Global Inflation Spiral: A capitalist crisis that requires a socialist response

No sooner had the worst of the Covid-19 pandemic receded than a new crisis emerged to take its place. Inflation is surging across much of the globe to levels not seen since the 1970s. The prices of goods and services are spiralling upwards, and the incomes of most workers aren’t close to keeping pace, leading to sharply falling standards of living. Daniel Waldron looks at what is causing these price rises and what is the solution for working people.

The cost of living crisis is already out of control. Governments, central banks and other global institutions have proven incapable of halting its advance, and no one can say when it’s likely to end or how bad it’s going to get. It’s having a detrimental impact on the poorest in society and will have real and lasting human costs for countless people across the globe, with the UN estimating that up to 95 million additional people will be pushed into poverty this year alone.

Undoubtedly, it will take little to convince the reader of the scale and depth of the cost-of-living crisis. In all likelihood, they will themselves be feeling its impact in their pocket, and seeing the effects on their communities. In the UK, energy costs increased by a whopping 70% in the year to October,1 while food costs rose by 11.6%.2 While the UK is one of the worst affected economies due to its reliance on imports, similar trends are seen elsewhere. In July this year, a survey found that 80% of households in the South of Ireland were struggling to keep up with their bills, while it is estimated that 70% of households in Northern Ireland will be in fuel poverty by January.3

For many who have already been forced to choose between heating and eating, it’s now a case of neither. This will lead to widespread malnutrition, deepen the mental health crisis, and cause unnecessary deaths this winter. Women and marginalised communities are being doubly impacted, reflecting the existing inequalities and oppression in capitalist society.

Supply changes disruption: from pandemic to new cold war

A number of factors have directly contributed to this crisis. Widespread lockdowns in response to the Covid-19 pandemic led to the rapid shutdown of whole sectors of the economy across the globe, with sudden changes in patterns of demand for various goods and services, and equally dramatic changes as lockdowns were ended. This had a stunning impact on many sectors, disrupting supply chains which have often not been able to return to their previous operational capacity.

This has been exacerbated by growing reliance on just-in-time production. In order to maximise profits, major corporations aim to have raw materials, components and goods move through their supply chain as smoothly as possible, arriving at their destinations ‘just in time’ to be used or sold, and thus minimising storage and other related costs.

Rising geopolitical tensions and conflict, most sharply reflected in the Ukraine war, have also played their part in driving up prices of many commodities. Ukraine is a major producer of wheat and other crops which are staple foodstuffs for people across the globe, particularly in the neo-colonial world. The disruption of agriculture and trade as a result of the war — combined with the encroaching impact of climate change, which is undermining food production in some previously fertile regions — has contributed to a 24% rise in the cost of food in sub-Saharan Africa, with rising levels of hunger and malnutrition. Western sanctions aimed at economically isolating Russia, and retaliatory measures from the Putin regime, have served to disrupt oil and gas supplies to western Europe, contributing to rising prices.

More generally, we are witnessing an intensification of the new Cold War between the US and China, with increased competition for geopolitical influence, prestige and access to markets as they grapple for global dominance. Despite their already antagonistic relationship, the economic ties between the US and China helped to soften the impact of the 2007/8 financial crisis and prevent the global economy from plummeting into a deep and prolonged depression, with a huge economic stimulus package from Obama maintaining a market for Chinese goods and thus for raw materials sources from across the globe. Today, however, a process of economic decoupling between these major powers and their allies is underway, with rising economic protectionism and trade wars.

The globalisation which defined the neoliberal model of capitalism over the last 50 years has been thrown into reverse. This has added to disruption of supply chains and limited the ability of the capitalist establishment internationally to respond coherently to the current economic turmoil.

Capitalists never waste a good crisis

Apologists for capitalism will point to these factors as ‘excuses’ for the cost-of-living crisis – more accurately, a cost-of-surviving crisis for many workers. They will say that this crisis is a product of unfortunate circumstances – of the pandemic, of climate change, or of war and conflict, rather than being a product of the system itself. Of course, all these circumstances are themselves products of the myopic and chaotic nature of the profit system.

It is the drive for profit above all else which has prevented meaningful action to reduce carbon emissions and tackle climate change, threatening humanity’s future; the logic of this sick system promotes unsustainable farming practices and encroachment into natural habitats which increases our exposure to new diseases; and capitalism has competition and conflict built into its DNA, between individual capitalists but also between national ruling elites, laying the basis for war and all the horrors that it brings.

Unsurprisingly, an important factor in the inflation crisis is straightforward opportunistic profiteering. Capitalists never waste a good crisis. With a general sense that “everything is rising”, many bosses will see this as an opportunity to bump up what they charge consumers, even if this isn’t reflective of increased production and supply costs. There are clear examples of this in the energy market. Suppliers have been quick to pass costs on to consumers when fuel prices have risen, but they have often maintained prices at artificially high levels even when supply costs decrease.

