Theories of inflation part two – heterodox and Marxist

This is the second part of my discussion of the causes of inflation in modern capitalist economies, based on an unpublished paper by Guglielmo Carchedi and me. Part 1 is here.

by Michael Roberts

There are various heterodox views on the causes of inflation. Generally, they argue against the mainstream focus on monetarism, excess demand and inflation expectations as discussed in part one. The heterodox views can be divided into two. First, there are those who suggest the focus should be on the sectoral structure of the economy, namely how supply constraints lead to price surges in certain sectors of the economy and then, through input-output linkages and changes in firms’ pricing behavior, spread to the whole economy. And second, there are theories based on the view that inflation is caused by class conflict ie workers’ demands for higher wages and the response of capitalists.

In the sectoral view, some turn to corporate price ‘mark-ups’ as an explanation of inflation i.e. inflation is caused by monopolies and their power to impose market prices above ‘free competition’ prices. Monopolies can raise their profit mark-ups and sale prices if costs rise, including labour costs.  Stephanie Kelton, the well known ‘modern monetary theorist’, explains that “companies with enough market power can also unilaterally raise prices in a quest for greater and greater profits.” 

Marx would disagree. Yes, the market price of commodities sold can and will deviate from the production price, the price at which all capitals produce commodiities at the same average rate of profit (a rate that is always moving). If the price of production that is based on the average rate of profit in the economy falls, then all individual prices revolving around that should fall as well. But there is a degree of freedom within which some firms might lower their price less than the average or even increase it. However, this ‘monopoly’ ability to do this always has limits. Competition will tend to rule, even with oligopolies. So the market ‘monopoly’ price cannot deviate for long from the price of production.

In the recent inflationary spike after the pandemic slump, the sectoral theory has taken a different form. In this view, inflation is due to supply constraints in key economic sectors, which is then amplified by firms raising markups due to their market power. Supply bottlenecks which spread through sectors in the economy initiate the inflationary process, but then markups by companies can go above the average, so putting additional pressure on prices. Isabella Weber and Even Wasner argue that rising prices in certain “systemically significant upstream sectors” provide an impulse for further price hikes. To protect profit margins from rising costs, downstream sectors propagate, or in cases of temporary monopolies due to bottlenecks, amplify price pressures. 

The evidence for profit-led sectoral driven inflation has some basis in the recent post-pandemic inflation spiral, but can it be considered as a general explanation of inflation in capitalist economies?  Inflation has existed long term in the major economies even when there have been no increased mark-ups by companies or when there are no spikes in raw material prices. Sure, prices in oligopolistic markets are likely to be higher than in more competitive markets, but higher inflation can occur both with fairly competitive or oligopolistic market structures. In the late 19th century, the so-called Gilded Age Era was characterized by the rise of cartels, but with deflation in prices; and the 1990s, often seen as a second Gilded Age with increasing market concentration, experienced a so-called Great Moderation in price inflation ie disinflation (as shown in part one). Indeed, in the last big inflationary spiral of the 1970s, profits actually fell. According to Sylos-Labini, writing then:“the decline of the share of profits in several capitalist countries can be attributed primarily to the persistent increase of direct costs in labor, raw materials, and energy.” I shall return to the discussion about so-called ‘sellers inflation’, profit mark-ups and sector-driven inflation in part four when I analyse the post-pandemic inflationary spike to date.

The second heterodox explanation for inflation is that it is due to class conflict. This heterodox theory rejects Keynesian theory that attributes inflation to wage-cost pushes resulting from excess demand and worker bargaining power. Instead, this theory reckons that wages rise in response to price rises, as Marx argued. But what about the cause of the original spurt in inflation? This will be due to supply disruptions or mark-up power by monopolies – so back to the first heterodox theory. But inflation will continue, depending on whether workers have sufficient labour power to respond, leading to further attempts by companies to compensate by hiking prices further.Thus inflation depends on the balance of class power between workers and capitalists.  But this theory provides no explanation of the initial inflation of overall prices, except the contingent factor of a supply disruption or ‘shock’. And it falls back on the initial trigger for any price surge being due to increased markups or supply constraints as in the sectoral argument above.

There are some overtly Marxist theories of inflation. One ‘Marxist’ explanation of inflation is merely the monopoly mark-up price theory as described above. Baran and Sweezy (1966) explained the cause of inflation as follows: “Keynesian theory assumed free competition; under oligopoly, increased demand leads to rises in prices … and ultimately (as a result of the rising cost of living) to higher wages rather than an expansion of output. The result is general inflation.” Similarly, Kotz (1982) argued that monopolies can set market prices that exceed prices of production. But monopolies since the end of WWII have existed both during the inflationary period (1949-1979) and even increased market power in the disinflationary period (1980-2021). So generalised inflation must be explained aside from monopolies. Indeed, if monopolies have the power to increase uncontrollably their market prices, why do they choose to do so only in very certain circumstances? Specifically, they have chosen to raise their prices significantly only twice in recent economic history (in the late 1970s and in 2021), namely when profitability was low.

