The Knife At Your Throat

Prices

Swipe through any newsfeed and tales of creeping horror will press up from beneath the touchscreen: prices rising undead from the depths of the grave called globalization, paychecks shriveling to ash, marauders emerging from the suburban forests to siphon black gold from boreholes drilled into gas tanks. The nightmare of inflation is back. As with any horror story, there must be a monster. What, exactly, is the cause of rising prices? The political message is often as clear here as in the little boomer-humor Biden stickers popping up on gas pumps across the country. Pundits track their favored monster to its bone-strewn lair, brandishing torches. When the monster is unveiled, there is not really a surprise: high wages, free-flowing stimulus checks, too much money spent on social programs—all different ways of saying too much money in the hands of those who were born to have less. New spending must be curtailed, the minor wave of youthful interest in unionization drawn back, all of that too-much-money out there siphoned back into the familiar too-few-hands. The Fed, which harbored such monsters, must now take responsibility by finally raising the blade of the interest rate like Paul Volcker, patron saint of brutal technocrats and bruiseless beatings.

“The Left” takes aim at a different monster, but a monster nonetheless. Inflation isn’t induced by high wages, but by price-gouging corporations and war profiteers. If anything, price increases justify demands for higher wages, reversing the chicken and the egg. This account is usually adorned with some acknowledgement of the state of emergency in the supply chain, thereby pairing price gouging with shocks to production in a narrative that, at its most earnest, concludes that the only way to slay the monster is through a pragmatic package of price controls similar to those instituted during wartime.¹ Here too, the lead players remain the “policymakers,” foremost among them the technocrats at the Fed. In fact, both rightwing and leftist narratives have tended to portray the past decade or so of economic turmoil as something like a prestige drama focused the intrigues of financiers and central bankers.² Stephanie Kelton, former Chief Economist for the Senate Budget Committee and advisor to the Bernie Sanders campaign, does something similar in her recent bestseller popularizing “Modern Monetary Theory” (MMT), the gist of which is that all the legal and theoretical prerequisites are already in place for fiscal and financial authorities to pour money into social programs, if only they choose to.³ The result is that even many “socialists” have come to see the only way out of the crisis—that of inflation, certainly, but also the more general crises of economic stagnation and ecological catastrophe—as the mobilization of the Federal Reserve and the Treasury to “Fund a People’s Climate Revolution”⁴ or similar seemingly plausible programs pursued within the existing institutional environment. The strategy is to approach utopia through political compromise. But remove the embellishment and we find a more straightforward logic: The only thing that can stop a bad guy with a bank is a good guy with a bank.

The actual mechanics of inflation aren’t particularly difficult to trace at any given moment. Even if higher earnings and more expansive social spending may have contributed to the stagflationary wave of the 1970s (alongside high energy prices from the oil crisis), the idea that high wages or other forms of “excess demand” are always the primary engine of economy-wide inflation and, thereby, unemployment has long been disproven.⁵ It’s fairly clear that the most important proximate causes of the present inflationary wave are the supply chain shortages still echoing out from the pandemic and the disruption in global energy supply caused by the war in Ukraine—facts acknowledged by conventional macroeconomic think tanks⁶—both of which have triggered price increases that appear, initially, as rapidly rising profits. The “tight labor market” has been more of a bogeyman than a reality. Prior to the pandemic, the growth rate of real wages was modest, with wages increasing more slowly than the already-slow growth of GDP and inflation over the same years. Thus, while average earnings did climb slightly over the latter 2010s (before spiking suddenly in 2020 alongside the stimulus), the increase in profits over the same period far exceeded the growth in wages. On the one hand, the meager gains that accrue to workers through wage growth do tend, over time, to be clawed back by inflation, and this creates the sense that the profits wrought from inflated prices are not normal profits but instead a special sort of monopolistic “profit gouging.” At first, this hypothesis even seems to hold up to the evidence. After the spike in real earnings in 2020, there is then a second, equally sudden (and still rising) spike in the gross profits of non-financial corporations (see Figure 1). While workers’ real earnings had grown slightly from 2014 onward, total profits in the non-financial sector had been more or less constant from 2012 through 2020, when the pandemic caused a slight dip. After this, however, profits skyrocketed, rising in a single year by the same volume they had grown in the entire half-decade leading up to the Great Recession. Altogether, the increase in total corporate profits on its own can account for maybe half of the recent increase in costs, on average.⁷

The remainder can only be accounted for by the original proximate causes, which are essentially limits to production. But even saying that half of the current inflationary wave is driven by rising corporate profits risks suggesting that these increased profits are an outcome of monopolies’ unchecked ability to gouge prices in a fashion that is somehow less “fair” than normal methods of money-making. Ultimately, though, the spike in profits hasn’t simply been the result of greedy companies (even in extremely monopolized sectors such as oil) refusing to expand production despite an ability to do so and thereby “artificially” diminishing supply to raise prices. In many cases, sectors have been unable to profitably expand production due to these very supply-side problems. To take the most prominent example, the oil industry has so far chosen to raise prices on dwindling supplies rather than make increasingly uncertain bets on the ability of supply chains in necessary input sectors like steel and sand to deliver in adequate time and at adequate prices to guarantee that investments in expanded production will turn a profit.⁸ Overemphasizing the role of monopoly profits, then, uses a real disproportion in circulation to disguise the source of this disproportion within production. In other words, tracing out the mechanics behind the inflationary wave ultimately leads us back to the sphere of production, where the shocks of plague and war have simply accelerated longer-run structural trends spanning the global economy.

