Stagflation Incoming: The Donald Ain’t Gonna Like What Happens Next!

by David Stockman | Apr 27, 2026 | 

Here is a salient place to start regarding the economic impact of the Donald’s misbegotten war on Iran: To wit, approximately 7 billion ton-miles of freight moves by truck each and every day in the USA, which heavy truck fleet consumes upwards of 2.9 million barrels per day (mb/d) of diesel fuel.

Alas, the price of diesel fuel was about $3.55/gallon both a year ago and as of early January 2026, but has since soared by more than+$2.00 per gallon to $5.60. That’s a 56% rise in the cost of pumping goods and commodities through the arteries of the US economy. On an annualized basis, the diesel fuel bill for the US truck fleet went from $155 billion per year to $250 billion per year at current oil prices.

The big question, of course, is through which channel these drastically higher fuel acquisition costs will be absorbed – in higher prices or reduced output? And that pertains not just to the microcosm of the trucking sector, but the entire GDP now being battered by the Donald’s elective war-based dislocation of the world’s 175 million BOE/day oil and natural gas markets.

We’d bet it will be a combination of both inflation and deflation, otherwise known as stagflation. The mix of these outcomes depends upon supply and demand conditions in individual sectors of the economy in part, but also, and ultimately and more importantly, on the Fed. That is, whether the nation’s central bank pumps incremental demand into the economy via credit expansion with a view to “accommodating” the soaring price of energy today, and, soon, food and other commodity inputs to GDP, too; or holds firm on the printing press dials and allows the now cresting energy and commodity shocks to work their way through the interstices of the $30 trillion US economy.

Of course, during the previous comparable petroleum supply disruption during the 1970s, the Fed made the huge mistake of printing the money to counteract what was a “supply shock” in the form of soaring petroleum prices. But that led – just as sound money advocates had always held – to double digit increases in the general price level by the end of the decade, and thereafter the trauma of the Volcker administered application of the monetary brakes.

With the Fed fixing to welcome a new Chairman, as today’s congressional hearings remind, it is therefore a question of whether or not the Kevin Warsh Fed will want to take its place in the monetary policy villains gallery along with Arthur Burns and the hapless William G. Miller.

We think not. We actually believe that for the first time since Volcker, we are about to get a Fed chairman who understands the requisites of sound money and noninflationary finance, as well as the profound error of Keynesian demand management at the central bank.

And not only that. As far as we can tell, he also has the experience from his prior service on the Fed during the so-called Great Financial Crisis and the cajones to lean heavily against the supply shock now emanating from the Persian Gulf.

Of course, in a perfect world of honest money and free markets – including in the production of money and credit – there wouldn’t be any central bank “leaning” to do. Under an honest money gold standard, for instance, the impending petroleum supply shock would cause relative price changes, thereby generating a sharp curtailment of activity in petroleum intensive sectors and the reallocation of activity, output, jobs and capital to less petroleum intensive sectors. That’s what the miracle of free markets do when they are allowed by the state to operate.

We obviously do not have anything close to free money and capital markets today. Yet we may be lucking out with the arrival of a new Fed Chairman who might well attempt to stand up a sound money proxy – at least in part – to simulate the deflationary and re-allocative impulses that would otherwise arise in the face of a world scale supply shock. That is to say, Warsh may well allow the incoming Persian Gulf supply shock to curtail output in heavily impacted sectors rather than monetize it, as did his failed predecessors during the 1970s.

Moreover, one thing which may well help Walsh lean in this anti-Keynesian direction is the the need to avoid the tattered legacy of the private equity based deal lawyer who proceeded him. As it happened, Powell had no clue that the blue suits who soon sourrounded him at the Eccles Building were wrong-headed Keynesian monetary statists through and though.

Accordingly, when the far smaller supply shock from the Black Sea dislocation at the on-set of the Russia-Ukraine War came cascading through the global energy and food commodity markets, Powell joined the Burns/Miller brigade and kept on accommodating.

That’s evident in the graph below, which depicts the domestic services inflation rate excluding energy. This is the Fed’s go to inflation metric because it arguably measures a subset of prices in the US economy that are mainly driven by so-called domestic “demand”, which is the very thing the Fed claims to be expert at calibrating.

We think Fed “demand management” is pretty much mischievous nonsense. The fact is, however, when the Ukraine War began in February 2022, the domestic services less energy index was already rising at a 4.1% Y/Y rate. So there was no room for “accommodation” at all.

