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Marxism money and inflation

Marxist Theory · 2026-05-13

Core Argument

The central thesis is that inflation is not a monetary phenomenon reducible to excessive money supply, but a complex symptom of capitalism's systemic crisis. Booth argues that the current inflationary wave — the worst since the 1970s — results from the interaction of three distinct factors: the massive injection of fictitious capital through pandemic-era state stimulus and quantitative easing; severe supply-side disruptions caused by broken supply chains, labour shortages, and the Ukraine war; and the beginning of a structural reversal of globalisation, which for decades had suppressed prices through access to cheap labour and economies of scale.

The article's polemical thrust is directed against both wings of bourgeois economics. Against the monetarists (Friedman), Booth argues that inflation is not "always and everywhere a monetary phenomenon" — the post-2008 QE experience, which produced no inflation, proves this. Against the Keynesians and MMT advocates, he argues that deficit-financed stimulus is a recipe for inflation that workers ultimately pay for. Both camps share a "money fetishism" that mistakes the symptom for the cause: the real driver is the anarchic, profit-driven logic of capitalism itself, which cannot be managed or reformed.

Theoretical Grounding

The analysis is rooted in Marx's labour theory of value as elaborated in Capital and Value, Price and Profit. Booth deploys three key Marxist concepts:

First, the distinction between value and price. Prices are the monetary expression of value, determined by socially necessary labour time, not by arbitrary mark-ups or supply-and-demand alone. This grounds the argument that workers are not the cause of inflation but its victims: wages chase prices, not vice versa, because profits represent unpaid surplus value, and any real increase in wages must come at the expense of profits.

Second, the concept of fictitious capital — money circulating as capital without any accompanying production of value. Booth traces this from Marx's analysis of state debt and financial securities through to modern quantitative easing, pandemic stimulus, and arms spending. Fictitious capital is an "illusory claim on future profits" that, when unmoored from material production, generates inflationary pressure.

Third, the tendency of the rate of profit to fall is implicit throughout, though not named directly. The argument that capitalism requires ever-larger injections of fictitious capital to survive, that globalisation's price-suppressing effects are exhausted, and that we face a period of "senile decay" all point to the underlying crisis of profitability that drives the system's convulsions.

The article situates itself within the Trotskyist tradition, drawing explicitly on Ted Grant's 1971 article "The Truth Behind Inflation" and his pamphlet Will There Be a Slump?, which polemicised against Keynesian illusions that arms spending could overcome the contradiction of overproduction. This places Booth in a lineage that insists on the impossibility of managing capitalism through monetary or fiscal policy.

Conjunctural Relevance

The article is written in mid-2022, at the peak of the post-pandemic inflationary surge. Booth cites specific data: UK inflation at 9%, US at 8.5%, eurozone at 7.5%, OECD average at 7.7%. He identifies the key conjunctural factors:

Pandemic stimulus: $16 trillion in fiscal support globally, $10 trillion in QE. US stimulus alone equated to 25% of GDP. This created a wave of pent-up demand released as lockdowns ended, colliding with supply-side constraints.

Supply chain breakdown: Bottlenecks in shipping, microchip shortages, labour shortages in key sectors. The "just-in-time" production methods pursued for decades have introduced extreme fragility.

The Ukraine war and sanctions: Driving up energy and food prices. Energy accounts for over half of inflation in most advanced economies; energy and food account for nearly three-quarters in the eurozone. NATO military spending increases — Germany's $100 billion pledge, the $40 billion US aid package to Ukraine — add further fictitious capital.

The reversal of globalisation: Protectionist policies (Trump's tariffs, Brexit, Biden's "Made in America") are raising production costs by reducing the efficiencies of international trade. This marks a structural shift from the decades-long trend that suppressed prices.

Debt overhang: Global debt at 360% of GDP, US federal debt at 140% of GDP — far higher than in the 1970s. This makes the Volcker-style remedy of sharp interest rate hikes far more dangerous, risking mass bankruptcies and financial contagion.