Paul Mattick Snr argued that “inflation is an expression of inadequate profits that must be offset by price and money policies … If prices rise faster than wages, then what could not be extracted from the workers in production is taken from them in the circulation process.” (1977, Chapter 3). This is evident. If prices rise faster than wages, there is a pro-capital redistribution at the cost of wages. And if prices grow less than wages, there is a pro-labour redistribution at the cost of profits. But neither explains any cause of the initialrise in the general price level.

Ernest Mandel (1987) attempted a Marxist explanation that involves money: if “paper money circulation has doubled without a significant increase in the total labour time spent in the economy, then the price level will tend to double too.” But why does money in circulation not just match the change in the value of commodities as measured in total labour time? Mandel is close to identifying the relevant factors in inflation, but without an analysis of how they combine.

Harman (1979) correctly identified that the profitability of capital was a key cause of inflation. But Harman adopted a subjective analysis: “in a boom, capitalists feel confident that their goods would sell, even if they increased their prices. … Once the recession sets in, capitalists have to respond … \[by\] contracting markets \[and\] have to slash prices.” This presents the capitalist reaction to a boom and price inflation, but does not explain the cause of inflationary or alternatively disinflationary periods. For example, it cannot explain the persistence of disinflation from the 1980s to 2019. There is no explanation of how movements in profitability are relevant and no recognition of the impact of the monetary authorities.

Choonara (2021) also underscores the role of profitability as the core cause of rising prices: “inflation depends on the interrelation between value creation through the expenditure of labour power, the creation of money (primarily through the credit system), and the relationship between capital accumulation and profit rates.” This is closest to our ‘value theory of inflation’ that I shall deal with in a later post.

The two most thorough Marxist explanations of the causes of inflation are by Anwar Shaikh and more recently, by Greek Marxist economists Stavros Mavroudeas and Athanasios Chatzirafailidis.

Shaikh does not like to call his theory Marxist, preferring ‘classical’. He argues that “modern inflation is the balance between a demand-pull generated by new purchasing power and a supply-response depending on profitability and the degree of growth utilization.” The combination of these two provides “a general theory in which inflation responds positively to new purchasing power because the portion of the latter which is not absorbed by current supply spills over into price increases; and negatively to net profitability, since this raises real output growth; and positively to the growth-utilization rate insofar as the latter inhibits real output growth.”

Where does this ‘new purchasing power’ that represents demand come from?  It comes from new domestic credit from private and central banks, ie in effect an increase of money in circulation.  The supply capacity to meet this increase in demand depends on the profitability of capital, which is the ‘motivation’ for investment.  If the stock of capital rises, it will provide an increase in capacity to produce and allow more ‘growth utilisation’, ie more real output.  If the stock of capital falls, the capacity to produce is lowered. In other words, Shaikh is saying that inflation is caused by aggregate demand exceeding supply capacity. If the profitability of capital rises, then capitalists will increase supply and inflation will be avoided. If the profitability of capital falls, then supply capacity will fall and inflation will emerge.

So inflation is driven up by increased demand (new purchasing power) and by low supply capacity, the latter being caused by falling profitability.  Inflation slows or disappears if new purchasing power is satisfied by rising supply and that will tend to happen when profitability rises. Thus in the period when US profitability fell (1964-82), the increase in supply capacity slowed and inflation accelerated.  In the period 1982-2007, when profitability rose, supply capacity rose and inflation decelerated. Shaikh provides empirical evidence to support this theory, while at the same time, refuting the Keynesian Phillips curve. I have reproduced his graph 15.10 from his magnum opus, Capitalism, p711 and recalculated it.

The graph shows a high correlation (0.63) between rising inflation and the using up of capacity (in other words, a slowing increase in supply) and vice versa. The correlation is very high in the inflationary (accelerating inflation) sub-period 1948-1981 (0.83) and still relatively strong in the disinflationary (slowing inflation) period from 1982-2010 (0.59).

Stavros Mavroudeas and Athanasios Chatzirafailidis define inflation as the phenomenon “in which the total sum of market prices significantly exceeds the total sum of prices of production for an appreciable period in the economy.” A strong and persistent inflationary phenomenon (namely the rise in total market prices above the total prices of production) arises when the capitalists’ demand for more means of production significantly exceeds investment for a considerable period.  