In fact, the Ukraine War supply shock had caught the Fed with its monetary pants down. The Fed funds rate was effectively zero in nominal terms at the time (February 2022) and had been pinned to the zero bound for the previous 22 months. Thereafter Powell and his merry band of money printers kept kidding themselves into believing that the Ukrainian War inflation surge was “transitory” and that a Volcker style slamming of the monetary brakes was unnecessary.

As is evident in the chart, however, the Fed’s tepid 25 basis points increases month after month in its target Fed funds rate was blatantly too little and way too late. By February 2023, the very inflation metric that the Keynesian central bankers claim to heavily influence – domestic services less energy services – was leaping higher at a +7.3% Y/Y rate.

By then, of course, and with double digit energy and food inflation layered on top, headline inflation was running at 40-year highs and knocking on the door of 1970s style double digit inflation.

We think this history is profoundly relevant to where a Kevin Warsh-led Fed may come out because it just so happens that the Y/Y rate on this key metric stood at +3.05% in March 2026 or about where it had been in October 2021 on the eve of the “Powell Inflation”.

We don’t think Kevin Warsh, who is a real student of money and economics, wishes to be placed next in line in the Burns/Miller/Powell gallery of monetary villains.

That is especially the case when you look at the history of the Fed’s so-called monetary target adjusted for the prevailing (Y/Y) inflation rate. To wit, there is no logical or sustainable world in which the inflation-adjusted or “real” cost of overnight money can be negative for any even limited period of time.

That’s because negative cost overnight money in real terms is truly the mother’s milk of speculation – especially on Wall Street among the hedge funds and fast money operators, but on the main street economy, too. Stated differently, cheap money everywhere and always causes excessive speculation, imprudent leverage, debt accumulation, financial asset bubbles, capital malinvestment and economic waste. But above all else it also fuels an inflationary rise in the general price level owing to artificial credit-fueled demand uncoupled from any prior and corresponding increase in supply.

In this context, the chart below tells you all you need to know about what the Warsh Fed will be up against, and also the lessons of the 2022-2023 error by the Fed in its delayed and languid reaction to the Black Sea commodity shock. To wit, the inflation-adjusted Fed funds rate in Q2 2022 when measured by the inflation metric the Fed swears by – the domestic services CPI less energy services – -was negative -4.4%.

Surely that was a signal that the money-printers were way over the end of their skis. That’s especially because the Fed funds rate had been negative in real terms for 57 quarters running, going all the way back to Q1 2008, when the real funds rate had last been slightly positive.

But here’s where the inflationary gale force was gestated. It actually took the Fed more than three years – until Q2 2025 – to get the Fed funds rate positive in real terms, and then only marginally so at just +0.75%. Indeed, it is nothing less than the big pool of negative real cost money printed by the Fed during those three years that rocked the US economy with an inflationary outbreak that is still not fully extinguished.

In fact, as the US economy now begins to absorb the far more powerful supply shock waves emanating from the Persian Gulf, the real Fed funds rate was still only a scant +0.66% as of Q1 2026. In that circumstance, and given the near miss into runaway double digit inflation during the mid-2022 Black Sea supply shock, we think the incoming Warsh Fed is not about to run a repeat of 2021-2022.

The more likely course is actually suggested by the left-hand side of the graph, which shows that the real funds rate measured with this metric hovered in the +2.5% range or higher during the salad days of non-inflationary growth of the 1980s and 1990s. That is to say, Kevin Warsh is likely to prove to be more of a Volcker/Reagan sound money central banker than we have experienced since Alan Greenspan sold his gold standard bona fides for a stint as the world’s most famous money-printing after the dotcom crash.

So the question recurs. What is likely to happen to the alleged Trumpian Golden Age when the Persian Gulf Supply shock smacks up against the incoming sounder money Fed under Kevin Warsh?

In a word, we think the US economy is already teetering on the edge of recession, waiting for the proverbial wing-flap to tip it over into contraction. After all, it’s already evident that the one bright spot in the US economy during the Donald’s second go round – capital spending – is purely an artifact of the stock market bubble in AI.

For want of doubt, the table below shows Capex spending for AI and data centers and compares it to the second column, which is the standard measure of business fixed investment in structures, equipment and intellectual capital as reported in the income and product accounts. It is notable that the former accounted for just 2.5% of business capital investment in 2020, but grew by $188 billion in 2025 versus prior year.

At the same time, total business investment rose by just $228 billion in 2025, meaning that the AI/data center boom accounted for fully 82% of total business investment spending growth in the US economy during 2025.