The article predicts that central banks' interest rate hikes will fail to control inflation because they address only the monetary symptom, not the underlying contradictions. Events since publication — persistent inflation despite aggressive rate rises — are presented as confirmation.

Where the Argument Continues

The article is a synthetic piece that draws together themes developed across the IDOM corpus. It points forward and backward:

Backward: It rests on Ted Grant's theoretical work on inflation and the limits of Keynesianism, particularly "The Truth Behind Inflation" (1971) and Will There Be a Slump?. These texts established the Marxist analysis of fictitious capital and arms spending that Booth applies to the current conjuncture.

Forward: The argument about the reversal of globalisation and the "balkanisation" of capitalism connects to IDOM's ongoing analysis of inter-imperialist rivalry, particularly the US-China trade war and the Ukraine conflict. The prediction of intensified class struggle as workers are squeezed between inflation and austerity points to the need for analysis of strike waves and the political situation — themes developed in Against the Stream episodes and other IDOM articles on the cost-of-living crisis.

Underdeveloped: The article does not explore the political implications of its analysis for the labour movement in detail. It ends with the general revolutionary conclusion — "expropriate the billionaires" — but does not discuss concrete strategic questions: how to build rank-and-file organisation, how to fight for socialist demands within the current conjuncture, or how to combat reformist illusions in the labour movement. These are addressed elsewhere in the IDOM corpus.

Connections

  • Marx, Value, Price and Profit (1865): The theoretical foundation for the argument that wages and profits are inversely related, and that workers are not the cause of inflation.
  • Marx, Capital Vol. 3, Part 5: On fictitious capital, credit, and the banking system.
  • Ted Grant, "The Truth Behind Inflation" (1971): The direct theoretical precursor, establishing the Marxist critique of monetarism and the analysis of inflation as a symptom of capitalist decay.
  • Ted Grant, Will There Be a Slump?: On the limits of arms spending as a Keynesian stimulus.
  • Leon Trotsky, "Report on the World Economic Crisis" (1921): On inflation as a symptom of capitalism's senile decay in the epoch of imperialism.
  • Ernest Mandel, Late Capitalism: For a broader Marxist analysis of the long-wave cycles of capitalist development and the structural crisis of the 1970s, which Booth's analysis implicitly updates.

Key Quotes

  1. "Inflation, therefore, doesn't make society richer in terms of real wealth. But it does redistribute wealth between creditors and debtors, and shift incomes around between capitalists and workers – normally to the detriment of workers, as prices rise faster than wages."

  2. "The monetarists are correct in this assertion. As discussed above, injecting money into circulation without any corresponding increase in values (commodities produced) paves the way for runaway price increases. Their analysis of money and inflation, however, like all of bourgeois economics, suffers from being extremely exaggerated, one-sided, and mechanical."

  3. "Inflation seen since is a symptom not of reckless governments, but of the fact that we are in the epoch of imperialism; the epoch of capitalism's senile decay. As Leon Trotsky explained in his speeches to the Communist International following the First World War, it is a sign of the deteriorating health of the system, which can only be kept alive by a steady drip of money-printing and debt."

  4. "Bouts of inflation and mounting debts, in this respect, are two sides of the same coin. Both are a reflection of the impasse of capitalism, which requires ever-larger injections of fictitious capital in order to survive. But all of this only adds to the contradictions, paving the way for even bigger, more explosive crises down the line."

  5. "Whatever decision the ruling class takes, therefore, will lead to disaster: either in the short term, or by preparing the conditions for even more intense crises down the line. On the basis of capitalism, in other words, all roads lead to ruin."

  6. "In the final analysis, inflation is a symptom of the anarchy and decay of the capitalist system; a plague that will only ever truly be cured if we rid ourselves of the market economy, by taking production out of private hands, and placing it under common ownership and workers' control."