Twenty twenty-two was the year of the central bankers. As inflation has continued to dominate discussions of world politics, these unelected mandarins have moved to centre stage. Their monthly proclamations on interest rates are observed by all, from the most desperate mortgagees to the captains of industry. Every word and phrase is obsessively analysed by those hoping to find meaning (and profits) in their sermons.
The reason for this almost comic obsession is that 2022 was a terrible year for investors. In a recent piece summing up the year, the Financial Times explained the scale of the catastrophe, sometimes described as a “richcession”:
Long-term US government bonds staged the biggest drop since 1788. Investors’ classic blend of bonds and equities has put in the worst performance since 1932. At its lowest point this year, the S&P 500 index had shed $11tn in market capitalisation… that is similar to the entire annual economic output of Germany, Japan and Canada combined.
The high priests of capitalism have clearly decided that it is worth sacrificing these unimaginable sums to stop inflation. Why do they care so much? Partly, as Ben Hillier outlined in a piece for Red Flag, inflation hurts lenders – especially the big banks – by reducing the value of the debt owed. Bankers aren’t the types to suffer in silence, so they’re engineering a global recession to protect their profit margins. This argument assumes that the banking sector has an overwhelmingly dominant sway over the fundamental settings of the world economy, but the aftermath of the 2008 crisis proved that this is not the case.
The ruling class has more fundamental problems with consistently high levels of inflation. For one thing, it is hard for institutions to make sensible investment decisions when assumptions about future prices, costs and returns are so unreliable. If currency exchanges, commodity prices and debt markets all rely on the value of money being relatively stable, so too do decisions made about expanding the productive capacity of the real economy. While some bosses will find ways to make profits in any scenario, the overall health of the system is inevitably compromised by a sustained period of inflation.
Higher inflation also has social and political ramifications. A sharp rise in the cost of living discredits the ruling class generally, and the ruling political party in particular, by exposing their inability to shield workers and the poor from the vicissitudes of the market. At the same time, the scrutiny that central banks are subjected to in these times peels back some of the mystery that surrounds economic policy and the choices that are made to shape it in particular ways. This can be partially ameliorated by the propaganda defending the need to reduce workers’ wages and spending, but there are always plenty who will reject such an argument, if only out of righteous self-interest. The most important consequence of rising inflation is the possibility of a more bitter round of class struggle. When the currency is relatively stable workers’ living standards can improve steadily, even as wages stagnate amid soaring profits. But inflation means social struggle becomes necessary just to hold ground, let alone go forward.
If investors were initially the biggest victims of the new era of higher inflation and interest rates, then that would be just fine. Nobody at the Marxist Left Review is shedding any tears for these parasites. But there is another side to the crisis. Workers across the world are seeing their real incomes squeezed as wages fall relative to the price of goods and services. In November the International Labor Organization released a report on workers’ wages that estimated that global monthly wages fell by 0.9 percent in the first half of 2022 alone: the first time this century that real global wage growth has been negative. The situation is worse in the US, where real weekly earnings for 106 million production and non-supervisory employees – the closest statistical proxy for the working class that exists there – is down by 2 percent since last December, which in turn was down by 2 percent from the December before that. In the EU and Eastern Europe, real wages fell by 2.4 and 3.2 percent in the first half of 2022. In Australia, real wages were down by 3.5 percent in the year to June, bringing wages down to levels last seen in 2011. This is class war of the most raw kind.
Rising prices are causing disproportionate pain for low-income workers, who spend more of their income on essentials. The situation is particularly acute for workers and the poor in the global south. There the UN estimates that the combination of COVID and inflation will have increased the number of people living in extreme poverty by 75 million compared to pre-pandemic forecasts. While workers in the global south suffered more during the first year of the pandemic than in the last two years, wage growth there remains weak, and in many cases is falling. But even in the advanced capitalist world there are widespread reports of supermarket shoppers cutting spending on unnecessary goods and shifting to cheaper options.