The final two columns show the same data in constant dollar terms. Whereas the reported data shows that real nonresidential fixed investment investment (fifth column) rose by a seemingly robust 4.1%during Trump’s first year, capital spending excluding the AI bubble actually shrank at a -0.4% annual rate.

As it happened, the latter had actually grown by 6.7% per annum during the time of Sleepy Joe (2024-2024) owing to the unsustainable stimulus of borrow, spend and print after the pandemic collapse in the spring of 2020.

So “Joe Biden” therefore gets no plaudits for the artificially bloated economy he inherited from Trump 45 and the money-printing excesses of the Powell Fed. Still, it can be well and truly said that the US economy was already positioned on a banana peel when the Donald elected to blow up the Persian Gulf for no good reason of homeland security.

Of course, the Donald makes up the numbers to suit his glandular impulses whenever he takes to his Truth Social soapbox. On that forum, he has claimed, for instance, that the US is in the middle of a booming recovery of the manufacturing sector owing to his big beautiful tariffs.

Alas, his victory on that front is about is vacuous as are his daily claims to having won the war against Iran. There is not a shred of truth to it, as the constant dollar level of manufacturing shipments depicted in the graph below clearly shows. To wit, real shipments have flat lined for years and stand 13% below their recent peak in Q4 2007.

In short, the Persian Gulf supply shock is about to monkey-hammer the US economy good and hard. And then the AI bubble in the stock market will bust – even as there will be no money-printers at the central bank waiting to bailout the mess.

So we welcome the impending arrival of Kevin Warsh at the Eccles Building – a man who at last may partially fill Paul Volcker’s big shoes. But we are quite sure that at the first opportunity, the Donald’s stubby little fingers will be pounding on the Truth Social keyboard about another “stupid” traitor who failed to do his bidding.

Welcome back to Trumpified Washington, Kevin!

David Stockman was a two-term Congressman from Michigan. He was also the Director of the Office of Management and Budget under President Ronald Reagan. After leaving the White House, Stockman had a 20-year career on Wall Street. He’s the author of three books, The Triumph of Politics: Why the Reagan Revolution Failed, The Great Deformation: The Corruption of Capitalism in America, TRUMPED! A Nation on the Brink of Ruin… And How to Bring It Back, and the recently released Great Money Bubble: Protect Yourself From The Coming Inflation Storm. He also is founder of David Stockman’s Contra Corner and David Stockman’s Bubble Finance Trader.

Socialism Without Illusions

By Mark C Rosenzweig

April 26, 2026

Source: Originally published by Z. Feel free to share widely.

Image by Anarcho-Syndicalist Federation/Wikimediacommons, licensed via CC BY 2.0

Among leftists, the question of why one continues to use the word “socialism” can for most seem almost unnecessary—until one notices how unstable the term has become even within our own ranks. We invoke it constantly, but often as shorthand for very different and sometimes incompatible political projects. For some it means Scandinavian social democracy with better branding. For some it means municipal reformism plus militant rhetoric. For some it means the memory of October before Kronstadt; for others, after Stalin but before neoliberalism; for others still, worker self-management, council democracy, or simply anti-capitalism without a worked-out institutional horizon. The word remains in circulation not because we have clarified it, but because the conditions that made it necessary remain with us, and because no substitute has displaced it.

The social relations socialism arose to confront have not disappeared. Capital remains the organizing principle of social life. Production is subordinated to accumulation rather than need. Wealth and power are concentrated to grotesque degrees. Labor remains fragmented, disciplined, and increasingly precarious. Social reproduction is privatized and destabilized. Public life is hollowed out and increasingly administered on behalf of markets. Democratic forms survive in attenuated ways, but democratic control over economic life remains largely nonexistent. The ecological crisis deepens under imperatives of endless growth and competition. War and militarization remain structural features of the world system. None of this is new. What is new is only the degree to which these realities are normalized. Under these conditions, socialism remains the name of the unresolved historical question.

I use the word historically, not devotionally. I do not mean by it a model, a state form, or a ready-made program. I mean a historical current of struggle and thought stretching from the nineteenth-century workers’ movements through the revolutionary ruptures of the twentieth century, through anti-colonial national liberation movements shaped by Marxist and socialist traditions, through the defeats, bureaucratizations, and ideological decompositions that followed. The word contains the Paris Commune and the SPD; 1917 and Kronstadt; the factory councils and the Five-Year Plans; Spain in 1936 and Hungary in 1956; Bandung and Havana; May ’68 and Solidarnosc; Eurocommunism, Western Marxism, Third World Marxism, council communism, libertarian socialism, and the long post-1989 fragmentation of the left. It contains aspiration, defeat, betrayal, adaptation, and survival.