In the UK, for example, this helped energy suppliers rake in almost £16 billion in profits over the last year. Globally, billionaires with interests in food and energy have seen their wealth increase by $453 billion over the last two years.4 Could there be a more clear cut example of the obscenity of this system?

Rising interest rates: workers pay the price

In response to spiralling inflation, many governments and central banks have begun to raise interest rates in an attempt to “cool” rising costs. This policy has a direct impact on people’s daily lives and again tends to impact the working class and poor the hardest. Due to poverty wages, many working-class people are forced to rely on credit just to make ends meet. Raising interest rates increases the price of debt and will make it unsustainable for many. This policy has also caused difficulties for those who have purchased homes with a ‘tracker’ mortgage which fluctuates with interest rates, with some seeing their mortgage payments increase by hundreds per month almost overnight.

Increasing interest rates carries risks for the capitalist establishment. It tends to stifle investment and economic activity, as well as potentially lead to widespread debt defaults, such as those seen in the “subprime” mortgage market in the US which triggered to 2007/8 financial meltdown. With the world economy already teetering on the edge of a downturn, and some countries already in recession, this can have major consequences both for the profit margins of individual capitalists and for the broader stability of their system.

The functionaries of capitalism are attempting to walk an economic tightrope in their fiscal policy, with the potential for a nightmare scenario of a period of stagflation – high inflation alongside economic stagnation or recession.

A wages-cost spiral?

In the midst of this crisis, capitalist policymakers and ideologues have warned against significant wage rises for workers. Andrew Bailey, governor of the Bank of England, has suggested that workers receiving pay rises would “embed” inflation.5 In other words, workers should simply accept a significant fall in their living standards for the interests of the system, even while bosses in many sectors make record profits and continue to swill on huge bonuses and dividends. For example, in the UK, BT and Royal Mail both paid out hundreds of millions to major shareholders over the last year, yet they are imposing a real-term pay cut on their staff. There is no call for bosses to rein in their profiteering, but workers are asked to sacrifice.

It is not possible to credibly argue that wage increases have caused the current crisis, given that the period following the 2007 financial crash has broadly been characterised by austerity and pay ‘restraint’, with wages failing to keep pace with inflation even before the current surge. For example, nurses in the UK saw their pay fall by 9% in real terms between 2010 and 2017.6 Most workers have not had any increase in pay to compensate for the surge in the cost of living. Only a tiny minority has achieved pay-rises which match or outstrip inflation, and those have been won through struggle. And yet the inflation crisis persists.

There is no automatic reason why rising wages must result in rising prices. While an individual capitalist may want to recoup profits lost through an increased wage bill, they may calculate that increasing prices would place them at a disadvantage compared to their competitors in the market, and actually decrease rather than increase their profits. If it were the case that pay-rises automatically led to price increases, the balance of wealth in capitalist society between wages and profits would remain constant, with pay-rises won by workers immediately wiped out. In reality, the share of society’s wealth paid out in worker’s wages, and the purchasing power of those wages, has varied widely across time and in different economies, reflecting the balance of power between the working class and the capitalists in a given context.

For example, during the economic upswing in the period following the Second World War, workers increased their share of the economic pie, both in terms of direct wage increases but also in the form of the social wage – investment in public services and social security. This reflected the strengthened position of organised labour in this period, and also the capitalists’ fear of revolutionary challenges to their system, with the Soviet Union – despite its Stalinist deformations – representing an alternative to capitalism based upon public ownership and economic planning. In contrast, the neoliberal era – emerging from the economic crisis of the 1970s and characterised by privatisation and attacks on the working class – has seen a downward trend in wages as a share of society’s wealth, with the labour movement broadly in retreat.

Across the advanced capitalist economies, the share of wealth paid out in wages to workers fell from 54% in 1980 to around 50% in 2014, with much sharper declines in some countries. In the south of Ireland, wages accounted for an impressive 92% of GDP in 1975. By the early 1990s, it was down to 75%. By 2009 it had fallen to 55% and in recent years it has hovered around 50%.7

In other words, there is a battle to be fought over whose shoulders the cost of this crisis should fall.

Mass struggle on the agenda

This year has demonstrated that workers, young people and the oppressed have the potential to take that fight to the capitalists. This is reflected in the mass movements which have exploded from Tunisia to Sri Lanka and beyond, movements directly or indirectly connected to the crisis facing ordinary people as the cost of surviving surges. In many countries, this battle is finding expression through upturns in industrial struggle. In France, determined strike action by workers at oil refineries is now spreading across the economy, with a major clash between the working class and the Macron government on the cards, while the UK is experiencing a strike wave in communications and local government, with disputes likely to emerge in key sectors like health and education.

All too often, unfortunately, conservative ‘leaderships’ in the labour and trade union movements have failed to reflect the urgency of the moment and the desire of workers for fundamental change. This is perhaps best summed up by the announcement from the Trades Union Congress in Britain, made to much fanfare, that they were calling for a £15 minimum wage – by 2030! Meanwhile, some union leaders in the south of Ireland have negotiated below-inflation pay deals – i.e., pay cuts – for their members and heralded this as success.

