Today, the issue of inflation threatens to help put Trump back into the White House. As a capitalist politician, Harris can neither explain nor deal with the issue adequately. That is why socialists must take it up. We hope this explanation will help people who want to discuss the issue. In this article we will show:

• The late 1970s and early ‘80s was a far greater inflationary period. It was caused by huge amounts of dollars sloshing around. The capitalists used this to raise prices. They didn’t fully reinvest, because that wasn’t sufficiently profitable.
• International competition due to globalization made it impossible to raise prices so much in following decades.
• The brief lessening of this international competition during the pandemic enabled the capitalists to jack up their prices again.
• If he gets back into power, Trump’s tariff plans will enable the capitalists to jack up prices again.
• As a capitalist politician, Kamala Harris cannot explain how capitalism itself is the real root of inflation, nor does she have any solution.
• Trump the megalomaniac and nihilist will create absolute chaos at best if he gets back in. That includes in the economy.

Past inflationary cycles
Prices in the US are affected by the international role of the dollar. The fact that it is the only global currency helps shield the dollar from a collapse in value relative to other currencies. Unsustainably large national debts, for example, would lead world capitalists to shun the Mexican peso, the Brazilian real, the Indian rupee or any other currency. This would cause that currency’s value to drop like a stone and prices to rise in the home country. But capitalists around the world cannot shun the dollar. Despite that, the U.S. experienced serious inflation in the late 1970s and early ‘80s. Here are the percent increases of the “consumer price index” (CPI), which is used to measure inflation in the US:

• 1976: 5.8% increase
• 1977: 6.5% increase
• 1978: 7.6% increase
• 1979: 11.3% increase
• 1980: 13.5% increase
• 1981: 10.3% increase

Thereafter, inflation gradually subsided to between 1-3%.

Keynesianism tried to equalize “supply” and “demand” to keep the economy on an even keel. It was unable to overcome the contradictions inherent in the capitalist economic system.

Keynesianism
What happened was this: After WW II, The US capitalist class had decided that it could not afford major depressions like its system had endured before the war. They adopted the strategy advocated by John Meynard Keynes, what was known as Keynesianism. Under this strategy, the federal government would increase the federal spending over and above what it took in in taxes, thereby creating a deficit. This would put money in workers hands. The idea was that this would “smooth out” the swings towards recession and back. The increased buying power of workers would boost profits which would encourage capitalists to invest, thereby creating more jobs. That was the idea. Internationally, U.S. capitalists reassured the rest of the capitalists that the dollars that they held would not be reduced in value. They did this by guaranteeing that their dollars would be convertible to gold at $35/ounce.

With US capitalists investing in rebuilding Europe for years following the war, and the lack of serious international competition, Keynesianism somewhat worked for a while.  But its drawback was that huge amounts of money were sloshing around in the system and the rate of profit was declining anyway.

The first major sign of trouble occurred when Nixon “closed the gold window”. In 1971, he unilaterally announced that dollars would no longer be converted to gold at a set price. But it was too late. By the end of the decade, the capitalists took advantage of the huge amount of dollars floating around and started raising prices; inflation took off, as the statistics show. Not only did inflation take off, but capitalists were experiencing a falling rate of profit so they were reluctant to invest. This meant that the economy was tending to stagnate while still experiencing inflation. This became known as “stagflation”. (See Oaklandsocialist’s pamphlet The Nature of this Period for a further explanation.)

The decades that followed
What happened in the following decades helps us understand the more recent inflationary bout. After a temporary respite, deficit spending resumed. This again left huge numbers of dollars sloshing around, chasing a relatively stagnant number of goods.

However, from the 1980s onward the capitalists couldn’t use this to increase prices so much (inflation) because of another development: the globalization of the economy.

1970s and beyond: Real world trade grew faster than production, increasing competition and keeping prices down. It also kept down the price of labor power/wages.

One statistic shows what happened: From 1980 to 2002, real world trade grew at a rate 50% greater than the growth of world output. This increased competition between US and other capitalists, forcing them to keep prices down and swallow lower profits. (See graph.) The fact that it was international competition that warded off inflation is shown by the one consumer item that did experience massive inflation during this entire period: Housing prices. Since there is a limited supply of land, and since houses can only really be produced domestically, that industry was largely shielded from global competition. As a result, housing prices increased by 353% from 1980 to 2000.