That historical density matters. I am suspicious of attempts to escape it through linguistic reinvention. “Post-capitalism,” “solidarity economy,” “economic democracy,” “commons-based production”—these may illuminate particular aspects of the struggle or identify institutional fragments worth fighting for. But they often function as evasions, whether consciously or not: efforts to retain the aspiration while shedding the burden of history. Yet the burden of history is not incidental. The defeats of the twentieth century are not detachable from the future of emancipation. The bureaucratic degeneration of revolutionary projects, the integration of social democracy into capitalist management, the failures of developmentalist state socialism, the limits of national liberation regimes, the collapse of labor movements in the metropole—these are not embarrassments to be rhetorically managed. They are constitutive of our political situation.

This is why contemporary electoral revivals of “democratic socialism” should be approached soberly. The recent rise of Zohran Mamdani in New York, following Sanders and the AOC moment, has once again made “socialism” a visible and publicly claimed identity in U.S. politics. That matters. It breaks ideological ground. It normalizes anti-capitalist language in a country where anti-communism long disciplined political speech. It introduces younger layers to ideas and demands once excluded from legitimacy.

But leftists should be clear-eyed about what this is and is not. Mamdani is not a harbinger of dual power. He is not the opening phase of revolutionary rupture. He is a democratic-socialist municipal executive operating within the fiscal, legal, and institutional constraints of capitalist urban governance. His program—rent regulation, public transit expansion, municipal provisioning, progressive taxation, childcare, and modest decommodifying reforms—is intelligible as left-Keynesian urban reformism. Such reforms may materially improve working-class life and can shift political consciousness. They should not be dismissed out of sectarian reflex. But neither should they be mistaken for socialism in the historical sense.

The pattern is familiar. Electoral socialists reopen ideological space. They weaken neoliberal common sense. They attract militants and sympathizers into political activity. Then the machinery of governance imposes compromise, adaptation, and selective retreat. The right mobilizes anti-socialist panic. Liberals insist on moderation and discipline. Parts of the radical left respond with denunciation, often abstractly, as though structural constraints were personal betrayals. The cycle repeats. The problem is not the moral weakness of individual politicians. The problem is structural: capitalist states, especially at the municipal level, are not neutral instruments awaiting capture. They are institutions embedded in property relations, fiscal dependency, and class power.

This does not mean electoral work is useless. Nor does it mean every reform is merely recuperation. Reforms can improve lives, build confidence, create organizational openings, and expose structural limits. But without independent class organization, without durable institutions rooted in labor and communities, without forms of struggle capable of contesting capital outside electoral cycles, municipal socialism becomes administration. At best, it can become a school in political contradiction. At worst, it becomes branding for competent management.

And this brings us back to the word itself. “Socialism” remains worth using precisely because it names more than redistribution, more than municipal reform, more than a more humane administration of capitalism. It names the abolition of class domination, the democratization of production, the socialization of economic power, and the transformation of social relations at their roots. It names a break, not merely an adjustment.

Yet to speak that word seriously now means speaking after defeat. After Stalinism. After the crushing of workers’ insurgencies. After the domestication of social democracy. After neoliberal globalization and deindustrialization. After the decomposition of organized labor in much of the capitalist core. After the conversion of politics into spectacle and administration. After the collapse of the Soviet bloc and the ideological triumphalism that followed. After the fragmentation of the left into moral communities, activist NGOs, electoral machines, and micro-sects.

The task now is not to revive formulas. It is to think strategically in the actual conditions we face while retaining continuity with the historical project. I continue to use “socialism” because no softer word adequately names the scale of transformation required. Because anti-capitalism alone describes opposition but not an alternative. Because “economic democracy” is too narrow. Because “post-capitalism” is too abstract. And because abandoning the word concedes too much—to the right that demonized it, to liberalism that diluted it, and to defeat itself.

The conditions remain. The antagonisms remain. The need remains. So the word remains—not as nostalgia, not as branding, and not as catechism, but as the still-unfinished name of a struggle to move beyond a world organized around profit, exploitation, hierarchy, and the commodification of life.