Of course, the situation remains highly fluid. It is possible that inflation will now fall steadily. Central bankers are currently planning to continue increasing rates for some time, and then to hold them higher for longer. If they stick to that approach, the pressure on the financial system will continue to grow, especially on leveraged investors, zombie companies and indebted nations in the global south. Profit rates will fall, unemployment will grow and a subsequent recession could be quite deep. Others are betting that central banks will begin easing interest rates sooner rather than later. The main rationale for this argument is that debt levels are at historic heights across the economy, and that the financial elite will forsake the cleansing destruction of a crisis in favour of another round of stimulus and kicking the can down the road. Time will tell which road the ruling class chooses to take, with each presenting its own dangers.
The economic data published so far in 2023 point to some kind of global recession, but it would be premature to make predictions. There is a huge number of variables, including the development of the war in Ukraine, whether China’s economy can grow, shifts in monetary policy, further geopolitical instability, and more. But regardless of how the immediate situation develops, the war on workers will continue.
Despite the harsh attacks on workers’ living standards, there is still no sign of a generalised response, either industrial or political. How to explain the lag? Decades of class war from above have devastated trade unions and essentially pulverised the radical left, leaving most workplaces bereft of agitators and organisers, let alone democratic institutions of coordination and struggle. Another factor is that living standards, in the advanced capitalist world at least, are yet to fall as drastically as headline inflation figures would suggest. Partly this is because many workers accumulated substantial savings during the pandemic, which are yet to be fully exhausted. As well, unemployment remains at historic lows, which provides a double buffer. Firstly, it means there are opportunities for extra overtime, internal promotions and second jobs. Secondly, it means that the pain is distributed relatively evenly: there is not yet a section of the core working class that is being acutely impoverished by job losses or industry restructuring. So while fears and insecurities about the future abound, the mass of people are yet to feel the crushing burden of unemployment and economic ruin. The final and most intangible factor is the impact of the pandemic. Lockdowns were disorienting and politically pacifying, but so too has been the reopening, with most prepared to wear the heightened risks of sickness, long COVID and death in order to take advantage of the freedom to consume and travel.
For all of that, there continues to be an audience for the radical left. The Financial Times recently published a report which noted that millennials are bucking the trend of shifting to the right as they age. This fits with anecdotal evidence of a generation that is hyper-aware of its downward mobility, imbued with a hatred of the rich, indifferent to conservative social values and angry about the destruction of the planet. This common sense has been shaped by the US wars in the Middle East, the Global Financial Crisis, the left populism of the Occupy Wall Street movement and recurring climate disasters. It manifests in enormous mobilisations around Black Lives Matter and other issues, and also in the popularity of neo-reformism when it appears genuine and disruptive, as with Corbyn, Syriza, and so on. Thus even if the working class and social movements are relatively passive in most places, there is an instinctive anti-capitalism in broad sections of society, especially concentrated among younger workers and students.
The UK and France are the countries in the advanced capitalist world where this potential is being mobilised to the greatest extent. In the UK, industrial action has seen a relatively sustained and substantial uptick in recent months. In part this is a product of that country’s uniquely dysfunctional political institutions and economic performance. Wages in the UK are less than they were in 2008. Among the G20 only Mexico and Italy have been worse over that time frame. Brexit has been a big problem for the British ruling class, not only severely undermining their economic prospects but entrenching in the majority of young people a hostility to racism, nationalism and other elements of conservative politics. The situation there also shows that reformism springs eternal, with left-wing workers projecting much the same hopes onto Mick Lynch (Secretary-General of the National Union of Rail, Maritime and Transport Workers) as they did on Corbyn. Though the union officials, Lynch included, are doing their best to stifle and contain industrial action, the intransigence of the Tory government and the energy of the rank and file means there is no sign it will abate any time soon. The situation is characterised by a plethora of local struggles over wages and conditions, punctuated by highly publicised and disruptive national strikes in public services.