Meanwhile, a major new industry developed: the tech industry. This not only encouraged investment, it also enabled the globalization of investment, production and distribution of goods. In other words, the globalization of capitalism itself.

Inflation under Biden
Now let’s look at the inflation figures under Biden. The Bureau of Labor Statistics shows them as follows:

• 1/2020: 2.5% (on an annualized basis)
• 4/2020: .3%
• 1/2021: 1.4%
• 6/2022: 9.1%
• 6/2023: 3%
• 8/2024: 2.5%

In other words, there was a brief inflationary spike in 2022 which quickly subsided. The problem for most people today is that while the rate of increase of prices may have slowed, the absolute prices did not come down. This puts the squeeze on workers and others.

In previous years there were similar increases in debt, both personal, business and government. But this time there was a decline in international competition. Statista.com shows that global trade more or less increased at the same rate as global production untilthe pandemic hit in 2019. Then there was a sharp decline in global price competition, and the capitalists took full advantage of it.

This is a graph of “supply chain pressures”. Note the jump in “supply chain pressure” leading up to 2022. What this really means is a sharp DECREASE in world trade. The capitalists took full advantage of this to raise prices and boost profits.

They had already sharply limited domestic competition by consolidation. Inequalitymedia.org pointed out “Only a few entities have access to the land and pipelines that control the oil and gas powering most of the world…. The (disposable diapers) market is dominated by P&G and Kimberly-Clark, which—NOT entirely coincidentally—raised its prices at the same time…. There are only four major meat processing companies in America, which are all raising their prices and enjoying record profits.”

Where the increased prices went

Marxist economist Michael Roberts in his blog “Thenextrecession” is more specific. He shows that corporate profits compose nearly 54% of recent price increases as opposed to 38% from “non labor” inputs. As for labor costs, they composed a trifling 7.9%.

While inflation has cooled to “normal” rates, consumers aren’t feeling that cooling very much because lowering the rate of increase doesn’t lower the actual price.

Donald Trump
As befits any reputable U.S. capitalist politician – never mind a disreputable one – Donald Trump is making hay over the issue. He’s playing into the simplistic tendency of US voters to credit or blame the sitting president for any change in the US economy, regardless of whether that president deserves any blame or credit. WUSF.org explains that Trump claims that the Biden/Harris “American Rescue Plan” is the cause. WUSF further writes: “The $1.9 trillion plan, supported by only Democrats, included $1,400 direct payments to about 85% of Americans, $360 billion for state and local governments and $242 billion in expanded unemployment benefits.” (So much for the claim of most socialists that Biden followed the neoliberal agenda!) People were only too happy to get that money and to this day even local Republican politicians are happy to take credit for local and state projects funded by this act. But never mind; consumers are directly feeling the pinch right now, so why not try to ride it back into the White House?

One of Trump’s main prescriptions is to “drill, baby, drill” for oil. Aside from the environmental consequences, it takes years to find oil deposits and develop wells. More to the point, oil prices are set internationally, and no action by any president can do more than marginally affect those prices.

Another major part of the Trump economic agenda is to lower taxes on corporations and the rich. This is based on the discredited claim that if profits increase, the capitalists will invest more, thereby creating more jobs. The corollary to this approach is that workers must take cut after cut in pay to compete with each other – in other words the never ending “race to the bottom”. This is the historical result of Reagan’s now discredited “trickle down economics”.

Trump’s main economic agenda is to increase tariffs, which he claims will increase jobs in the U.S. Jason Furman, former chair of then-President Trump’s Council of Economic Advisors, wrote in the Wall St. Journal that “Mr. Trump… has proposed 10% tariffs on all U.S. imports, as well as 60% on Chinese goods. [These tariffs] would cover $4 trillion [worth of imports]….” Furman wrote that “Harris is the safer economic choice…. I recommend voting accordingly.” Trump’s tariffs would mean either a sharp decline in imports or an increased price for them. More likely some of both. U.S. producers would react exactly as they did when global trade was briefly disrupted by the pandemic – they would boost their prices. And why not? As Thomas Murphy the former chair of General Motors said, “General Motors is not in the business of making cars. It is in the business of making money”, in other words, profits. What is true for cars is true for the production of diapers, meat or any other product or service. Any self-respecting capitalist will raise prices just as much as “the market” will allow.

