Inflation and the Spectre of World Revolution

By James Petras

"Inflation is here big time", Charles Holliday CEO, Du Pont. June 24, 2008

"The sustained rise in the price of oil and commodities has hammered industries…and deepened fears of global inflationary spiral – which has already provoked riots across Asia – as producers pass on higher costs to manufacturers and consumers."  The Financial Times  June 25, 2008. page 1


Inflation and all of its repercussions for wage and salaried workers, fixed income middle classes, as well as manufacturers and transport industries is splashed all over the financial pages of the major newspapers throughout the world.  Inflation is the great solvent that dissolves paternalistic ties between employers and workers, landowners and peasants, clientele-patronage regimes and the urban poor and sets in motion violent protests against private property and previously popularly elected regimes.  Historical religious, clan, party, ethnic, tribal, caste and other differences are temporarily suspended, as Hindus and Moslems in India, Communists and Christians in the Philippines, peasants and workers in China, industrial workers and public employees in Egypt, blacks and mulattos in Haiti…join together in sustained mass protests against inflation which profoundly and visibly erodes their living standards from week to week, in some cases from one day to another.

But the left, the Anglo-American left?  Where and what do our most prominent public intellectuals, including those with booking agents charging five-digit lecture fees, have to say about this world-wide revolt?  Nary a word is found in left, center-left magazines, web sites and blogs.  During their lucrative lectures, they thunder against the immoralities of war and climate change.  They hurl imprecations against rulers and exploiters and their immoralities, and the bellicose interests they represent (with special exemption of the ubiquitous Zionist Power configuration).  Yet there is hardly a mention of the purveyors of the global cancer which is literally eating away the bread of everyday life of billions of people.  They talk of a ‘peace movement’, (which has disappeared); of one or another dissident electoral candidate; and reminisce over youth revolts 50 years ago.  But like the intellectuals who sipped their wine while the revolting masses headed for the Bastille, they are at best irrelevant, unblinking spectators to the greatest turmoil of the new millennium.

The targeted capitalists and their regimes and the downwardly mobile middle classes and the masses facing destitution are much more aware of the centrality of inflation to their profits, living standards and everyday life and the threats of popular upheavals.  The Anglo-American left, in all of its variants, is destined once again to irrelevance in the face of world-historic challenges and opportunities.  This contrasts with the intense preoccupation of the capitalist class with inflation.  It is the central topic of weekly meeting of central bankers the world over.  Empty resolutions are approved at the monthly conferences convoked by international financial institutions.  Almost daily there are pronouncements by finance and economic ministers.  Yet the complacent indifference of our intellectuals is striking.

To awaken from intellectual stupor and political irrelevance in the face of the mass revolt against inflation, it is necessary for the Anglo-American left to come to grips with the scope, depth and significance of accelerating inflation in our times.  Inflation is pre-eminently a political phenomenon in every sense of the word:  it is a product of public policies which deeply affect markets, supply and demand, consumers, producers and speculators.  Inflation is the detonator of mass political action and offers historic opportunities for broad-based ‘regime transformation’ and even revolutions in a way similar to the way the destructive imperial wars have in the past.  Like wars, inflation devastates vast sectors of society, puts them all in common deteriorating positions and projects their worst nightmare – a regression into the abyss of mass destitution.

The Centrality of Inflation
The most threatening challenge to contemporary imperial regimes and their client nations is out of control inflation and a raging rise in food prices.  Writers on the Left who write of the end of empire and focus on the financial crises (in the US), or the energy crises (in Europe), or the grievance of mass peasant protests over corruption in China, have overlooked the one grievance which cuts across all regimes of the world (with greater or lesser intensity but everywhere growing more powerful) namely inflation, especially in vital necessities such as food and fuel costs. 