Why would demand exceed investment for periods?  Mavroudeas and Chatzirafailidis fall back on Marx’s reproduction schema as in Volume 2 of Capital.  For them, inflation is due to the systematic over-accumulation of capital and specifically due to an incessant demand for more means of production. Investing in more means of production relative to labour drives up the organic composition of capital, which in turn eventually leads to a fall in profitability which slows investment and delivers weaker output growth. So demand outstrips supply and market prices rise above prices of production and inflation ensues.

Both theories have the merit of placing the role of profitability of capital at the centre of the causes of inflation. Unlike Shaikh, Mavroudeas and Chatzirafailidis emphasise that the supply side in Marxist terms depends on the growth in the value of commodities: “inflation should not simply be perceived as a process in which the market prices of commodities are vaguely rising above an arbitrary “normal” price level. On the contrary, they should have the values of commodities as their “anchors.”  

But in my view, both theories do not provide a complete Marxist theory of inflation.  While Shaikh says that aggregate demand is driven by credit growth or money in circulation, which in my view is correct, he offers no explanation why that demand should accelerate or decelerate. What he does not explain is why demand does not also sink along with a fall in supply capacity and thus avoid inflation. After all, that is what happens in a slump. Also his emphasis on capacity utilisation rather than on the rate of growth in value for the supply side of the inflation equation suggests a Keynesian excess demand theory rather than Marxist value theory.. 

In contrast, Mavroudeas and Chatzirafailidis put the value of commodities firmly as the anchor for prices of production around which market prices fluctuate. But they have no role for money. For them, inflation of prices in a capitalist economy is purely a real, not a monetary phenomenon. They start with the assumption that money is a commodity (gold), which rules out the role of money in inflation. This is unrealistic in modern economies where money can be created by central banks and governments (fiat money) that is not tied to the value of the gold commodity. In modern economies, money growth can diverge from growth in the value of commodities and so affect market prices.  Without money in the story, we cannot explain why demand should outstrip supply and cause inflation.

In part three, I shall present what Carchedi and I call a ‘value theory of inflation’, which incorporates the role of the profitability of capital, changes in the value of commodities and the role of money.  Bringing all these together offers a more comprehensive theory.

Capitalism in Crisis Throws Democracy Out the Window

By Mike Craig

Northern Ireland

I really wish the general public would pay attention to this.

 

We do not live in a democracy. Within the capitalist system democracy is always limited, but because global capitalism is teetering on the brink of collapse, those who own and control it will go to even greater lengths to try and save it at the expense of democracy and international law. 

 

Part of this battle is the attempt to take over the Middle East and remove all threats to Western hegemony. Israel is a key part of this project, and contrary to the idea that Israel controls western governments, the reality is actually the other way around. 

 

The USA, the UK and the EU need Israel as the attack dog against the perceived enemy - any country which doesn't lie down and accept western control, or any country which would threaten the primacy of the petrodollar in global trade. The West's attack dog is a settler colony which suffers from a serious case of siege mentality, the longer the colony continues to exist the more deeply imbedded this mentality becomes. 

 

The g*nocidal tendencies of this have reached a point where even the supporting western governments have become embarrassed by it, nevertheless they still continue to arm the g*nocide and cover for it.

 

Over the last few years we have seen George Orwell's predictions becoming a reality, nowhere more so than in the Middle East, where truth has been turned on its head. 

 

Israel is in breach of several international laws and countries who support it, like the UK, are also in breach of international laws for continuing to support its actions rather than carry out their duty which is to hold it to account.

 

In the UK too, truth has been completely turned on its head. The Government is a collective criminal, it's lapdog media and its leading judiciary are guilty too, yet they compound this by criminalising any protest against their delinquency.

 

This isn't just about Palestine Action, it is an assault on democracy and the real rule of law. 

 

Our Governments and their institutions are arch criminals who hold no value for human life. 

 

We are now entering the period of barbarism which we were warned about by Rosa Luxembourg. 

Theories of inflation: part one – the mainstream

by Michael Roberts

Guglielmo Carchedi and I have been working on a theory of inflation for several years.  We completed a detailed paper some time ago which was accepted for publication by a Marxist journal.  However, publication takes forever, so I thought I would provide a shortened version of our work on my blog.

For the blog, I have divided the paper into various parts: 1) mainstream theories of inflation; 2) heterodox and other Marxist theories; 3) our theory, called a ‘value theory of inflation’; and finally 4) a discussion of the application of our theory to the recent spike in inflation since the paper was completed.

Let me start with part one: mainstream theories.  

