that there are two barriers to the development of the productive forces under capitalism: private property and the nation-state. Globalisation, the article argues, partially overcame the second barrier by deepening the international division of labour, lowering costs, and temporarily suppressing inflation. The current reversal of globalisation — driven by geopolitical rivalry, protectionism, and the search for "supply chain security" — represents the reassertion of the nation-state as a fetter on production.

The article also deploys a Marxist understanding of inflation not as a monetary phenomenon but as a reflection of deeper contradictions in the accumulation process. Inflation is presented as a mechanism of redistribution from labour to capital, with monopolies able to pass on cost increases while workers see their real wages eroded. The concept of stagflation — stagnation combined with inflation — is used to show that the normal crisis-management tools of central banks (raising interest rates) are self-defeating, as they risk triggering recession without necessarily curbing price rises.

The analysis sits within the tradition of Marxist political economy that emphasises the anarchic, unplanned nature of capitalist production and the tendency toward crisis inherent in the system. It is less concerned with formal models of the tendency of the rate of profit to fall than with the concrete, conjunctural mechanisms through which crisis manifests: supply bottlenecks, raw material shortages, and the breakdown of trade networks.

Conjunctural Relevance

The article is written in May 2022, at a specific conjuncture shaped by several overlapping factors:

• The war in Ukraine and sanctions on Russia: The article details how Russia and Ukraine together produce 12 percent of the world's tradeable calories, and how the loss of Ukrainian grain and Russian fertiliser has driven up food prices. Wheat prices had already risen by a third, with further increases predicted. The war also removed Russian diesel and natural gas from European markets, driving energy costs up sharply.

• The pandemic's legacy: The article notes that the COVID-19 pandemic created a crisis in logistics, with shipping costs and freight transport prices increasing dramatically. While some bottlenecks had eased by May 2022, underlying costs continued to rise. The article also highlights China's zero-COVID lockdowns, which affected an estimated 300 million people and caused industrial production to drop by 2.9 percent and retail sales by 11 percent in April 2022.

• Protectionism and deglobalisation: The article documents a wave of export bans — on food from Indonesia and Russia, on fertiliser from China and Russia — as states prioritise domestic supply over world market integration. It also traces the "decoupling" of Western supply chains from China, particularly in semiconductors and lithium refining, where China controls 80 percent of battery-grade lithium hydroxide production.

• The specific crisis of British capitalism: The article singles out Britain as facing the worst inflation in Western Europe, with energy prices rising 54 percent in April 2022 and a further 30 percent expected in October. The Bank of England predicted inflation would hit 10 percent by the end of the year, while the governor admitted the Bank was "powerless" to act without triggering recession.

• Warning signs from bourgeois economists: The article cites Pascal Lamy (former WTO Director-General), Lloyd Blankfein (former Goldman Sachs CEO), and Martin Sandbu (FT columnist) as figures who publicly expressed alarm about the depth of the crisis, lending weight to the argument that the system's managers themselves see no easy way out.

Where the Argument Continues

This article opens a line of analysis that the RCI has developed in subsequent pieces. The argument about the end of globalisation and the return of protectionism is explored further in articles on the "new Cold War" and the economic rivalry between the US and China. The claim that inflation will drive class struggle is taken up in pieces analysing strike waves, cost-of-living protests, and the political radicalisation of workers in Britain, France, and elsewhere. The specific crisis of British capitalism is a recurring theme in Socialist Appeal articles and Against the Stream episodes, particularly around the energy price cap, the cost-of-living crisis, and the political fallout for the Conservative Party.

The article's treatment of the war in Ukraine as an imperialist conflict that will ultimately destabilise the Western powers is developed in RCI analyses of NATO expansion, the sanctions regime, and the prospects for a broader European war. The argument that the ruling class will use the war to impose austerity is continued in pieces on the "war economy" and the militarisation of state spending.

Connections

The article should be read alongside:

• Lenin, Imperialism, the Highest Stage of Capitalism — for the theoretical framework on the nation-state and the export of capital.
• Trotsky, The War and the International — for the analysis of how interimperialist rivalry drives crisis.
• Marx, Capital Volume 3 — particularly the chapters on the tendency of the rate of profit to fall and the counteracting factors, which provide the deeper theoretical context for the crisis tendencies described here.
• RCI articles on the "new Cold War" and the economic decoupling of the US and China — for the extension of the argument about protectionism and supply chain reorganisation.
• Socialist Appeal analyses of the British cost-of-living crisis — for the concrete development of the argument about inflation and class struggle in Britain.
• Against the Stream episodes on the war in Ukraine — for the political-strategic dimension of the argument, particularly the critique of NATO and the call for revolutionary defeatism.

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 Russian invasion of Ukraine has put an end to the globalisation we have experienced over the last three decades." (Larry Fink, CEO of BlackRock, quoted in the article)

3. "Inflation is therefore a finished recipe for class struggle."

4. "The more far-sighted economists understand the dangers implicit in these conditions... The U.S. economy lives and dies for the consumer, and as soon as this consumer starts to slow down. I think that will hit the economy hard." (Victoria Greene, G Squared Private Wealth, quoted in the article)

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."