For Marxists, their narrow focus is on the class struggle at the workplace and related issues of unemployment and deteriorating work conditions as the detonator of mass unrest and organized anti-capitalist action.  For environmentalists, the point of mobilization is climate change, peak oil, environment degradation and the resultant deterioration of human existence.  For anti-imperialists and related anti-war activists, it is the US, EU and Israeli wars in the Middle East which represent the great moral challenges of our times and the greatest danger to world peace. 

While these progressive analyses and prognoses are righteous in intent and worthy causes to support, they overlook the fact that they are not the points of greatest conflict between imperial and client regime and the great majority of humanity today.  The greatest concern and the issue, which has consistently mobilized hundreds of millions over the past year, is inflation, rising food and fuel prices, declining living standards, hunger and the everyday experience (and reality) that conditions are deteriorating with no end in sight.  The point of greatest contention today is not the workplace (or point of production) but in the ‘market’, the place of consumption, where money earned from production purchases less and less of the necessities of life.

Inflation: Detonator of the First Sustained World Revolt

In Asia, particularly Pakistan, India, Indonesia, South Korea, Philippines, Nepal, Mongolia and China, hundreds of millions of workers, peasants, artisans and low-paid self employed workers, as well as house-wives and pensioners have engaged in sustained mass protests as they experience a decline in the quality and quantity of food purchases as prices skyrocket.  In Africa, hunger stalks the land and major food riots have occurred from Egypt through Sub-Saharan Africa to South Africa.  In the Caribbean, Central and South America, food riots have led to the overthrow of regimes, mass protests, road blockages from Argentina, Bolivia, through Colombia, Venezuela and Haiti. 

Recognizing the revolutionary potential of ‘hunger politics’ induced by inflation, even right-wing, as well as center-left regimes have attempted to limit unrest through (1) food subsidies, (2) raising interest rates and cutting public expenditures to slow down the economy and lessen inflation (Brazil), (3) lowering food exports in order to supply local consumers (Vietnam, India, Indonesia), (4) enacting special laws against hoarders and speculators (Philippines) and (5) repressing mass protest (Haiti, Egypt).  None of these short-term, local ameliorative measures have worked: Controls of exports have not lessened imported inflation and wholesalers/retailers have not complied with price controls and engaged in hoarding and black market activity.  While agricultural production has increased, the growth of non-food products (ethanol for bio-gas) has grown even faster.  The ineffectiveness of these ‘reforms’ reflects the failure of agricultural policies over the past half-century, which have focused on financing large-scale specialty export agricultural crops and urban-service-industrial complexes, while neglecting basic food production by family farmers for local consumption.  Countries, as diverse as Cuba, Egypt, China and the Philippines, have divested from agriculture to service (tourism in Cuba), recreational facilities for the wealthy (golf courses), agro-exports (Brazil), real estate (China), technology centers and commercial shopping malls (Philippines and India).  In the process they have displaced food producing small farmers, depriving them of credits, price incentives and infrastructure – not to mention confiscating rich agricultural lands from indebted farmers for conversion to golf courses, exclusive subdivisions and shopping malls.

The result is the convergence of ongoing protests by dispossessed peasants and farmers, suffering from lack of access to land, irrigation and agricultural credits, and masses of poor urban consumers suffering from inflation of food prices.  What is at fault is not merely the prices but the social relations of production.  State priorities and the configuration of class power, which control the state and decree economic strategies, reorganized the economy at the expense of local low-cost and available food production.  None of the ameliorative measures taken by contemporary regimes have even approached the structural roots of the inflation crisis and the rising cost of food.

Inflation and Structural Vulnerability

Inflation has had such a devastating effect today – even more than in the past – because of several profound shifts in the occupational and social organization of the economy.  Worldwide class-based trade unions have declined in numbers and capacity to safeguard the interests of urban and rural wage labor. With this decline has come the abolition of wage indexes, sliding scales of wages, which allow workers wages to keep up with the rise of prices.  Secondly the vast growth of informal and service sector workers are not organized to raise wages in response to increases in food prices.  The growth of pensioners with fixed income has increased their vulnerability to inflationary prices, leading to sharp declines in purchasing power.  The growth of contract labor, precarious labor contracts has undermined all possibilities of negotiating labor contracts which allow wage and salary workers to keep up with inflation.