On the one hand, as economic historian Robert Brenner emphasizes, growth has long been premised on cycles of boom and bust where investment pours into particular asset classes—think subprime mortgages, tech stocks, or cryptocurrencies—inflating the price of those assets and thereby making new rounds of investment more likely in a self-reinforcing bubble, which ultimately ends in a crisis. These speculative cycles have become so central to growth that an entire institutional ecosystem has developed to tend to them, reshaping macroeconomic management into a sort of “asset price Keynesianism.”⁹ While this might seem unrelated to limits at the point of production, the phenomenon has been driven by falling profitability¹⁰ in the non-financial sectors of high-income countries, particularly within manufacturing.¹¹ When profitability declines, the rate of investment (especially “fixed” investment in things like plant and equipment) will also tend to decrease and capital will instead pour into whatever channels seem capable of guaranteeing greater returns. Over the past several decades, these have increasingly been sectors where returns are linked to inflating asset prices, which has also created pressure for more and more assets to be “financialized,” allowing them to be more easily traded and leveraged (increasing their “liquidity”) so that they can act like alternate forms of money, but with higher returns.

While the claim of falling industrial profitability in relationship to rising financialization is often associated with (strawman) Marxists making apocalyptic claims of imminent economic collapse, the basic trend is, in fact, such a widely acknowledged feature of our present economic landscape that it often merits no explicit mention. Not only is the core of the claim—the generally declining returns on investment, on average, across all lines of manufacturing—not exclusive to some imagined “heterodoxy,” it is essentially commonplace across the conventional economic literature, used to account for everything from globalization and offshoring to the growth of the service sector. Michael J. Howell, an economics PhD who works as the director of a large investment advisory firm, illustrates the basic relationship well: “falling industrial profitability and the associated structural shortage of safe assets are key factors behind the long downward slide in World interest rates.”¹² These low interest rates have encouraged inflationary spikes in high-liquidity sectors, which have kept relatively stagnant economic growth rates in high incomes countries from dropping further. But these financial sectors are not merely speculative activities divorced from production, since both the construction and maintenance of global supply chains “are highly finance-intensive activities that make heavy demands on both the working capital of firms and on supplies of short-term bank credit.”¹³ In other words, the decline of industrial profitability not only drives investment into speculative financial assets, but also drives increasing complexity in the technical characteristics of production itself—including mechanization and more meticulous divisions of labor within firms, but also a more refined and spatially dispersed division of labor between firms—which requires the mediation of ever-more-complex financial mechanisms.

On the other hand, intensifying industrial competition and more substantial economic slowdowns—all preceding the pandemic, but then amplified by it—in the handful of countries that buoyed the growth of the global economy over the past two decades (namely China) have led to a general retrenchment in the structure of supply chains and a plateauing of the growth of global trade. The “great trade collapse”¹⁴ triggered by the 2008 crisis was followed by the gradual “regionalization” of formerly “globalized” supply chains. These are, however, slight misnomers. The more central change has been the growth of consumer demand in the poorer countries, shaped by both the (now deflated) commodities bubble and the global process of “depeasantization,” ¹⁵ whereby the world’s remaining subsistence farmers and pastoralists have largely been forced into dependence on the market (regardless of whether urban industrial employment can support them).¹⁶ Combined with the sudden collapse in demand in the wealthy countries, supply chains that were once centered almost exclusively around exports to North America and Europe (during the heyday of “globalization”) were subtly rerouted and diversified over the course of the 2010s to include proliferating end markets in the “emerging economies,” giving production itself an increasingly regional character.¹⁷ Writ large, the trend is visible as a general stalling in the growth of global trade (see Figure 2).

Meanwhile, intensifying competition induced the further consolidation of firms across the board, including both the increasing monopolization of the (capital-intensive or asset-heavy) sectors that were already heavily consolidated and a new wave of monopolization within labor-intensive sectors. This has begun to fundamentally change the character of many formerly dispersed “sweatshop” industries, with emerging monopolies located in poorer countries now mechanizing and rationalizing more of their production lines to challenge the established monopsonies (big brands and retailers that control particular markets due to the scale of their purchases) and retain more of the ultimate profits lower in the value chain.¹⁸ These retained profits are then poured back into further acquisitions and expansions, often in emerging industrial zones in countries further down the imperial hierarchy.¹⁹ The process is also a fractal one, with consolidation occurring not only among the major contract manufacturers (for example, Taiwanese firm Foxconn, which assembles iPhones) but also among the sub-contractors (for example, mainland Chinese firm Lens Technology, which supplies the glass screens for iPhone production), narrowing profit margins and intensifying competition at every link in the chain. At the international level, this was accompanied by increasing geopolitical and trade competition between countries, with slowing growth in output and global trade making success and failure an increasingly zero-sum affair. Though it’s fashionable to blame the so-called “trade war” with China on Trump, the reality is that the same tensions had already been building throughout the Obama administration and have continued to intensify under Biden. Similarly, they are by no means exclusive to the US. Both Japan and the EU, for example, have also pursued increasingly aggressive stances toward China, as part of a more general increase in protectionist measures visible across the globe.

This does not mean, however, that global trade or economic integration has declined. Production is still planetary. Inflation, then, isn’t just a domestic policy problem that can be solved or perpetuated by central banks. In fact, not only is the emergence of US dollar inflation linked to the state of world supply chains, but attempts to restrain it are also amplified back through the global financial system. Since the dollar serves as the de facto global currency, tinkering with interest rates effectively revalues the cost of debt across the world economy, with the impact both narrowing and intensifying the further one gets from the Fed. In other words, it etches out the pattern of a lashing whip. A minor flick of the wrist—inching the interest rate up a few fractions of a percent—undulates out to the narrowest extremities of capital markets, where its impact cracks full-force against the lives of those tens of millions unlucky enough to have been born at the bottom of the world. Whether or not the bureaucrats believe themselves to be primarily tasked with managing a single national economy’s money supply is irrelevant. The consequences of their actions always whip outward, first destabilizing the poorest and most precarious countries where the growth boom itself had been only tenuous. Overnight, the cost of servicing debt increases. So too does the cost of inbound investment (which is usually²⁰ dollar-denominated). The more general decline in global growth also means that decreasing investment elsewhere suppresses demand for the few commodities (namely raw materials) that compose the bulk of poorer countries’ output.