The French struggle looks quite different. It is an explicitly political movement against Macron’s attempt to increase the retirement age to 64. Where left-wing British workers have been unsuccessful in winning the argument for general strikes, the French movement has so far been defined by multiple days of coordinated national strike action, with more planned as we go to print. This has obvious advantages in terms of the size and scope of the movement, with more than 2 million striking and marching on multiple occasions already. The scale of such a movement means it is very much in the hands of the officials, who have been typically hesitant to call for the indefinite strike action needed to decisively defeat the proposal. Yet the 7 March strikes and demonstrations were the largest yet, with a number of important unions shifting gears into renewable indefinite strikes.
In the global south, it is Iran and Peru where class and social struggles have been most sustained, and where the ruling classes have been besieged by ongoing mass mobilisations. The perseverance and courage of the Iranian movement continues to impress, with months of joint protests by Kurds, women, students and conscious workers now renewed following the poisoning of young girl activists. Regardless of the outcome, the rebellion will surely leave a significant legacy for organisers to build on. In Peru, the coup against the mildly reformist Castillo has backfired badly, with workers and peasants taking to the streets in enormous numbers. Attempts to wind up the struggle by granting concessions and by firing on unarmed protesters have both failed. The congress has refused to call new elections, a demand supported by the vast majority of the public, 70 percent of whom also agree with the left’s proposal to rewrite the authoritarian constitution. As this journal went to print, the situation remained deeply unstable. Given that Peru is one of Latin America’s largest economies and is traditionally on the right wing of regional politics, this level of crisis and resistance can be important for the development of politics across the whole region. Much more so than the victory of a chastened Lula in Brazil, who has aligned himself with sections of the far-right establishment, or the election of yet another moderately reforming pink tide leader.
The tectonic plates of world imperialism are moving at multiple speeds in all sorts of directions. This is producing immediate eruptions, such as Putin’s war on Ukraine, and a long-term build-up of pressures that threaten even greater catastrophe, as with the new cold war between the US and China.
The situation in Ukraine continues to grind on. After almost half a year of stasis on the Eastern front, Russia seems to be on the cusp of gaining a victory in Bakhmut, though at enormous cost. Ukraine’s success in retaking Kherson in November last year stimulated a new round of military aid from the West, but the prospects for further advances seem less clear. For now, reports that NATO stockpiles of essential weapons are starting to run low are motivating a new round of investment into the means of producing death, also known as the military-industrial complex. But it’s possible that there could be an abrupt about-face in the Western attitude to the war. Some US commentators in particular are indicating that the recent decision to send American and German tanks, artillery and anti-aircraft weaponry could be one of the last shipments of heavy weapons that Ukraine receives. A lot depends on the results on the battlefield: Ukrainian victories will make it harder for the West to blackmail them into surrendering.
The war has been highly controversial on the left. A minority have tended to apologise for Putin’s invasion, blaming the West for encroaching on Russia’s sphere of influence. Others clearly condemn Putin’s decision to invade, but emphasise the need to oppose Western aid as a reckless escalation of the conflict. For the latter group, opposing the escalation of inter-imperial tensions generated by the war overrides their support for Ukrainian national rights. Another tendency sees the war as a straightforward attack by Russia on Ukraine, with little attention given to the broader imperial dynamics. For some in this group, support for Ukraine has at times slid into apologism or indifference to Western imperialism. This is deeply problematic, given that the war has been used to re-legitimise and relaunch Western imperialism for a new era of global conflict.
For our part, Socialist Alternative believes it is impossible to separate the dynamics of the war and the inter-imperial jostling that surrounds it. We therefore support the Ukrainian resistance, but neither call for nor oppose arms shipments to Ukraine. While the national resistance has the right to call for weapons to fight, we cannot lend our support to the growing militarisation of NATO and its allies, including Australia.