Revisiting Permanent Revolution in a Time of Permanent Crisis

By Michael John-Hopkins

April 26, 2026

Source: Originally published by Z. Feel free to share widely.

Image from Friends of the Earth website, https://www.friendsoftheearth.ie/news/campaign-launch-act-local-for-faster-and-fairer-climate-acti/

The 2026 escalation of conflict and atrocity crimes in the Gulf is not simply another geopolitical crisis. It is becoming a systemic global shock, exposing the fragility of an economic order built around energy dependence, concentrated chokepoints, extended supply chains and uneven vulnerability. It is also forcing millions of people into forms of precarity that, for many in the Global South, have long been a daily reality, and which is undoing decades of economic development in regions around the world.

The discussion that follows uses the current Gulf crisis as a diagnostic shock, a moment in which the normally opaque architecture of the global order comes into clearer focus, revealing both its fragility and the harms it causes, displaces and normalises. It revisits the concept of permanent revolution not as a slogan of inevitable rupture, but as a way of thinking about systems that can no longer resolve the crises they generate, before turning to human-scale economics as one possible constructive orientation beyond permanent crisis.

Dire Straits: A Shock That Reveals the System

The disruption of energy flows through the Strait of Hormuz, through which roughly one-fifth of global oil supply normally passes, has triggered what analysts describe as an unprecedented supply shock. Oil prices have surged. Supply chains are fracturing. Inflationary pressures are building across major economies.

But the effects do not stop at energy; they also extend to, as we are all rapidly experiencing, connected commodity markets and interest rates. Fertilizer markets are tightening, threatening global food production. Manufacturing inputs, from helium to semiconductors, are being disrupted. Airlines are cancelling flights as jet fuel becomes scarce. Governments are declaring energy emergencies, rationing fuel, and scaling back state functions.

What appears, at first glance, as a crisis caused by an illegal war of attrition started by the USA and Israel, is horizontally escalating to attacks on strategic energy and logistics targets, which quickly reveals something deeper. The global economy has been constructed around hyper-fragile supply chains, concentrated maritime chokepoints, and a relentless prioritisation of efficiency and dependencies over resilience. The present shock does not create these vulnerabilities. It exposes them.

In doing so, it invites a more unsettling question, namely what if the real problem is not the current Gulf war itself, but the system that makes such crises both inevitable and unmanageable, and what if we are now truly at a fork in the road?

The System that Cannot Stabilise Itself

Modern capitalism is often described as adaptive and resilient. Yet the current moment suggests something closer to the opposite, namely a system that depends on stability that it is structurally incapable of reproducing. Three features stand out.

First, infrastructural fragility. The global economy relies on narrow maritime chokepoints, tightly synchronised supply chains, just-in-time production models and economic dependencies. When a single node fails, cascading effects ripple across entire systems with uncontrollable effects.  War accelerates these failures, but climate breakdown is already doing the same work more slowly and relentlessly, through floods, fires, droughts, and extreme weather.

Second, the crisis of insurability, risk, and loss allocation. Insurance is foundational to capitalism. It allows investment under uncertainty and stabilises long-term planning. Yet as risks become systemic rather than episodic, they become uninsurable. Insurers are withdrawing from wildfire zones, floodplains, and regions exposed to extreme weather. As ecological and geopolitical risks intensify, the very mechanism that underwrites economic stability begins to break down.

Third, the limits of private provision. As risks become unmanageable, private actors withdraw and states are forced to intervene, or not. The positions and responses are uneven. Governments subsidise energy markets, ration fuel, and stabilise food systems. These are not ideological shifts. They are emergency responses to systemic failure. In other words, the system increasingly relies on forms of collective management that contradict its own organising logic.

The Ecological Security Crisis

What is now being revealed through war is structurally identical to what is already unfolding through ecological breakdown.

Recent national security assessments make this explicit. They now indicate with high confidence that global ecosystem degradation and collapse pose a direct threat to national security, economic stability, social cohesion and starkly, civilised human existence. They also identify a series of cascading risks that are highly likely to persist, even if the current military and political crisis were resolved diplomatically in the short term, including crop failures and reduced food production, intensified natural disasters, the spread of infectious diseases, geopolitical instability and conflict, mass migration, and economic insecurity. These are not hypothetical future scenarios. They are already occurring, and they indicate a growing recognition, at government level, that nature is not an externality, but rather the foundation of national security and organized life. 