The historical record here is salient: in response to the last inflationary crisis, Federal Reserve Chair Paul Volcker instigated a sharp rise in interest rates beginning in 1979 and peaking in 1981 (the “Volcker Shock”), intentionally marking up the cost of capital and triggering a recession. This is widely considered to be the decisive pivot signaling the movement from loosely “Keynesian” forms of macroeconomic management, which often included fiscal stimulus and took full employment (or something approximating it) as its goal, to the current Monetarist consensus, which instead mobilizes the central bank to manage the money supply with a preeminent focus on restraining inflation. But although the initial Volcker Shock was mainly designed to address the way that stagflation ate away at the assets owned by the wealthy in high-income countries, it also ended up precipitating²¹ the Third World Debt Crisis—an economic collapse so severe that many countries in Sub-Saharan Africa, for example, have still not recovered the levels of industrialization they had achieved on the eve of the crisis, with per capita incomes still lower today than their peak in the 1970s.²² Within the US (and the UK soon after), the interest rate adjustment also accelerated mass layoffs and factory closures, impacting unionized sectors the worst.²³ In other words, the last major interest rate intervention made in the name of tamping down inflation was a naked deployment of class power that underlined the centrality of US interests in the global economic hierarchy and forced workers in the high income countries to bear the costs of economic restructuring—offering only a limited palliative in the form of debt-financed consumption and homeownership—while the rich easily pivoted into new lines of business.

Profits

But if the results of such interest rate tweaks are not limited to one country, neither are the causes of the inflationary wave itself. While the proximate causes of today’s inflation appear²⁴ incidental and unpredictable—the outbreak of a plague, followed by a war—these factors only accelerated trends already in motion. In fact, after almost a decade of near-zero interest rates following the Great Recession, the Fed had first tried to raise interest rates in late 2018 as a preemptive measure to cut off prospective inflation from a tightening labor market and to prevent the potential emergence of new economic bubbles. But the decision was reversed when stock market prices plummeted, threatening to annihilate the modest “recovery” from the Great Recession that had been painstakingly built atop a speculative tech boom and the autophagic financial magic of stock buybacks. In response, the Fed made an equally decisive correction, dropping interest rates back to near-zero, where they sat until the first few months of 2022. It was this 2018/19 cycle that instigated popular interest in Modern Monetary Theory and triggered the current round of debates over the mandate of the Fed and the prospect of “democratizing finance.” More importantly, the attempt to raise rates as early as 2018 also signals that the opposite of our current inflationary moment—almost a decade of extremely low interest rates that deflated the cost of capital and thereby accelerated the growth of new asset bubbles—had proven increasingly untenable. In a strange way, then, the current inflationary crisis is actually an expression of a much deeper deflationary trend built into the very laws of motion of capitalism.

This deflationary trend is easily visible in one of the most fundamental features of capitalist production: the tendency toward mechanization. Competition drives the replacement of human labor with machines, allowing for more of a given good to be produced with less labor. This also stratifies the labor market, deskilling the labor that the majority of workers do even while increasing the complexity of skilled work. This enables management to both draw from cheaper pools of labor and exploit a whole new range of social divisions.²⁵ While early adopters of new technologies can make windfall profits selling an increased volume of goods at the prevailing price while paying far fewer workers-per-unit, the price of these goods will ultimately tend to fall as the new technologies are more widely adopted by other producers. Since this process occurs just as easily in consumer goods sectors as in capital goods, it also means that the effective price of labor can be cheapened even further, since workers can buy more essentials such as food, clothing, and various home-goods, without an equally large increase in the wage. While certain sectors (usually classed together as “services”) may be resistant to technical transformation, the long-run tendency across essentially all commodities should be for prices to fall if production is proceeding apace. This is essentially what has occurred throughout the consumer goods sector, with the emergence of mass production and, more recently, the logistics revolution that has enabled globalization cheapening clothing, cars, appliances, and a whole range of other products, making wage stagnation in the high-income countries more bearable while also amplifying the gains of rising wages in new industrial cores by muting the local price inflation that usually attends rapid industrial growth.

This means that, when inflation occurs outside the context of rapid industrial growth, it usually signals either some disproportion in circulation or some sort of problem within production limiting the supply of value in the first place. If confined to circulation, inflation is usually centered in a few sectors and has the classic character of an asset bubble, usually centered on some combination of real estate, stocks, or other private equities. Though it sounds counterintuitive, this sort of asset-price inflation can only really arise at scale in deflationary conditions (and tends to reinforce these deflationary conditions), since asset bubbles require high levels of debt and low interest rates. Sometimes, inflation confined to circulation can also take the form of classic monopoly pricing, where a cartel of major producers engages in price-gouging that directly affects only the commodities that they produce but often has indirect effects in related sectors; an example is the spike in oil prices in the 1970s, driven by the OPEC oil embargo. However, as noted above, windfall profits can also take this form for purely structural reasons, when inventories are sold off while production is constrained. In any case, these are all instances of inflationary islands within a deflationary sea.

Over the past thirty years, this kind of asset price inflation has grown increasingly dominant, driving the rapid increase in cross-border flows of liquidity and changing the very shape of the global economy to prioritize “carry trades,” where (to simplify) debt is taken out in currencies with a low interest rate and used to invest in other higher-yielding currencies or assets. Also crucial here is the fact that, according to Brenner, the relative competitiveness of different currencies—with a “weaker” currency effectively cheapening production costs and thereby making a country’s manufacturing industries more competitive in the global market—also structures the global hierarchy of production. Areas with rapid industrial growth therefore see inflationary pressure (enabling rising wages) that simultaneously attracts both investment in the growing productive sector and purely speculative portfolio investment that exploits the yield differential—with the volume of capital flowing into speculative assets often outgrowing that flowing into traditional FDI, further suppressing the competitiveness of manufacturing and inflating an asset bubble atop declining industrial profits. The classic example is Japanese development in the latter half of the twentieth century.²⁶ The phenomenon is, again, not at all foreign to conventional economics. Brenner’s basic boom-and-bubble narrative is echoed by Tim Lee, Jamie Lee and Kevin Coldiron—all current or former managers at hedge funds and other private equity firms—who argue that these dynamics ultimately result in the emergence of a global “carry regime” attuned to maintaining high asset prices and defined by a “sawtooth return pattern” in which the relatively smooth increase in returns from inflating assets is periodically punctuated by “short periods of sharply negative returns—carry corrections or crashes.”²⁷ Similarly, social scientists Lisa Adkins, Melinda Cooper, and Martijn Konings describe the same scenario as the creation of an “asset economy,” defined by the fact that assets appreciate at a faster rate than either growth or wages, creating an entirely new landscape of inequality tied less to wages or returns on productive investment and more on access to flows of rent.²⁸