Thirdly, the dominant ideology, promoted by all capitalist economists and accepted by many trade union officials, claims that wage increases, and wage indexing induces inflationary pressure.  This leads to collusion between ‘labor and capital’ in creating a ‘lag’ between rising prices and wage adjustments, resulting in declining living standards.  Fourthly this pernicious and erroneous doctrine deflects attention from the real causes of inflation  — declining capitalist investment in the productive economy, the vast increase of capital flowing in the paper economy, the huge increases in profits and the grotesque salaries, bonuses and payoffs to senior executives, totally unrelated to ‘performance’.  As a result there is a decrease in the production and circulation of goods of mass consumption.  The growth of a vast parasitical ‘service sector’ with money pursuing fewer actually available goods has led to higher prices.  Most of the affluent classes (the upper 20%) can afford the higher prices, in part because they can pass on the added costs to the mass of working class and urban and rural poor.  In other words, in the contemporary economy, inflation benefits the wealthy because they pay their workers in deflated currency, while they can take advantage of inflation to further jack up prices and then income.  In other words the upper classes have fortified their economic positions to take account of inflation through their power over prices, income and other compensations in a way that wage workers and people on fixed income and other vulnerable sectors cannot.  Bankers protect their loans via adjustable interest rates.  Monopoly resource owners jack up prices to retain profits.  Wholesalers mark up prices to compensate for higher commodity prices.  Large-scale retailers squeeze final consumers – the great majority at the bottom of the production and distribution chain.

Inflation:  The Targets of Revolt

The revolts of the mass of vulnerable consumers are directed at retailers, wholesalers and the government, which are held responsible for the higher prices.  Governments are charged with deregulating the economy, subsidizing the profiteers, promoting profiteering, complicity with monopolies, imposing wages and salary constraints without commensurate control over prices and basic necessities.  Where some subsidies or price controls are decreed they are not consistently implemented or enforced.  Worse still, widespread evasion, hoarding and black-marketeering is rife because of official complicity and corruption.  According to regime bureaucrats it is ‘easier’ to control wages than prices – hence the uneven and unjust enforcement.  Moreover capitalist producers frequently dis-invest or withhold products especially necessities from the market as an effective weapon against price controls, forcing scarcity and inducing popular discontent with the incumbent regime.  Reformist policies and regimes then are forced to choose between ‘lifting controls’ to increase profits and prices or maintaining controls and facing the wrath of masses confronting empty shelves.  Few if any contemporary regimes are willing to make credible threats to intervene in economic sectors or even enterprises, withholding goods or investments.  Even less likely are regimes willing to actually mobilize workers, farmers and consumers to take over strategic economic sectors vital to popular consumption.

Anti-Inflationary Revolts and Extra-Parliamentary Politics

Given the total dominance of unhindered and unregulated ‘free market’ ideology among all the leading political parties and within the executive, legislative and administrative branches of government, there are no institutional political vehicles through which the consumers can act to arrest their declining living standards, their decreasing capacity to meet basic needs and in many regions avoid growing malnutrition and hunger.  Because of the all-pervasive and powerful stranglehold of free market capitalism among all national and international decision makers, all the meetings convoked by international organizations to deal with the ‘food crisis’ (narrowly defined as ‘hunger’ induced by scarcity and exorbitant food prices) have repeatedly failed to come up with practical and workable solutions.  At best they simply pledge funds for temporary food aid, subsidies and proposals for technical or market assistance.  No meeting challenges the power of corporate agriculture to raise prices, allocate investments to more profitable fuel use rather than food; no crisis managers suggest massive shifts of credits from agro-exporters to family farmers; no effort is made to end price gouging by wholesalers or retailers.  In other words, the crisis managers are of the same class as the beneficiaries of high prices and scarce food producers – and therefore they operate within the same market rules, which perpetuate higher profits and declining living standards.