This recognition is not only strategic or ecological. It is increasingly legal. The Torres Strait Islanders’ climate case against Australia shows how climate breakdown is beginning to reshape normative thinking about the state, the environment and human rights. In Billy v Australia, the Human Rights Committee found that Australia had violated the rights of Torres Strait Islanders under articles 17 and 27 of the ICCPR by failing to implement timely and adequate adaptation measures to protect their homes, private and family life, and ability to maintain and transmit their Indigenous culture. The decision is significant because it frames climate adaptation not merely as a discretionary policy response to environmental risk, but as part of the state’s positive human rights obligations where climate impacts are foreseeable, serious and already affecting vulnerable communities. In that sense, the emerging duty to mitigate and adapt is not simply a matter of emergency management. It is part of a developing legal and ethical reconfiguration of the state’s responsibility to preserve the ecological conditions within which human dignity, culture, security and social life remain possible.This shift is also visible in the Inter-American system, where environmental degradation and climate breakdown are increasingly treated not merely as policy concerns, but as conditions capable of engaging state responsibility for failures of prevention, adaptation, regulation, consultation and protection of vulnerable communities.

As ecosystems degrade, competition for food, water, and resources intensifies. This drives political instability, conflict, and migration. Increasing scarcity will exacerbate existing conflicts, start new ones and threaten global security and prosperity. What the Gulf crisis reveals suddenly, ecological breakdown is producing continuously, namely a world in which the conditions of stability themselves are eroding.

From Crisis to Permanent Crisis

We are no longer living in a world of discrete crises. War, climate breakdown, supply chain disruption, financial instability, and migration pressures are not separate phenomena. They are interconnected expressions of a system not only under strain, but under intentional, or at least knowing destruction. This is what might be called a condition of permanent crisis. In such a world, shocks are no longer exceptional. They are structural. Instability is no longer temporary. It is the norm. And this brings us to an unlikely but increasingly relevant framework, namely Leon Trotsky’s theory of permanent revolution.

Revisiting Permanent Revolution

At first glance, Trotsky’s theory of permanent revolution, developed in the context of early twentieth-century industrialising societies, might seem far removed from the present crisis. But stripped of its historical specificity, it contains a powerful insight that a social system can reach a point where it becomes structurally incapable of solving the problems necessary for its own survival. Trotsky argued that in late-developing societies, the capitalist class could not complete essential historical tasks, such as democratic reform and economic modernisation, because it was too entangled in structures of power designed to preserve accumulation.

Today, a similar paradox emerges on a global scale, despite the advent of so-called artificial intelligence. Global capitalism is increasingly incapable of stabilising the climate, managing systemic ecological risk, maintaining resilient supply chains, sustaining the material conditions of social reproduction, let alone the conditions for freedom, justice and peace in the world. Yet it remains the dominant organising system, locking societies into its logic through debt, coercion, and geopolitical competition. The result is a system that cannot stabilise itself, yet cannot easily be replaced.

The Return of “Socialist Measures”

Trotsky’s theory of permanent revolution emphasised the necessity of what he called “socialist measures”, structural interventions required to stabilise society under conditions of crisis. These included the socialisation of key industries, public control over finance and credit, coordinated planning of production and distribution. What is striking today is that elements of these measures are increasingly being adopted, not by revolutionary movements, but by capitalist states themselves.

We see state intervention in energy markets, public subsidies for critical industries, central bank support for financial systems, government coordination of supply chains. These measures are not framed as transformation. They are framed as necessity, and typically result in even more concentrated forms of accumulation and inequality. But their logic is unmistakable. They reflect the growing recognition that private markets alone cannot manage systemic risk.

The International Constraint

Trotsky insisted that transformation could not succeed within national boundaries alone. Whatever one thinks of that claim in its original context, it has renewed relevance today. Climate change, biodiversity loss, and ecological collapse are inherently transnational. Emissions cross borders. Supply chains are global. Food systems are interdependent. A growing number of national security assessments highlight this constraint clearly. Most economies within the global system now depend heavily on global food imports and fertiliser supply. Ecosystem collapse in distant regions could directly threaten domestic food security. This creates a structural impasse in that the problems are global, the political mechanisms remain national, and intergovernmental fora for dialogue and multilateralism are under strain.  Attempts to act unilaterally risk economic disadvantage and political backlash. Yet global coordination remains fragile and contested. War intensifies this contradiction, fragmenting cooperation and accelerating competition for resources.