The emergence of this “carry regime” or “asset economy” is often narrated as a change triggered by a constellation of “neoliberal” state policies designed to favor the interests of the wealthy at the expense of workers, epitomized by the Reagan regime in the US and that of Thatcher in the UK. Since the Volcker Shock is often considered the inaugural act in the neoliberal offensive (followed by similar uses of high interest rates to discipline labor elsewhere), the contrast between a “Keynesian” period of high public spending, high wages, and high inflation to a “Neoliberal” period in which all three are reversed seems, on the surface, to be obvious. Similarly, it is evident that finance became more central to the international economy over the same period, producing both a stark rise in global liquidity and the proliferation of myriad financial instruments. As profitability stagnated in the “deindustrializing” countries of the core, finance, insurance, and real estate (alongside bubbles in tech stocks and the odd oil boom) became the only sectors capable of buoying already-modest growth rates. In such accounts, structural dynamics are often acknowledged as constraints or inertial forces, but the ultimate responsibility again lies with “policy makers,” who are essentially selecting between two possible worlds: a) the Keynesian world of “deflationary inflation,”²⁹ where asset prices depreciate but (the hope is) wage growth and public spending accelerate at a faster pace, allowing for full employment to be approximated at the expense of capital gains; or b) the Neoliberal world of inflationary deflation, where asset prices appreciate faster than wages or general economic growth and public spending is suppressed, allowing for capital gains to skyrocket at the expense of labor income.

In this scheme, the trend of economy-wide inflation tracks the passage between the two worlds. If the deflationary success of the Volcker Shock ripped open the policy portal leading from the Keynesian to the Neoliberal universe, then some sort of inflationary shock must be necessary to open the door to the “democratic socialist” future of full employment and “public finance for the people.” This would necessarily entail the end of the asset economy and the inversion of the carry regime. But what, exactly, would this look like? According to the hedge fund managers, “the absolute end of the carry regime is likely to be marked by either systemic collapse that ends the dominant role of central banks or galloping inflation—or both.”³⁰ The two options here are also interconnected, since the very attempt to stave off systemic collapse—maybe marked by an “exogenous” shock such as a pandemic, a war, a large popular uprising, or a series of ecological catastrophes—would likely induce inflation due to increased spending in the midst of economic shutdowns, with the effects cascading through supply chains well after the immediate crisis was over. For example, to prevent a deflationary collapse, “one extreme measure would likely be the direct monetization of government spending: sending checks to every family or individual […]”³¹ Not only is this exactly what happened in the years of the pandemic, but it also describes the basic thrust of the Universal Basic Income plans proposed by many progressives and democratic socialists today.³² Ultimately, the hedge fund managers conclude that a range of interventions by the Fed and Treasury would be able to stave off systemic collapse. This leaves us with the other alternative, wherein “the carry regime will be ended finally by high inflation” and, thus, “from a macro perspective […] an important sign that the carry regime is ending would be the emergence of inflation itself.”³³ Inflation is most likely to emerge gradually, accompanied by increasing financial volatility. However, “once high inflation is entrenched”³⁴ and no longer responsive to central bank policy, it is hard to see how the carry regime could continue to sustain itself.

Meanwhile, the broad strokes of the hypothetical “anti-carry regime” that could emerge in the aftermath are also loosely predictable, since they’re just the opposite of the regime currently in place: high general inflation, the depreciation of assets, the “receding importance of financial markets,”³⁵ sharp growth in the real money supply³⁶ (driven by stimulus and even direct money printing, but also by expanding demand for bank credit, since debt burdens would cheapen over time), crises marked by inflation spiraling out of control (rather than the rapid deflation that etches the “sawtooth pattern” of a carry crash) and a collapse in the demand for both “money-like” assets and even true money despite the growth in the money supply (since inflation ensures that holding cash will, over the long-term, result in losses). At the international level, such a regime would likely be marked by declining global liquidity, the fragmenting of global trade, increasing conflict between currency blocs competing in the space left by a declining dollar, and new inflationary crises blossoming across the world, most likely consuming the weakest economies first.

In the end, the inflationary alternative to the present world would seem to be little better than the current one. This is because two are not, in fact, separate worlds, but merely the two hemispheres of a single spinning planet. While the sun may gradually set on one and rise in the other, the empire of capital is always bathed in light. Fashionable academic discussions about the “death of neoliberalism” therefore add little, if any, insight beyond the trite observation that the sun sometimes sets. Meanwhile, it seems likely that an inflationary world will combine the worst features of the present with the grimmest prospects on the horizon: high inflation alongside high inequality, stagnant growth alongside stagnant wages, trade wars and forever wars side by side. As might be expected, the hedge fund managers at least offer a blunt diagnosis, stressing the reality of class power regardless of which door we might want “policy makers” to pry open: “From the point of view of society as a whole, and not merely financial speculators, both the carry regime and the hypothetical anti-carry regime will have the feature that those with the greatest resources will be the winners.”³⁷