Kamala Harris
Harris initially blamed corporate “price gouging” for the inflation. She called for a federal ban on corporate price gouging on groceries. But what does that mean? How can such a “ban” be enforced? Through price controls? In 1973, then-President Nixon set price

Nixon announces meat price controls. It did not work as planned.

controls on meat. I remember the result clearly: We couldn’t find meat in the grocery stores!

According to the NY Times “the [price gouging] message polled well with swing voters.” Nevertheless, in the last month, Harris has stopped talking about price gouging, partly because she has no real answer for what to do about it and partly because, as the NY Times also explains she is “trying to strike a more business friendly tone.”

It is exactly this “more business friendly tone” that inhibits her all along the line: 

• It inhibits her from directly and clearly explaining the underlying cause of the recent inflation since such an explanation would necessitate explaining that the capitalists are in business to make profits not products.
• It inhibits her from showing the full inflationary impact of Trump’s tariff proposals, for the same reason.
• It inhibits her from attacking Trump’s broader economic proposals for what they are – trickle down economics since the entire economic system upon which she and her party are based depends on maintaining profits.

Nor is increased world trade a solution for the working class. World trade increases price competition, and there is one key price that workers must never forget: the price of their ability to work. In other words, wages. World trade boosts the competition among workers globally for who will work for less. Manufacturing workers see it. Call center workers see it. Now, even tech workers are seeing their jobs being farmed out to low wage countries. Lower wages in one sector drives down wages in all sectors. So Harris cannot explain the inflationary effect of tariffs, because she cannot fully explain how increased global competition lowers prices, which includes the price of labor power aka wages. Harris cannot explain all this.

Harris’s political evolution
The policies of all top capitalist politicians are determined by two factors: One is the needs of US capitalism, and the other is the base of the particular politician. Biden, for example, supported neoliberal austerity measures when it suited the needs of US capitalism. It was the same for his support for increased repression of black people. In 2020, those needs shifted and so did Biden.

It’s similar with Harris. When she ran for the Democratic presidential nomination in 2016, her base was still mainly with the “progressive” California Bay Area wing of the Democratic Party. She played to that base, criticizing Biden for opposing bussing, and she called for an end to fracking. Once she became vice president, her base shifted and so did she. That shift was greatly accelerated since she became the presidential candidate. There is no major “progressive” or liberal base in the Democratic Party nationally. On the other hand, the overwhelming majority of the capitalist class supports Harris, as shown by her endorsement by such right wing Republicans as Dick Cheney and Trump’s former top economic advisor Jason Furman, whose Wall St. Journal article is quoted above.

This not only gives her the hope of winning over conservative voters who don’t like the megalomaniacal nihilist Trump; it also provides her with a big fundraising advantage over Trump. And anyway, if she ran to the “left” it would split her party, leaving her campaign apparatus divided and semi-isolated even within her party.

So, Harris is caught between the devil and the deep blue sea. She can neither deal with the economic issues satisfactorily nor make a turn to the “left”. Whether her half steps will be sufficient to overcome Trump’s  lunacy, nihilism, and bigotry remains to be seen. 

We conclude with our original six points in the hope that this article will help workers and young people better understand and discuss this issue with their friends and co-workers:

• The late 1970s and early ‘80s was a far greater inflationary period. It was caused by huge amounts of dollars sloshing around. The capitalists used this to raise prices. They didn’t fully reinvest, because that wasn’t sufficiently profitable.
• International competition due to globalization made it impossible to raise prices so much in following decades.
• The brief lessening of this international competition during the pandemic enabled the capitalists to jack up their prices again.
• If he gets back into power, Trump’s tariff plans will enable the capitalists to jack up prices again.
• As a capitalist politician, Kamala Harris cannot explain how capitalism itself is the real root of inflation, nor does she have any solution.
• Trump the megalomaniac and nihilist will create absolute chaos at best if he gets back in. That includes in the economy.