This underlines how out of touch some of the heads of the trade union movement are, many of them comfortable on large salaries and used to managing retreats rather than fighting for victories. In this context, it is vital that workers themselves discuss what is needed to deal with this crisis and fight for these demands both in their workplaces and within the union movement.

Socialist programme needed

The starting point for the workers’ movement must be a refusal to accept any fall in living standards. Instead, the burden of this crisis should fall on the shoulders of big business and the super-rich. As well as fighting for real-term pay increases in individual workplaces and sectors, the labour movement should also fight for sweeping guarantees that wages, benefits and pensions will increase at least in line with inflation. Measures along these lines – also known as the sliding scale of wages – have been fought for and won previously in France, and Italy and currently exist in Belgium, and have helped to safeguard the purchasing power and therefore the living standards of the working class in the face of inflation, although they were subsequently undermined and attacked by the capitalist establishment when they felt able to move against the working class.

This should be a stepping stone in the struggle for guaranteed living incomes for all, and a fundamental shift in the distribution of wealth in society. Emergency taxes should immediately be levied against the super-rich and the major corporations which have made a killing throughout the pandemic and now this crisis, with the wealth used to end poverty and invest in essential public services, renewable energy and sustainable industry, creating jobs and helping to tackle the climate crisis.

Food and energy are at the epicentre of the current inflationary crisis. The workers’ movement should fight for price controls which keep the cost of the necessities of life at affordable levels for all, with the labour movement setting out independent demands around maximum prices of essential goods and fighting to enforce them. Unlike schemes like the entirely insufficient energy price cap scheme introduced by the British government – in reality, a public subsidy for the energy conglomerates that merely shifts costs from workers as consumers to workers as taxpayers – the cost of these price controls should come at the expense of profits.

Connected to this, the need for public ownership of the energy sector, the major supermarkets and food producers is a clear necessity. The concept of public ownership, long ridiculed and regarded as archaic by capitalist ideologues, again has growing support. Indeed, so sharp is this crisis that it has even convinced two-thirds of Tory voters in Britain to support nationalisation of the energy sector – at least temporarily.8 But why should these sectors which are essential to people’s very survival ever be handed back to the vultures who have profited from misery? These and other key sectors should be brought into public ownership immediately and with compensation paid to shareholders only on the basis of proven need. And rather than being run in a top-down manner like private companies by faceless bureaucrats, they should be run democratically by elected representatives of those who work in these sectors and the wider working class in order to ensure efficiency and to ensure they function to meet society’s needs.

These demands are, of course, anathema from the point of view of the tiny capitalist class and their political representatives of all shades across the globe. But they are also objectively and thoroughly necessary for the working class, young people, the oppressed and, indeed, the very future of humanity. That gets to the heart of the issue – this capitalist system must go. Significant concessions can be wrestled from the capitalist establishment if they are made to fear for the survival of their rule by united and determined working-class struggle. But the capitalists will always seek to claw back these gains whenever they can, sometimes through brutal and bloody repression, as we have seen throughout history.

Therefore, the fight for immediate demands to address the cost-of-surviving crisis facing the working class must be tied to a perspective and a struggle for revolutionary socialist change, breaking the rule of the parasitic capitalist elite and placing control over society’s wealth into the hands of those who create it – the working class – so it can be used in a planned and democratic way to eliminate poverty, suffering, and safeguard the future of our planet.


1. By Susanna Twidale, 2 Aug 2022, ‘UK energy bills expected to leap again, raising stakes for next PM’, Reuters,

2. Lucy Skoulding, 2 Nov 2022, ‘UK food inflation hits record high of 11.6% as prices of basics from tea bags to sugar soar’, Independent,

3 Margaret Canning, 2 Aug 2022, ‘Warning: Almost three quarters of NI households in fuel poverty by next year‘, Belfast Telegraph,

4. Rupert Neate, 23 May 2022, ‘Food and energy billionaires $453bn richer than two years ago, finds Oxfam’, The Guardian,

5. Mark Sweeney, 5 Aug 2022, ‘Workers asking for pay rises risk embedding inflation, says Bank boss’, The Guardian,

6. Mark Dayan, 4 April, 2021, Chart of the week: Real-terms NHS staff pay from 2010 to 2020’, Nuffield Trust,

7. Michael O’Brien, 11 Mar 2022, ‘Do wage rises fuel inflation?’,

8. J. Elgot and P. Walker, 16 Aug 2022, ‘Two-thirds of Tory voters back temporary nationalisation of energy firms – poll’, The Guardian,

Previous Article

Socialism 101: Doesn’t capitalism incentivise hard work because people are motivated by money?

Next Article

Struggle to free migrant fishers from exploitative visa achieves victory

Related Posts
Read More

Telling the story of the Visteon Occupation

John Maguire was the Unite the Union Convenor at the Visteon plant in Belfast before it closed in 2009. He played a leading role in the occupation of the plant which secured better redundancy packages for the workers. He has now written a play about the occupation which is due to premiere in Belfast in November. Here, John speaks to about his upcoming play.