Power

Ultimately, though, the point is not to scour the dark hills for undiscovered monsters. There is no “true” cause of inflation lurking beneath the wage-push theory or the appeal to corporate greed. Inflation and deflation are epiphenomenal price trends which, large or small, are akin to tides and waves undulating across the surface of the great sea of our total planetary productive power—what Marx called value—as it is actually organized by the social relationships spanning the human species. What we think of as “policy” must ultimately accord with the demands of planetary production. Policy is therefore a discussion over the terms of the hostage situation that is the economy, not a way to end it. In other words, the entire process of making policy occurs within the bounds of a rigged game, with both inflationary and deflationary spirals—or simply “economic crisis” in general—marking moments when the basic relationship of power built into the game must be reasserted. This is a constant reshuffling, in which the “countervailing tendencies” holding back the fall of profitability enable the reproduction of the same basic relationships that structure capitalist society through the continual reinvention of these relationships. Though this process seems to constantly generate new “varieties of capitalism” (whether divided by decade or branching at national borders), little actually changes.³⁸

There is only and has only ever been a single capitalist society. The long-run expansion and development of this society changes the conditions in which it must survive, but without changing its basic laws of motion. New institutional arrangements, new geographic centers, the emergence of new technologies—these are all, in the end, adaptive reiterations of those same laws. Incidental variation must be distinguished from the more essential changes induced by the motion of these invariant laws across time and space. The latter are only traceable in the secular tendencies visible over the long-run: the constantly increasing scale, complexity and geographic extent of production (accompanied by more intricate state intervention, larger monopolies, more complex supply chains requiring more detailed coordination, the intensification of production’s geomorphological impact, the penetration of market logic into new realms of life, etc.); the growing ability to produce more goods with less labor and the subsequent tendency to exclude larger shares of the human population from productive activity (Marx understood the former as the main means for expanding relative surplus value, of which the latter is a consequence, constituting the “general law of capitalist accumulation” that appears today as a rise in “informality,” “precarity,” and the “service economy”); and the opening of a larger and larger rift between the matter and energy requirements of the planetary production complex and the matter and energy cycles that compose the Earth system (most obvious today in the form of climate change, but better understood as a more general ecological catastrophe spanning mass extinction, deforestation, the gradual exhaustion of soil systems, etc.). These secular tendencies also shape and reshape the most invariant feature of capitalist society—class conflict—constantly recalibrating the prospects of revolutionary change.

Breakdowns in the price system, whether inflationary or deflationary, thereby carry two seemingly opposed implications. Viewed from the perspective of the system’s reproduction, they are both methods of reasserting stability and moments when all the silent compulsions that structure capitalist society become temporarily audible. Despite all the technical debates about the mechanics of inflation and interest, or the meager hopes that policy might be used for “the people,” macroeconomic management is and always will be nothing more than a knife at your throat. The interest rate ticks up and inflation eats away the rise in your wage. The interest rate ticks down and bubbling asset prices hike rents, keeping homeownership always just beyond your reach. In this moment, we’ve been blessed with the worst of both worlds. High asset prices have remained high even while the cost of food and gas continued to climb. The effects are undeniable, with the most egregious examples visible at the opposite edges of the class divide. As of 2021, the richest 10 percent of the world population owned 76 percent of all wealth, compared to a mere 2 percent held by the bottom half of the population.³⁹ This wealth inequality not only widened rapidly during the pandemic, but also saw the fastest increase in wealth concentrated at the very top: in the same year, roughly 11 percent of all wealth was held by just .01 percent of the population, an increase of a full percentage from the year prior,⁴⁰ with the (roughly 2,775) billionaires⁴¹ in the world seeing their share increase from 2 percent in 2020 to 3.5 percent in 2021 and the total growth in their wealth amounting to some 4.4 trillion dollars. Meanwhile, over 120 million people had been pushed into extreme poverty, nearly wiping out an entire decade of (modest) income gains among the world’s poorest.⁴² This is the context in which the current inflationary burst began.

While these trends are, as always, most extreme when measured at the global level, this does not mean that those in the wealthiest countries have been immune from the impact. The class divide is a faultline that cuts below and beyond every border. On the eve of the pandemic, the only systematic census of the US homeless population—the HUD’s annual “Point-in-Time” (PIT) count, widely acknowledged to be a substantial underestimate⁴³ of the true number, designed to measure the minimum of the range rather than the central tendency—counted a total of 580,466 homeless people across the country, roughly 61 percent of whom had access to homeless shelters, with the remainder unsheltered.⁴⁴ The highest per capita rates were seen in cities with the highest property prices.⁴⁵ This link between asset inflation and homelessness should come as no surprise. According to one recent study, across twenty of the largest urban centers the country “a one hundred dollar increase in median rental price was associated with about a ninepercent increase in the estimated homelessness rate.”⁴⁶ More rigorous population counts⁴⁷ conducted by local authorities in these places indicate that as many as 1-3 percent of the total population are homeless, with many of these states⁴⁸ also seeing substantially higher shares of unsheltered population, alongside higher rates of homelessness in both suburban and rural areas. After the outbreak of the pandemic, however, two things happened: first, in an attempt to implement social distancing measures many shelters cut their total number of beds and pivoted into alternative service schemes; and second, in 2021 HUD simply canceled the count of the unsheltered population entirely. This decision was made despite their own data showing that the total number of unsheltered individuals had been rising faster than the total sheltered even prior to the pandemic.⁴⁹

This homelessness crisis, inextricably linked to asset inflation, has now been accompanied by a growing crisis in other subsistence goods as inflation spreads to fuel and food. Thus, the pandemic and subsequent inflationary burst also saw a stark increase in both survival crimes—such as shoplifting food or baby formula—and the more speculative spread of black-market commerce, such as the resale of siphoned gas or the trade in stolen catalytic converters. The popular press blames the entirety of this rising criminality on the homeless. But when rising costs make the conditions of life untenable, more and more people will find alternative ways to glean the means of their survival. These alternatives should not be romanticized, nor should they be seen as somehow escaping the bounds of the capitalist world. They are instead grim options of last resort, often operating within a nexus of secondhand predation controlled by a different order of black-market capitalists. The result is usually tragedy—the slow reactionary suicides of the dispossessed preying on the slightly-less-dispossessed in an unfolding fractal of backstabbing. But these widening rifts in the status quo also reveal the potential for new modes of proletarian power to emerge if the different battles for subsistence can be superseded and synthesized within a greater struggle. Similarly, the most hopeful aspect of any breakdown in the price system is the return of the specter of expropriation, the most distinctive feature of communist political practice.

