Recent years have witnessed a number of big shifts in the macroeconomic environment in the UK and globally that affect how policymakers, economists, and the general public view the economy. The first has been the dramatic return of inflation after a period in which it had all but disappeared. With the reemergence of inflation, central bank interest rates have been increased, including by the Bank of England, with consequences for household and consumer debt servicing and for business investment.

Academic and policy debate has been raging about the source of this new inflation, which can hardly have been driven by wages given that it arrived on the back of an extended period of wage stagnation. It has been dubbed in part a form of “sellers’ inflation” by economist Isabella Weber and her colleagues.[58] These economists have pointed out that corporations are keeping prices high even when supply chain pressures have eased – a form of profiteering in an environment in which companies are able to hike prices above rising costs without suffering any falloff in demand. As a result, there have been calls for price controls and other anti-profiteering measures, rather than increases in interest rates, as the appropriate policy response.

The shape of the UK economy and the patterns of British politics suggest that, far from a temporary aberration, the new inflation and cost-of-living crisis are likely to become structural features of a ‘new normal’ in which there is major downward pressure on living standards and an ongoing crisis of debt and affordability.

The round of inflationary pressures unleashed as a result of the U.S.-Israeli war of choice on Iran are currently being discussed as if they are conditions that will come and go – “short term pain for medium term gain,” in the grotesque formulation of President Donald Trump – but that is just what was said of the Ukraine war energy crisis. In fact, between that and COVID-19 we have seen the onset of a new period of higher inflation and instability which looks set to become part of a permanent new state of things for most people.

We are also entering into the period in which the full impact of the climate transition will begin to be experienced. Far from a Green New Deal, this is manifesting as the mother of all ‘Structural Adjustment Programmes,’ with a permanent downward structural adjustment of living standards in the Global North and looming catastrophe in parts of the Global South.[59]

Absent a major shift in political direction, this is as likely if not more so to be imposed upon Britons as upon the residents of all the other societies across the advanced industrial and postindustrial world.

The political backlash from such febrile conditions, on top of what is already several decades of austerity and wage stagnation, are likely to be extraordinary, and are certainly fertile breeding ground for a resurgent authoritarianism and fascism.

4.1 Inflation

Over the past several decades, Britain has experienced three distinct inflationary periods, all of which left a decisive mark upon its subsequent political and economic direction.

Following a period of deflation in the 1930s, inflation surged during the Second World War, peaking at 17% in 1940 as wartime spending and supply constraints drove prices upward. The next major spike occurred in the late 1970s when inflation soared to 24% in the wake of the 1973 oil crisis, which sent energy prices skyrocketing and triggered a broader economic shock, and then again in 1980 largely due to the second oil shock in 1979 and the resulting global stagflation. After nearly 30 years of relative stability, inflation shot up again in the early 2020s, reaching 11.6% in 2021.[60]