Putting aside these nuances, it is clear that the Ukraine war has had a deeply reactionary impact on politics in the West. In Europe, the US and the UK the conflict has been aggressively used to buttress right-wing governments, and the public’s legitimate concern for Ukraine’s rights has been used to ram through a massive expansion of the arms industry. Germany, previously known for the strong pacifist traditions on the left and in broader society, allocated €100 billion in new funds to the Wehrmacht last year. Some in the SPD cabinet, including the defence minister, are now calling for mandatory conscription to be reintroduced and for the military fund to be increased to €300 billion. This comes on top of a broad explosion in arms expenditure prior to the war, with Canada and the EU having already increased their military budgets by $130 billion from 2016 to 2020.
In the US, military spending has continued to grow under Biden, as has the aggression directed against China. The recent shooting down of spy balloons, alongside a handful of unidentified flying objects, has taken tensions between the countries to a new level. This escalation is occurring despite China very openly signalling that it wants to cool the diplomatic and economic conflicts between the two nations. But the Democratic administration has shown little interest in any sort of detente, instead instigating multiple rounds of crippling sanctions and working increasingly closely with Taiwan’s political and military institutions. The constraints being put on China’s capacity to import and produce microchips are designed to hold back China’s technology and artificial intelligence industry for years, if not decades, and is part of a concerted strategy to entrench US hegemony in a field that will likely determine the future of warfare and industry. US corporate behemoths such as Apple are quietly resisting this shift to a cold war footing, fearful of losing access to China’s enormous domestic market. Yet it seems inevitable that they will be forced into line.
If open conflict between the US and China seems unlikely in the short term, the long-term prospects look increasingly dire. China is a rising power that is expanding in all sorts of important ways, including its military capacity, domestic consumption, productive capacity, share of international trade, and more. It has a big advantage in a handful of key sectors, including renewables and rare earth minerals. Yet recent events have shown that the US empire should not be underestimated. It has unrivalled power to reshape the parameters of the world economy and geopolitical landscape, using a range of strategies including fiscal and monetary policy, sanctions and deeply embedded international institutions, all backed by the unprecedented military power of NATO. The US-led network of military and political alliances is stronger than ever, and includes the entire advanced capitalist world as well as most of the regional powers in the global south.
How these dynamics play out, and the speed with which the contradictions develop, is an open question. It’s possible the internal contradictions of Chinese state capitalism will prevent it from becoming the systemic challenger to the US that many assumed was inevitable a few years back. Alternatively, Chinese elites may seek to deflect domestic weakness by engaging in a more aggressive imperial policy. Either way, the overall risk of global conflict and nuclear war is higher than it has been since the Cuban missile crisis of 1962. The tensions will also lead to long-term economic shifts, most notably the unwinding of some elements of globalisation that have weakened the US and allowed China to grow, including just-in-time production and lengthy supply chains. Instead we are likely to see the growing division of the world into competing economic blocs, as countries seek to reshore or “friendshore” key industrial sectors. Together with the growing costs involved in responding to climate change and dealing with ageing populations in China and the West, there are many reasons to think that baseline inflation rates will be higher than they have been for some time.
After decades of relative prosperity, Australia is at something of an inflection point. As of October last year inflation had wiped out every cent of the (pitiful) wage rises workers had gained since 2011. Meanwhile, rapidly rising interest rates are squeezing working families, who suffer from one of the world’s highest debt to disposable income ratios: 50 percent greater than the UK and double that of the US. Those without a mortgage are not being spared, with rental prices shooting up in the major cities as landlords pass on increased costs and take advantage of a shortage in supply (which does not include the many investment properties deliberately left empty for tax purposes). While living standards are far from collapsing, this is the first real decline in living standards for decades.
Into this maelstrom steps the Labor Party, which has taken power for the first time in almost a decade. But far from taking a stand in defence of workers’ living standards, the Albanese government has happily accepted that cuts to living standards are necessary to restore economic stability. Treasurer Jim Chalmers has been emphasising the need to balance the budget: refusing to increase Australia’s derisory welfare payments, and making the “tough” decision to raise taxes on low- and middle-income families. All of this to avoid undercutting the Reserve Bank’s explicit goal of slashing demand – ie workers’ living standards.