On their own, both illegality and the various forms of self-consciously political organizing—ranging from “autonomous” activities such as mutual aid to the institutional projects of formal trade unionism or policy advocacy—tend to remain segregated from one another and from the population at large, with each form romanticized by some political faction within the broad but shallow “Left.” Kept separate, these activities are not only weak, but often actively undercut each other. If we take a more expansive view, however, the potential to build communist power is just as visible in the increasing popular interest in unionization as in the semi-improvised, semi-organized looting networks that developed through the George Floyd uprising. After all, class struggle is always reborn in battles over the terms of subsistence. But it also quickly withers if confined to merely negotiating the conditions of survival. It only grows into something more when the walls dividing the various channels of subsistence are broken down. If we were to choose a single principle according to which communists might orient themselves and appraise the success or failure of their various efforts, it might be something like this: small expropriations must grow into large ones. In other words, true communist combines can only emerge when the rudimentary forms of organization gestated in these sequestered subsistence struggles evolve beyond their initial bounds, shattering the separation that prevails between the different political paths—illegality vs. legality, policy vs. autonomy—and thereby also spanning the divides between the dispossessed. Obviously, this is not possible when struggle remains solely subcultural, nor when it is pursued purely within existing institutions. The first principle therefore implies an ancillary one: any political strategy that tries to sidestep, deny, or flee from the necessity of expropriation is not communist in character.

In all likelihood, the current inflationary burst will recede. Inflation will not immediately become entrenched and the current supply chain obstructions will be smoothed out. In the US, the CPI is already trending slightly downward, and the Fed has hinted that the next round of rate increases may be followed by declines in 2023. While it’s likely that areas more directly affected by the ongoing energy shocks due to the war in Ukraine will have greater difficulty reversing the trend—this is evident in the vast declines in real wages across Europe, for instance, and the prospect there of a cold, dark winter—there does not yet seem to be the political will to fully deflate the asset bubbles propping up the (slow, but not insubstantial) growth rates of the high-income countries. As protectionism, the regionalization of supply chains, the growing monopoly power of contract manufacturers, and widening political sanctions all continue to mute growth in world trade and further segment capital markets, however, the risk of new inflationary bursts only grows. Similarly, cascading ecological catastrophes and other seemingly “exogenous” shocks are becoming monthly affairs. Just as the CPI began to decline from its summer peak, for example, Pakistan suffered devastating floods that placed a third of the country underwater, displaced millions of people and destroyed millions of acres of cropland—likely to impact world prices for wheat, cotton, and possibly rice. On the one hand, then, the current carry regime is already exhibiting diminished returns and the extreme levels of inequality visible in the world’s wealthiest cities and between the richest and poorest countries are making its continuation increasingly unpalatable. On the other, the deflationary carry crashes that have marked the last thirty years will now be accompanied by more frequent inflationary crises linked to the slow fragmentation of trade and production.

In the extreme, this fragmentation will take the character of aggressive mercantilist policies aimed at catalyzing industrial competitiveness (such as those currently being pursued in India) or even the cartelization of crucial commodities sectors (oil on one side and lithium on the other) possibly combined with the (always partial) political delinking of entire national economies (the acute example being Russia, though Brexit illustrates a milder case of the same basic trajectory). The realities of climate change will, meanwhile, see such policies justified in terms of resilience, each region rendered as a green fortress that must, for its very survival, erect walls against the rising tide of climate refugees, secure its own sovereign sources of energy and food, and tend to the growing police and military infrastructures deemed necessary to survive in the face of domestic unrest and foreign threats. These trends will only drive further overcapacity in core industries, pressing down global growth even if they succeed in raising growth rates for the few winners in the zero-sum game. As it has in the past, renewed geopolitical jostling within the imperial hierarchy will again take the form of a righteous struggle by the countries forced to occupy lower positions in the great pyramid of siphoned surplus value. In the name of development, they will utilize allegedly “socialist” methods such as state planning and subsidization of key industries⁵⁰ to assert the ascendance of their national ruling classes against the decaying imperium. In such a moment, the divides between the dispossessed deepen at both the domestic and international scales. Communist power is built by breaking down such divides, refusing to stay sequestered within subsistence struggles or to take sides when a lesser imperial power challenges a greater one, instead constructing subterranean infrastructures that integrate the illegal and legal, the autonomous and the institutional, and connect the “national” proletarian forces on all sides of every warring border under the banner of ever-grander expropriations, thereby superseding all such categories in a broader conception of political power—and maybe, just maybe, wresting the knife from our throat to wield it against the blood-fattened bastards who own every inch of this dying world.

1. Meg Jacobs and Isabella M. Weber, “The way to fight inflation without rising interest rates and a recession”, The Washington Post, 9 August 2022. https://www.washingtonpost.com/made-by-history/2022/08/09/way-fight-inflation-without-rising-interest-rates-recession; Richard D. Wolff, “There are Better Ways for Societies to Address Inflation Than by Hiking Interest Rates”, Richard D. Wolff, 8 June 2022. https://www.rdwolff.com/there_are_better_ways_for_societies_to_address_inflation_than_by_hiking_interest_rates
   
2. There is probably no more important figure in this regard than Adam Tooze, an economic historian whose journalistic accounts of the decision-making process of financial barons and central bankers stands in stark contrast to the seemingly cold, impersonal theories of boom and bust bubbles offered by Marxist economic historians like Robert Brenner, who provided one of the best known and most systematic accounts of the coming crisis of 2008 in the years leading up to its outbreak. In its aftermath, Brenner’s work thereby became a sort of touchstone for many involved in the revival of communist theory throughout the 2010s. Tooze, by contrast, represents a latter-day liberal rewriting of the incisive accounts of Marxist critics like Brenner, acknowledging all the same major features and adding enlightening, eclectic, and empirical detail tied together by artful storytelling. But Tooze’s eclecticism, while admirable in its polymathic breadth, is also the signal of a deeper weakness: the inability to offer (or, maybe more fairly, theoretical opposition to) any systematic, structural explanation of the world economy’s “laws of motion” capable of accounting for more than the story it is currently telling. This weakness is itself treated like a badge of honor in the classic fashion of liberal philosophers—whether pragmatist or postmodernist—who reject “totalizing” narratives as dangerously reductive and inherently authoritarian. But the underlying maneuver here is political. Recent economic history is retold in a way that obscures the operation of capitalism as a social system, reducing the ins and outs of the global economy to the (invariably complex) interplay of the various personages who helm the institutions that (the story would have us believe) run the economy.
   