The Fork in the Road

It is tempting to assume that a crisis will force transformation. History suggests otherwise. The same pressures that push towards collective solutions can also produce authoritarian consolidation, securitisation of resources, militarised borders, exclusionary politics. National security assessments anticipate this trajectory as being highly likely.  They increasingly warn that resource scarcity will increase geopolitical competition, intensify conflict, and create opportunities for organised crime and non-state actors to exploit instability. In other words, crisis does not determine outcomes. It determines the terrain on which outcomes are fought.

Beyond Illusions

If there is a lesson to draw from both Trotsky’s framework and the present moment, it is that systems do not collapse because they are irrational, they collapse because they cannot resolve the contradictions they generate. Capitalism today faces multiple, overlapping contradictions such as between profit and planetary limits, between efficiency and resilience, and between national governance and global problems. War in the Gulf does not create these contradictions. It reveals them. The danger lies in misdiagnosis. If we treat each crisis as isolated, we will respond with partial solutions that fail to address the underlying dynamics. If we recognise the systemic nature of the crisis, we can begin to think differently, and consider the ways in which the fabric of our lives is locked into this very crisis-prone and destructive system.

The Solutions Are Already Emerging

One of the most striking features of the current moment is that elements of potential solutions are already visible. They appear in fragmented and often contradictory forms, such as public investment in renewable energy, ecosystem restoration initiatives, industrial policy aimed at resilience, discussions of food system transformation, experiments with new forms of economic coordination.

National security assessments increasingly point to this. They emphasise that protecting and restoring ecosystems is not only environmentally necessary but economically and strategically rational. They also highlight that resilience, not efficiency, is the key to future stability. In other words, the logic of transformation is already emerging from within the crisis. The question is whether it can be coherently developed and politically directed in an even and consistent way.

A Chance, Not a Guarantee

The current moment is undeniably dangerous. A prolonged conflict in the Middle East is now triggering sustained energy shortages, global recession, and intensified geopolitical instability. Ecological collapse could amplify these dynamics, producing cascading failures across food systems, economies, and political institutions. But the crisis also provides clarity. It reveals that the global economy is far more fragile than assumed, as private risk management mechanisms are breaking down, and the existing system is increasingly unable to guarantee basic stability. This does not guarantee transformation but it makes the question unavoidable and provides a historic opportunity for a paradigm shift.

Conclusion: Thinking Strategically in An Age of Planetary Breakdown and Destruction

What does it mean to think strategically in an age of permanent crisis? First, it means abandoning the illusion that stability will return once the current Gulf crisis passes. Instability is no longer an interruption. It is becoming the operating condition of the system itself. Second, it means recognising that risk is already being socialised, but in uneven and often unjust ways across different countries.  In some countries, States are intervening, markets are being underwritten, and collective resources are being mobilised. The question is no longer whether collective management will occur, but where, how, and for whose benefit. Third, it means confronting the international dimension of the problem. The crises we face, from war to climate breakdown to food insecurity, are structurally global. Without coordination across borders, even the most ambitious national efforts will remain constrained, fragmented, and vulnerable. Finally, it means holding open the possibility of transformation without assuming its inevitability. Crisis creates pressure, but it does not determine outcomes.

Trotsky wrote of the need for permanent revolution so that social progress does not end once one specific class can reap the lion’s share of accumulation, but our current moment suggests something different, namely the permanence of crisis. But within that condition lies a possibility, not a certainty, but a structural opportunity. A system that cannot stabilise itself must, eventually, change. The question is whether that change will be managed or chaotic, democratic or authoritarian, emancipatory or exclusionary. Yet there is another question, quieter but no less important. What kind of world are we trying to stabilise, or transform, in the first place?

Here, the insights of E.F. Schumacher offer a different kind of orientation. Not a programme, not a blueprint, but a set of deep principles that begin to point beyond the limits of our current frameworks. If the crises we face are planetary, then the response cannot be purely economic or purely political. It must also be civilisational, ecological, and unified around a deeper understanding of our relations not just with each other but our planet. 

Small is Beautiful: Why Human Scale Matters

A civilisational response requires us to rethink scale, not simply in terms of efficiency, but in terms of human and ecological limits. Systems built on concentration, extraction, and fragile global interdependence must give way, at least in part, to forms of organisation that are more local, more resilient, and more accountable. Small, in this sense, is not a retreat. It is a condition of sustainability. Schumacher’s central idea is that economic systems should be organised at a human scale. Large-scale systems tend to become impersonal, bureaucratic, extractive, environmentally destructive, whereas small-scale systems may be more adaptable, more democratic, and more meaningful for human life. Schumacher’s  point was not that big is always bad, but that scale must match human needs and ecological limits, that the earth can provide for our basic needs, but not infinite greed.

