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Capitalism is in crisis. Global growth rates are falling. Wages are falling. Inflation and interest rates are rising and people are suffering. New Labor Treasurer Jim Chalmers has offered little by way of analysis and even less optimism.

he used the cliché employed by all economic spokespeople when things go astray: “The headwinds our economy is facing — higher inflation at the top of that list, along with slowing global growth — are now reflected in the revised economic outcomes and forecasts.”

He said economic growth will fall to 3.75% and continue to slide, with gross domestic product growth shrinking to just 2% in the next financial year.

Inflation is expected to continue to rise with the International Monetary Fund (IMF) predicting the global inflation rate will reach 8.3% by the end of the year, meaning wages in real terms will continue to fall. Rising interest rates will make mortgage repayments increasingly unsustainable and rising energy bills will add to poverty and despair for millions more.

The depth of the crisis was underlined in the IMF’s for July.  IMF economic counsellor Pierre-Olivier Gourinchas said “the outlook has darkened significantly since April”, adding that, “the world may soon be teetering on the edge of a global recession, only two years after the last one”.

The IMF cited a confluence of issues, including: the slow-down in China’s growth; the impact of the COVID-19 pandemic; and the war in Ukraine to explain the current crisis. Each of these play a part but each have a root cause in the very economic system itself: the “headwinds” Chalmers refers to are of capitalism's making. Previous global crises were not driven by a pandemic or European war, but by inherent problems within the system.

Despite the rhetoric, the truth is that the global economy never fully recovered from the Global Financial Crisis. These ongoing crises are a feature of capitalism.

A 2013 IMF report revealed that, from 1970 to 2011, there were 147 banking crises, 217 currency crises and 67 sovereign debt crises. Since the 1970s, there have been global recessions every decade.

Workers everywhere are suffering. Chalmers and the Labor government have that regardless of the hardships imposed by the economic system, workers’ real wages will not be growing anytime soon.

It would be foolish to suggest that Chalmers or any treasurer of any government of any individual capitalist nation-state could do anything about a problem that reflects a systemic flaw in capitalism. After all, apologists for capitalism cannot mend the system they support.

Leaders are quick to apportion blame and to point to this or that as some causal issue for what are uniformly described as setbacks or corrections or headwinds. The pandemic has been used as just such a causal issue for a “temporary” problem.

This presupposes that, before COVID-19, everything in the capitalist garden was rosy.

However, the IMF’s , immediately before the pandemic, was all about a shrinking global economy. The “cause” at that stage was the trade war between China and the United States. We are expected to have a collective memory of a couple of months and to accept without question the latest pronouncement from the mouthpieces of capital.

Gourinchas said combatting inflation should be the top priority for policymakers, but inflation is but one part of the crisis. Gourinchas supports the near-collective decision of central banks around the world to raise interest rates, but has little regard for the pain that will flow to those least able to withstand higher mortgages and a rising cost of living. 

His advice was that “tighter monetary policy will inevitably have real economic costs but delaying it will only exacerbate the hardship”.

“Central banks that have started tightening should stay the course until inflation is tamed,” he said.

“[Governments] could cushion the impact of the slowdown on the most vulnerable through targeted support,” he added. “But the help should be paid for by higher taxes or lower public spending to ensure the job of central banks was not made harder.”

The relationship between the institutions of capitalism and the state has never been more clearly seen. Capital demands, its institutions advise, governments follow and the working class pays the price.