3. Stephanie Kelton, The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy, New York: Public Affairs, 2020.
   
4. This is the title of an actual strategy document put forward within the DSA’s internal theoretical journal: Neil Taylor, “How to Fund a People’s Climate Revolution”, Socialist Forum, Winter 2019. https://socialistforum.dsausa.org/issues/winter-2019/how-to-fund-a-peoples-climate-revolution/
   
5. Joseph Politano, “The Life, Death and Zombification of the Phillips Curve”, Apricitas Economics, 16 October, 2021. https://www.apricitas.io/p/the-life-death-and-zombification?s=r; Ekaterina V. Peneva and Jeremy B. Rudd, “The Passthrough of Labor Costs to Price Inflation”, Journal of Money, Credit and Banking, Volume 49, Issue 8, 16 November 2017. pp. 1777-1802.
   
6. Alan FitzGerald, Krzysztof Kwiatkowski, Vivien Singer and Sven Smit, “Global Economics Intelligence executive summary, April 2022”, McKinsey & Company, 9 May 2022. https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/global-economics-intelligence-executive-summary-april-2022
   
7. This estimate is based on an overview of several studies examining the contribution of various factors to the recent inflationary wave. For example: Josh Bivens, “Corporate profits have contributed disproportionately to inflation. How should policymakers respond?”, Economic Policy Institute, 21 April 2022. https://www.epi.org/blog/corporate-profits-have-contributed-disproportionately-to-inflation-how-should-policymakers-respond/; Celasun Oya, Niels-Jakob H Hansen, Aiko Mineshima, Mariano Spector and Jing Zhou, “Supply Bottlenecks: Where, Why, How Much, and What Next?”, International Monetary Fund, 17 February 2022. https://www.imf.org/en/Publications/WP/Issues/2022/02/15/Supply-Bottlenecks-Where-Why-How-Much-and-What-Next-513188?cid=em-COM-123-44313
   
8. Dan Eberhart, “Supply Chain Woes, Inflation Crimp U.S. Producers’ Growth Potential”, Forbes, 2 April 2022. https://www.forbes.com/sites/daneberhart/2022/04/02/supply-chain-woes-inflation-crimp-us-producers-growth-potential/?sh=6ba4b7d0505d
   
9. Brenner, The Economics of Global Turbulence: The Advanced Capitalist
   
10. Profitability is measured as a rate, usually the rate of profit or rate of return, not to be confused with the mass of gross profits discussed above. It’s perfectly possible (in fact, quite normal) for total profits to increase even as the rate of return on investments declines.
    
11. Robert Brenner, The Boom and the Bubble: The US in the World Economy, New York: Verso, 2003.
    
12. Michael J. Howell, Capital Wars: The Rise of Global Liquidity, New York: Palgrave Macmillan, 2020. p.46
    
13. ibid, p.146
    
14. Richard Baldwin, “The great trade collapse: What caused it and what does it mean?”, in Richard Baldwin (Ed.), The Great Trade Collapse: Causes, Consequences and Prospects, London: Center for Economic Policy Research. pp. 1-14. https://cepr.org/voxeu/columns/great-trade-collapse-what-caused-it-and-what-does-it-mean
    
15. Farshad Araghi, “Global Depeasantization, 1945-1990”, The Sociological Quarterly, 36(2), 1995. pp. 337–368.
    
16. For more detail on the consequences of the process and its linkages to larger-scale changes in planetary food production, see: Nathan Eisenberg, “Hunger Regime”, Cosmonaut, 2 January 2022. https://cosmonautmag.com/2022/01/hunger-regime/#easy-footnote-bottom-158-5445
    
17. Gary Gereffi, “Global Value Chains in a Post-Washington Consensus World”, Global Value Chains and Development: Redefining the Contours of 21^st Century Capitalism. Cambridge: Cambridge University Press, 2018. pp.400-428.
    
18. Ashok Kumar, Monopsony Capitalism: Power and Production in the Twilight of the Sweatshop Age, Cambridge: Cambridge University Press, 2020.
    
19. I document some of the political outcomes of these trends in: Phil A. Neel, “Swoosh”, Ultra, 8 November, 2015. http://www.ultra-com.org/project/swoosh/
    
20. According to Howell (2020, p.142), about 70-80% of trade in “emerging market economies” is invoiced in US dollars, despite only 10-15% of this trade being with the US.
    
21. Walden Bello, “The capitalist conjuncture: over-accumulation, financial crises, and the retreat from globalization”, Third World Quarterly, Volume 27, Number 8, 2006. pp.1345-1367.
    
22. Pádraig Carmody, Peter Kragelund and Ricardo Reboredo, Africa’s Shadow Rise: China and the Mirage of African Economic Development, London: ZED, 2020.
    
23. Samir Sonti, “The World Paul Volcker Made”, Jacobin, 20 December, 2018. https://jacobin.com/2018/12/paul-volcker-federal-reserve-central-bank
    
24. Of course they are nothing of the sort. War is an extreme form of market conflict structured by global imperial inequities, and intensifying pandemics are an outcome of capitalist production’s agroecological devastation, as documented in: Chuang, “Social Contagion: Microbiological Class War in China”, Social Contagion, Chicago: Charles Kerr, 2021. https://chuangcn.org/books/social-contagion/ch1/
    
25. The classic study of this phenomenon is: Harry Braverman, Labor and Monopoly Capital: The Degradation of Work in the Twentieth Century, New York: Monthly Review Press, 1974.
    
