Maintaining the low interest rates, and inflation, even after 2008, has required a monumental effort by the ruling class, including a deliberate damaging of capital itself. It required large-scale fiscal austerity to undermine the economy across the globe, at the same time as an even more astronomical increase in liquidity, which was even more deliberately driven into the sphere of speculative assets, via QE, and by government policies to encourage property speculation, thereby, also driving liquidity out of the real economy, and into asset markets.
But, even that was not enough to prevent global growth rising, even with policies to reduce trade, such as the US's trade war against China and the EU, and its many economic sanctions against countries across the globe, and such as Brexit. As global growth and interest rates began to rise again, in 2020, it was only abruptly ended by the imposition of physical lockdowns of economies, whose idiocy, and real purpose was shown by their continued use by the Stalinists in China, to slow economic activity, and control populations, in the hope of staving off a while longer the rise in wages, interest rates, and crash of asset prices.
Martin writes,
“In my investigations of the 2008 crash later written up in the book Crisis and Sequels I asked Costas Lapavitsas, a Marxist writer specialising in finance, whether governments' emergency policies would unleash inflation (as then looked possible or even likely).
They might, Costas replied, but probably not. The squalls of incipient inflation died away, and I didn't return to the question.”
But, of course, the inflation did not die away at all. It simply continued to appear in the same way it had for the previous 20 years, as an inflation of asset prices. (Indeed, for several years, even consumer prices, in Britain, ran at over 5%).
Between 1980 and 2000, the Dow Jones rose by 1300%, although US GDP rose by only 250%. The same was true of the S&P 500, and other indices. By 2007, the Dow had risen a further 40% to 14,000 (pretty much in line with the US GDP growth between 2000 and 2007). In the crash it fell to 6500 in March 2009. But, in the following 13 years, it has risen to a high of 37,000 in January 2022, and even now, after the falls in asset prices of recent months, it stands at 34,000, or two and a half times the extreme bubble level it hit in 2007. In the same period, US GDP has risen by just 50%.
In other words, it stands at even more astronomically inflated levels, today, than it did at the time of the 2008 crash, and that has been brought about simply as a result of the inflation of asset prices via huge injections of liquidity by the central bank. Part of the problem facing developed capitalist states is shown in the comparison between US and Chinese GDP between 2009 and 2021. The latter tripled during that period. The ruling class can try to hold back economic growth, in order to limit wage growth, and interest rates, so as to prevent further crashes in asset prices, but, as they do so, other developing economies fill the gap, just as monopolies if they seek to limit their own expansion, only encourage other smaller capitals to increase their own market share.
In the last part of his article, Martin, basically, collapses into an orthodox, Keynesian explanation of inflation that is really a discussion of market prices, rather than the phenomenon itself. It is based upon market prices, as driven by supply and demand, and competition, rather than an examination of the material conditions standing behind those superficial manifestations of social processes. So, we are told,
“One factor adduced is increased world-market competition - cheaper imports driving down prices. However, there had been a previous surge of world-market competition in the late 1960s, which plausibly had been a factor in increasing inflation (capitalists seeing diminished profits, so increasing mark-up where they could, and having that facilitated by anxious governments).”
The evidence that competition is the cause of neither inflation, nor deflation is given in the statement itself, in which its argued that it results in higher prices at one time, and lower prices at another! This is just a restatement of the orthodox Keynesian view of inflation arising from an excess of aggregate demand, and deflation as an excess of aggregate supply. In Theories of Surplus Value, Chapter 17, Marx illustrates the fallacy of Say's Law, and shows that, at any one time, there can be an overproduction of all commodities, because there is an increased demand for the general commodity – money. In other words, commodity owners, having sold, and obtained money, decide to hold on to the money, rather than spend it. This overproduction of commodities leads to commodity owners attempting to clear the market by reducing their prices.
But, this is not the same as deflation. Has the value of commodities changed? No. Their market prices have fallen, temporarily, because of the glut, i.e. the commodities represented a quantity of unnecessary social labour, because a quantity of them did not represent use values for consumers, at their market value.
If supply is reduced, correspondingly, because some producers go bust, and leave production, then the market prices of these commodities will revert to their previous level, unless, as less efficient producers are now removed, the market value of the commodities itself is reduced, as the average labour-time required for production falls. In fact, as Marx sets out in A Contribution To The Critique of Political Economy, such conditions can lead not to deflation but inflation (stagflation), because the quantity of money tokens is not reduced proportionate to the total value of commodities to be circulated. Keynesian policy, indeed, increases it, as part of a demand stimulus, witnessed in the Weimar and 1970's stagflations.
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