What causes inflation has been a puzzle for mainstream economics. As Walter Munchau in the Financial Times put it in 2020: “central bankers do not really understand how inflation works. There are lots of theories and approaches, theoretical and statistical, but none that has been able to explain persistently what is going on in the real world.” Charles Goodhart of the London School of Economics was harsher in 2021: “The world at the moment is in a really a rather extraordinary state because we have no general theory of inflation.”  Why is this? It’s because conventional or mainstream theories of inflation have failed to provide any robust explanation of why there are changes in the prices of goods and services in modern economies. 

The mainstream view of inflation can be divided into three groups: 1) the monetarist theory; 2) the Keynesian ‘excess demand’/cost-push theories; and 3) central bank expectations theory.

The monetarist theory of inflation holds that inflation is purely a monetary phenomenon, i.e. that inflation is determined by changing money quantities relative to the changes in the quantity of output. Leading monetarist Milton Friedman argued that “inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.“

The monetarist perspective is based on a mathematical identity 𝑀𝑉 = 𝑃𝑌, where 𝑀 represents the money supply, 𝑉 is the velocity of money (which measures how frequently money is transacted within the economy), 𝑃 is the general price level, and 𝑌 is the real output of the economy. MV adds up to money in circulation and PY adds up to the nominal amount of income in an economy. Monetarism argues that the left hand side of the equation drives the right-hand side. So, assuming that the velocity of money (V) remains constant, then if M rises faster than Y, there will be an inflation of prices. Thus, changes in M drive changes in P. 

But this equation is an identity; the causal direction cannot be assumed. Marx’s position was the opposite of the monetarist direction. For Marx, money is not value, but the representation of value. So it is changes in the value/price of commodities that determines the volume of money in circulation. “If the velocity of circulation is given, then the quantity of the means of circulation is simply determined by the prices of commodities. Prices are thus high or low, not because more or less money is in circulation, but there is more or less money in circulation because prices are high or low.” 

Changes in P (prices of production) determine changes in MV (money in circulation).And prices change as a result of value changes (Y), as measured in the amount of labour time used to produce all the commodities. If the value of commodities rises/falls (ie more or less labour is necessary for their production), more/less money is needed for their circulation. This is because money is the representation of value, not value itself, which comes from the expenditure of human labour, not from money.

Who is right, Friedman or Marx?  Do changes in MV lead to changes in PY, or vice versa? Is there a close correlation between changes in money supply (M) and changes in prices (P)? Figure 1 shows annual percentage changes in US money supply (M2) and inflation as measured by the ‘implicit’ GDP price deflator). The correlation between the two seems relatively close up to the 1990s.  But from then on, US money supply growth accelerated as a trend while the price deflator decelerated. There was even a negative correlation. Over the whole period from 1960, the correlation between money supply and prices was low (0.21).

Figure 1. Source: FRED, authors’ calculations

A key factor in the weak correlation between changes in money supply and changes in prices is that money supply and money in circulation are not the same. Money hoarding and use of money to make purchases of financial assets can make a considerable difference to the relationship between money supply and prices. Indeed, as Figure 1 shows, the rising gap between money supply growth and GDP deflator from the mid-1990s onwards suggests a diversion of money out of productive assets into financial assets. 

Thus Friedman’s monetarist theory does not hold to explain US inflation in the post-war period.  In a later post, I shall show how it is changes in prices of production (or the value of commodities) that drives ‘money in circulation’ – the opposite of monetarism.

The second mainstream theory is Keynesian. This is dominant among mainstream explanations. A classic example of the ‘cost-push version of this theory was recently offered by Jason Fulman, former US White House economic advisor: “When wages go up that leads prices to go up. If airline fuel or food ingredients go up in price, then airlines or restaurants raise their prices. Similarly, if wages for flight attendants or servers go up then they also raise prices. This follows from basic micro and common sense.” (Fulman, 2022). The causes of inflation, apparently, are rising raw material costs and attempts by workers to get higher wages. This forces companies to raise prices to maintain profits.  This is the cost-push inflation theory.

Marx answered this theory way back in 1865. When debating with the trade unionist Weston who argued that wage rises would cause inflation, Marx argued that rising wages are the “reaction of labour against the previous action of capital” and that “wage rises generally happen in the track of previous price rises.” (Marx, 1865).  Moreover, it escapes Fulman that the effects on prices of wage increases or of materials could be countered by less profits. Given a certain quantity of value, if wages rise/fall, profits fall/rise, prices can remain unchanged.  Fulman’s argument assumes that profitability must be maintained ‘at all costs’.