Labor’s stance on China has been equally hawkish, despite the facade of friendlier relations between the two nations. Foreign Minister Penny Wong has been involved in an endless and aggressive round of regional diplomacy to shore up allies in the Pacific. Labor’s austerian approach to government spending clearly doesn’t apply when it comes to investing in killing machines, with the military budget set to grow from 1.96 percent of GDP in 2022–23 to 2.23 percent by 2030. And that’s before the cost of the AUKUS nuclear-powered attack submarines is taken into account, estimated at an eye-watering $368 billion.
If the ALP has essentially maintained the capitalist status quo, their strategy has been to promote a series of symbolic gestures as transformational policies. This is the case on climate, on women’s pay, on robodebt and most importantly, the Indigenous Voice to parliament. Peter Dutton has taken a strong oppositional stance to basically every Labor policy, hoping to repeat the successes of the hard-right Tony Abbott Opposition of a decade earlier. So far there is no sign of this having an impact, but it is yet to be seen how long a right-wing Labor government can hold on to its support in a context of falling living standards. One thing is for sure: Albanese lacks the principles or the savvy to stand up to serious political pressure.
Unions and the broad left have shown no interest in challenging the many attacks on workers and the poor. Instead, they’ve been signing deals with bosses that will allow them to trade wages for conditions, signing off on public service contracts that offer less than 2 percent wage rises, and championing the Labor Party’s symbolic proposal for an Indigenous Voice to parliament. Amid the news of falling wages and housing unaffordability, the unions are currently campaigning in support of the Labor Party’s $3 million cap on superannuation. Aside from the fact that this pathetic proposal continues to offer substantial tax breaks to the rich, it will raise a pittance and does nothing to address the profit and power of the super-rich, whose share of national income continues to grow.
Overall then, we face a world system riven with tensions and contradictions, though not, importantly, in permanent crisis. Given the instabilities described here, it is inevitable that there will be flashpoints of struggle and resistance. The rebuilding of an international revolutionary left is as urgent as ever.
Burn-Murdoch, John 2022, “Millennials are shattering the oldest rule in politics”, Financial Times, 30 December. https://www.ft.com/content/c361e372-769e-45cd-a063-f5c0a7767cf4
Dutra, Israel 2023, “Why should we support the popular rebellion in Peru?”, International Viewpoint, 27 January. https://internationalviewpoint.org/spip.php?article7967
Hassan, Omar 2023, “The new frontier for global imperialism: Review of ‘Chip War’ by Chris Miller”, Red Flag, 13 February. https://redflag.org.au/article/new-frontier-global-imperialism-review-chip-war-chris-miller
Hillier, Ben 2022, “Crunch time”, Red Flag, 3 October. https://redflag.org.au/article/crunch-time
ILO 2022, “Global Wage Report 2022–23”. https://www.ilo.org/wcmsp5/groups/public/—ed_protect/—protrav/—travail/documents/publication/wcms_862569.pdf
Martin, Katie, and Harriet Agnew, “A year of pain: investors struggle in a new era of higher rates”, Financial Times, 30 November. https://www.ft.com/content/c93f3660-821f-458b-ae0f-23ac05b8f03f
OECD n.d., “Household debt”. https://data.oecd.org/hha/household-debt.htm
United Nations n.d., “End poverty in all its forms everywhere”. https://unstats.un.org/sdgs/report/2022/goal-01/
U.S. Bureau of Labor Statistics 2022, Real Earnings News Release, 12 January. https://www.bls.gov/news.release/archives/realer_01122022.htm
 Martin and Agnew 2022.
 Hillier 2022.
 ILO 2022.
 U.S. Bureau of Labor Statistics 2022.
 United Nations n.d.
 Burn-Murdoch 2022.
 Dutra 2023.
 We hope that our alien comrades understand that conscious proletariat are opposed to interstellar warfare.
 Hassan 2023.
 OECD n.d.