Given the failures of official policies and the lack of any institutional solutions of redress, the only outlet for downwardly mobile masses is extra-parliamentary opposition; the sacking of trains, stores and wholesale warehouses; the overthrow or voting out of office of incumbent regimes; the blocking of transport and seizure of government buildings; mass marches and demonstrations facing legislative and executive houses.  Incumbent regimes everywhere fear mass repudiation in upcoming elections, even as their ‘populist’ opponents provide no systematic alternative.  As yet the mass consumer protests, even as they draw heavily upon the families of workers, have yet to enlist the organized working class at its point of production.  Only on rare occasions have organized workers engaged in ‘general strikes’ against price increases of basic foodstuffs.  The process of linking producter and consumer sectors is however not far on the horizon as local joint actions are occurring and calling into question the reliance on unrestricted markets.  Bourgeois journalists, some financial editorial writers and a few government advisers are aware of the growing danger of inflation, rising food prices and the profit/wage gap to the capitalist system and are calling for anti-inflationary policies and public regulation.  Faced with the deepening financial crisis resulting from the speculative crash and the necessity of large-scale, long-term state intervention and bail-outs, sectors of the capitalist class are also calling for greater state supervision and tighter controls over covert (off the books) institutional swindles.

Popular perception of massive state bailouts of banks and proposals for new regulations to save the financial system has reinforced the idea that the state can equally (or with greater justice) interfere to regulate food and fuel prices and to prop up declining living standards.

Inflation and the Transition from Protest to Popular Uprisings

Inflation and high levels of engagement of the state in saving capitalism has raised mass discontent from a local protest against local price gougers and profiteers to a national political protest against a class biased state, which ignores deteriorating living standards and concerns itself only with the very rich.

Previously apolitical or even conservative workers, peasants and households who experienced incremental and cumulative gains in living standards through long hours and multiple household workers are now seeing their livelihood decline.  Their earnings are devalued.  Their capacity to satisfy basic needs deteriorating.  The sensation of ‘going backwards’ or losing control over their everyday lives and of downward mobility is fueling mass collective anger.  The treadmill of added work without rewards, respect or recognition is reinforced daily by the added costs to everyday goods.  Inflation destabilizes all calculations, not only for the future, but also of everyday life:  What to buy or not buy. What to pay or what to pay off.  Uncertainly about what is affordable today and unaffordable tomorrow.  Uncertainty spreads from the poorest to the ‘stable workers’, from the ‘fixed income’ pensioners to the ‘secure public employees’.  Inflation’s global spread undermines living standards in Europe and the Americas, Asia and Africa, and with it, discontent erodes party loyalties and confidence in electoral and/or regime legitimacy.  Historically nothing undermines public confidence in the currency, the banks, politicians and the existing market ideology as much as daily creeping inflation.  The greatest fear of all is the sense that a lifetime of effort will result in the ‘loss of everything’ – home, transport, health, and education – as prices rise faster than income.  At some point, rampant inflation leads to absolute regression and with that a rupture with all previous loyalties and commitments.


Inflation, as it accelerates, in the past and today, is the great solvent of incremental everyday habits and politics:  Today it undermines incumbent politicians; tomorrow it can call into question regimes and social orders.

In the past, inflationary disorders and desperation brought forth rightist demagogues who specialize in imposing order and stability.  It ill behooves the left to once again ignore the destructive effects of inflation, the demands for order and stability and mass consumer discontent.  Inflationary fears are as much entrenched as class and property issues.  Combating inflation, especially basic price increases is central to any prospect for a social transformation, which claims to benefit the wage and salaried workers, urban or rural dwellers, the poor, minorities, consumers and producers.

– Professor James Petras’ forthcoming book is: Zionism, Militarism and the Decline of US Power (Clarity Press). He contributed this article to

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