As a recent editorial in the Financial Times pointed out, the era of low interest rates is well and truly over. What does this mean for global capitalism? 

In the years between 2008 and 2022, the world became accustomed to extraordinarily cheap money. It all started when central banks cut interest rates following the financial crisis in a desperate attempt to encourage investment by reducing financing costs. 

But, as Keynes could have told them, simply reducing the costs of taking out credit didn’t do much to boost growth when investors were still reeling from the impact of one-in-a-generation financial crisis and remained deeply uncertain about the future. 

It was in this context that central bankers began pumping money into the world economy in an unprecedented display of coordinated central planning within nominally free market economies. 

Central banks purchased assets from private investors, leaving them flush with cash and desperately seeking out high returns. This search for yield produced the odd economic conditions of the last decade: from the boom in fast-growing but unprofitable tech companies to an unprecedented wave of mergers and acquisitions to a bubble in cryptocurrency markets.

Extraordinarily loose monetary policy pushed up asset prices across the board, making asset owners extremely wealthy in the process. It also allowed unviable businesses and impoverished working people to cover over the cracks in their balance sheets with every greater borrowing. 

But this model of debt-fuelled growth was never sustainable. 

As economists like Joseph Schumpeter realised, capitalism requires creative destruction to maintain its dynamism. Financial crises are critical parts of capitalist development because they clear out old, unproductive firms to make space for newer, more innovative ones. 

But in every crisis since the 1980s, central banks have intervened to ensure that large, powerful corporations and financial institutions are protected from the consequences of their own greed and recklessness. 

In doing so, they have created economies dominated by sclerotic, unproductive monopolies that grow through predatory rent extraction and symbiotic relationships with capitalist states. 

High interest rates will not undo this model — in fact, they will embed it. The largest and most powerful firms will take advantage of their cash piles and close relationships with financial institutions to buy up their struggling competitors, consolidating their market-dominating positions. 

As their market power grows, they will become even more deeply embedded in political life, making any attempt to constrain them much less likely to succeed. Meanwhile, the massive banks that lend to these corporations will consolidate their dominance over their smaller competitors, whose clients are less likely to survive tougher economic conditions.

The costs of this model are borne by those least able to bear them. 

An economy dominated by powerful oligopolies is one in which investment and productivity are lower, which translates into lower employment and wages. It is also an economy in which large employers have an immense amount of power over their workers, many of whom have little choice other than to work for the one dominant employer in their area. 

And while the move to an economy dominated by sectors like finance and big tech appears to herald a shift away from concrete production, this production is still taking place, though today it is out of sight of consumers in the rich world. 

Some of the poorest people on the planet labour under horrendous conditions to produce the commodities the rich world has come to rely on, and the immense power of corporations headquartered in the global North makes it harder for workers to fight back. 

The governments of these poor countries, meanwhile, are weighed down by huge amounts of unpayable debt. Many poor states are now spending more in interest on existing debts than they are on their entire health budgets. 

While high interest rates are making many of these problems worse, they cannot be undone simply by a return to loose monetary policy. 

In any case, interest rates are likely to remain elevated for the foreseeable future. Profound economic and social shifts like demographic ageing, deglobalisation and climate breakdown are creating structural impediments to capital accumulation.

On their own, each of these shifts would make it harder to produce the goods we rely on to survive. Together, they are paving the way for a new era of scarcity capitalism. 

We are moving into a world in which natural resources and labour are likely to become more expensive (no matter how hard capital tries to keep wages down), and in which disturbances to production — like those caused by the pandemic, Trump’s trade war, or Russia’s invasion of Ukraine — will all become much more frequent. 

This is a world in which conflicts between different social groups cannot be overcome by attempts to expand the economic pie for everyone. This is a world of real and deep distributional conflicts that will create winners and losers for decades to come.

In other words, this is a world of escalating class conflict. 

As I argued in my piece earlier this month, the only populist strategy the Right can rely on in this context is escalating culture wars and conspiracy theories. It is up to the left to keep their sights firmly focused on questions of production and reproduction — in other words, questions of how we survive as a species.