Production by the Masses, Not Mass Production

Operating at a human level requires us to rethink production, not as mass output driven by abstract growth, but as participation in the reproduction of life. Production by the masses, rather than mass production, points toward economies in which people are not reduced to inputs, but are active agents in shaping their material and social worlds. For Schumacher, modern economies prioritise efficiency through large-scale production, and so he argued that distributed production, labour-intensive but meaningful work, and local economic participation have both economic and moral merit, in that work should not just be about producing goods, but it should develop human capacities and dignity.

The Concept of Intermediate Technology

Meaningful work requires us to rethink technology, not as an autonomous force driving progress, but as something to be chosen, shaped, and limited. Appropriate or intermediate technologies, rooted in local conditions and human needs, offer a different path from systems that maximise power while externalising risk. The concept of intermediate technology is one of Schumacher’s most important contributions, as it posits a design principle that technology should sit between traditional, low-productivity tools and highly capital-intensive industrial systems, in the sense that it is affordable, locally maintainable, resource-efficient, suited to local conditions, and fit for purpose, not simply the most advanced available. This design principle is hugely relevant today when it comes to technologies such as renewable micro-grids and materials, decentralised agriculture, low-cost manufacturing, digital tools adapted for local use, and technologies that are repairable, long-lasting, and cross-compatible.

A Critique of Growth for Growth’s Sake

Fundamentally, the planetary crisis requires us to recognise that we have been living off capital, not income. The natural systems that sustain life, soil, water, forests, biodiversity, have been treated as expendable inputs rather than the foundation of all economic activity. As these systems degrade, and planetary tipping points are reached, then the illusion of endless growth begins to break down.

Schumacher rejected the idea that continuous economic growth constitutes progress, and instead argued that infinite growth on a finite planet is impossible as growth often produces environmental destruction, social alienation and breakdown, and resource depletion. In this way, Schumacher both embodies and calls for the mainstreaming of theory and practice relating to ecological economics, degrowth debates, peak-oil, transition, and sustainability discourse.

The Preservation of Natural Capital

Importantly, Schumacher distinguished between income (what can be consumed) and capital (what must be preserved) and argued that modern economies treat natural capital (forests, soil, fossil fuels) as income and so are effectively liquidating and destroying the planet. This is remarkably aligned with theory and policy on modern planetary boundaries, such as the safe and just space for humanity, and ecological collapse analysis emerging across a range of national security assessments.

Think Globally, Act Locally

Schumacher calls us to rethink the purpose of the economy itself. His simple formulation, economics as if people mattered, now appears almost radical. It asks us to consider that work should be meaningful, that communities should be sustained, and that the economy should serve life rather than the other way around.

A core value within his work is that global problems (poverty, ecology, development) must be understood at a systemic level, but solutions must be rooted in local conditions. This orientation rejects one-size-fits-all development models and top-down technocratic planning, and instead prioritizes local knowledge, local institutions, local participation. The counterpoint to mainstream economics treating people as inputs or costs and prioritising growth over well-being, is that economics should serve human flourishing, support meaningful work, and sustain communities This is a direct challenge to GDP-focused growth models and purely efficiency-driven policy

Taken together, these principles point toward something that is not easily captured by existing political categories. They suggest that the crisis we are living through is not only a crisis of systems, but a crisis of orientation and paralysis. A question of how we understand our relationship to each other, to work, to nature, and to the future. In this sense, the search for solutions cannot be confined to policy or institutional design, important as those are. It also involves a shift in how we think about value, scale, and purpose. A movement away from domination and extraction, toward stewardship and interdependence, a recognition that resilience is not simply a technical problem, but a social and ethical one involving simplicity, by avoiding unnecessary consumption, and non-violence; by avoiding exploitation of human and non-human animals and planetary ecosystems. These notions of resilience are perhaps  a modest form of what might once have been called a spiritual insight in the sense that posits that Earth is a self-regulating, living organism where biota and their environment evolve together to maintain habitable conditions, and that many aspects of global capitalism are detrimental not only to the Earth as a safe and just space for humanity, but life on planet Earth itself.Email

Michael John-Hopkins

Dr Michael John-Hopkins Senior Lecturer in Law School of Law and Social Sciences (LSS) Faculty of Humanities and Social Sciences (HSS) Oxford Brookes University