26. The Japanese case is one of several explored in Brenner 2003. For a detailed exploration of the Japanese case on its own, see: Makoto Itoh, The World Economic Crisis and Japanese Capitalism, London: The MacMillan Press, 1990.
    
27. Tim Lee, Jamie Lee and Kevin Coldiron, The Rise of Carry: The Dangerous Consequences of Volatility Suppression and the New Financial Order of Decaying Growth and Recurring Crises, New York: McGraw-Hill, 2020. p.4
    
28. Lisa Adkins, Melinda Cooper, and Martijn Konings, The Asset Economy, Cambridge: Polity, 2020.
    
29. This term comes from Paul Mattick’s description of Keynesian theory and the stagflationary crisis of the 1970s, in: “Deflationary Inflation,” Economics and the Age of Inflation, New York: M.E. Sharpe, 1978.
    
30. Lee, Lee and Coldiron, 2020. p.210
    
31. Ibid, p.213.
    
32. For a critical overview of these plans that documents their increasing popularity, see: Alyssa Battistoni, “The False Promise of Universal Basic Income”, Dissent, Spring 2017. https://www.dissentmagazine.org/article/false-promise-universal-basic-income-andy-stern-ruger-bregman
    
33. ibid, p.214
    
34. 34.
35. ibid, p.165
    
36. The money supply is divided into several distinct and nested measurements. The most basic measurement is M0, which includes physical money and central bank reserves. Money-printing by the Treasury and certain forms of central bank stimulus can increase M0. But a broader and more commonly used measurement is M1, which includes M0 plus demand deposits (money held in bank accounts that can be withdrawn at will) and travelers’ cheques. M1 is significant not only because most money today is held in bank accounts rather than in hard cash, but also because banks effectively create money by loaning out excess reserves. Thus, M1 can grow not only through money-printing and other forms of fiscal stimulus, but also through expanded bank credit.
    
37. ibid, p.173
    
38. The idea of “varieties of capitalism” has been central to the recent revival in (self-described) “political economy” research within the social sciences. The concept was originally laid out in: Peter A. Hall and David Soskice, Varieties of Capitalism: The Institutional Foundations of Comparative Advantage, Oxford: Oxford University Press, 2001.
    
39. According to the 2022 World Inequality Report produced by the World Inequality Lab: https://wir2022.wid.world
    
40. ibid
    
41. As measured by the Forbes Billionaires List for 2021.
    
42. Fracisco H. G. Ferreira, “Inequality in the time of COVID-19”, International Monetary Fund, Summer 2021. https://www.imf.org/external/pubs/ft/fandd/2021/06/inequality-and-covid-19-ferreira.htm
    
43. In many counties, local governments conduct their own, more rigorous, estimates of homeless population, which almost always exceed their HUD-mandated PIT Counts, often substantially. For example, in 2020, the PIT Count conducted by the Regional Homeless Authority in King County, WA, only recorded 13,368 homeless, while a second, more rigorous survey by the same agency recorded 40,800 homeless (almost 2% of the total county population in the same year). See: Greg Kim, “How many homeless people are in King County? Depends on who you ask,” The Seattle Times, 4 July, 2022. https://www.seattletimes.com/seattle-news/homeless/how-many-homeless-people-are-in-king-county-depends-who-you-ask
    
44. Meghan Henry, Tanya de Sousa, Caroline Roddey, Swati Gayen, and Thomas Joe Bednar, “The 2020 Annual Homeless Assessment Report (HAR) to Congress”, The U.S. Department of Housing and Urban Development, January 2021. https://www.huduser.gov/portal/sites/default/files/pdf/2020-AHAR-Part-1.pdf
    
45. Gregg Colburn and Clayton Page Aldern, Homelessness is a Housing Problem: How Structural Patterns Explain U.S. Patterns, Oakland: University of California Press, 2022.
    
46. GAO, “Homelessness: Better HUD Oversight of Data Collection Could Improve Estimates of Homeless Population”, United States Government Accountability Office, July 2020. https://www.gao.gov/assets/gao-20-433.pdf
    
47. See Kim 2022, above, for a comparison conducted in King County, WA. For a more detailed breakdown of the problem with the PIT count in New York, widely held up as the gold standard for the method, see: Ricci Dipshan, “How Many Street Homeless? NYC’s Tallies Leave the Question Open”, CityLimits, 13 October 2015. https://citylimits.org/2015/10/13/how-many-street-homeless-nycs-tallies-leave-the-question-open/
    
48. Total homelessness is highest in the most expensive urban coastal areas, raising the rates for all the West Coast states as well as those in the Northeast Corridor. Unsheltered homelessness is highest, for the most part, in the Western States, with California leading in almost all measures. By contrast, New York City continues to have a high number of total homeless, but aggressive efforts to expand shelters over the course of the 2010s mean that the unsheltered population was substantially lower than cities on the West Coast as of the last pre-pandemic count. Even in New York, however, the pandemic seems to have clearly increased the number of people living on the street, leading to a new series of aggressive street sweeps in the first term of mayor Eric Adams.
    
49. Meghan Henry, Tanya de Sousa, Colette Tano, Nathaniel Dick, Rhaia Hull, Meghan Shea, Tori Morris, and Sean
    
50. All countries within capitalist society use these methods to differing degrees and are therefore “mixed economies” in the terms of conventional economics. Industrial planning, aggressive subsidization, and intense control over trade competition and capital markets have always been particularly pronounced among “late developers” attempting to instigate rapid industrial booms. When these countries use such policies, it is common for them to be erroneously portrayed as having adopted a form of “state capitalism” (or even “socialism”) that is distinct from “true” capitalism. For a good historical overview of the phenomenon, see: Ernest Ming-tak Leung, “Developmentalisms: The forgotten ancestors of East Asian developmentalism”, Phenomenal World, 18 September 2021. https://www.phenomenalworld.org/analysis/developmentalisms/