An IMF study in 2022 addressed this question by applying a cross-economy database of past episodes among advanced economies going back to the 1960s. It found that “wage-price spirals, at least defined as a sustained acceleration of prices and wages, are hard to find in the recent historical record. Of the 79 episodes identified with accelerating prices and wages going back to the 1960s, only a minority of them saw further acceleration after eight quarters. Moreover, sustained wage-price acceleration is even harder to find when looking at episodes similar to today, where real wages have significantly fallen. In those cases, nominal wages tended to catch-up to inflation to partially recover real wage losses, and growth rates tended to stabilize at a higher level than before the initial acceleration happened. Wage growth rates were eventually consistent with inflation and labor market tightness observed. This mechanism did not appear to lead to persistent acceleration dynamics that can be characterized as a wage-price spiral.” In inflationary episodes, wages just try to catch up with prices. But even then, wage increases do not cause ‘wage-price spirals’ – this echoes Marx’s view in 1865.

A variation of the Keynesian view is the ‘demand-pull’ theory of inflation, namely that inflationary pressure results from a positive ‘output gap’ – where actual GDP exceeds ‘potential GDP’, defined as output at the limits of productive capacity including full employment. So inflation results from ‘excessive demand’ in an economy (ie above the supply capacity limit). This ‘excessive demand’ could be due to an expansionary government fiscal policy or due to fast rising wages given full employment, compounded by a fall in ‘potential GDP’, possibly from supply chain constraints and energy shocks. 

What is the evidence for this ‘excessive demand’ theory? Keynesians refer to the ‘trade-off’ between changes in wages and prices and/or changes in unemployment and prices.The former would have a positive correlation and the latter an inverse correlation. In graphic form, this trade-off would take the form of curve, as was first argued by AW Phillips with his so-called Phillips curve in 1958. The evidence for the post-war US economy is that, far from being a curve (ie a trade-off), the Phillips relation is broadly flat.  Here is our own calculation for the US.

Figure 2. Source: FRED, author’s calculations

Other empirical studies also show the Phillips curve to be broadly flat – in other words, there is no inverse correlation between wages or prices and unemployment. President Daly of the Federal Reserve Board of San Francisco, concluded that “the relationship between unemployment and inflation has become very difficult to spot.”. BIS economist Borio agrees: “the response of inflation to a measure of labour market slack has tended to decline and become statistically indistinguishable from zero.” And more recently, he concluded that “inflation has proved unexpectedly unresponsive to economic slack – the Phillips curve is very flat.” (Borio 2021). The former Fed Chairman Jay Powell also acknowledged the problem: “There was a time where there was a tight connection between unemployment and inflation. That time is long gone.” (Powell 2021). This uncomfortable conclusion was also reached earlier by two prominent mainstream economists. Solow (2018) remarked that “the slope of the Phillips curve itself has been getting flatter, ever since the 1980s, and is now quite small.” And Gordon (2018) echoed this: “The slope of the short-run inflation—unemployment relationship has flattened.”

So why do economists and central bankers continue to peddle a theory that has little empirical support? Gavyn Davies, a Keynesian and former chief economist at Goldman Sachs, explained: “without the Phillips Curve, the whole complicated paraphernalia that underpins central bank policy suddenly looks very shaky. For this reason, the Phillips Curve will not be abandoned lightly by policy makers” (Davies 2017). ). But the theory is not made less shaky by denying the empirical evidence against the theory.

The third mainstream theory of inflation is even weaker. It is promoted by central banks and international agencies. It is the expectations theory of inflation. Here inflation is caused by the psychology of the economic agents. If prices rise, then consumers expectations for price rises also increase, leading to accelerating inflation. As the IMF puts it: “It is possible that changes in current and expected inflation are both driven by changes in expectations about the future state of the economy. For example, if firms and households expect that the economy will be in a recession in the near future and inflation will be lower than today, they will start cutting their consumption and investment expenditures now, putting downward pressure on inflation today.”

But the consumer or household expectations of a rise in inflation does not provide a theory for why prices are rising in the first place. Federal Reserve economist Rudd points out that “unsurprisingly, what little evidence we have suggests that firms pay little attention to forecasts of aggregate economic conditions, including inflation.”  Yes, if inflation over the long term falls, then ‘unsurprisingly’, households and firms will expect inflation to fall. So “there is a suggestive low-frequency correlation between an estimate of inflation’s long-run stochastic trend and survey measures of long-run expected inflation.” In the graph below, as inflation slows, so expectations or forecasts of slowing inflation also follow. But expectations follow inflation rates, not vice versa.

Rudd concludes: “economists and economic policymakers believe that households’ and firms’ expectations of future inflation are a key determinant of actual inflation. A review of the relevant theoretical and empirical literature suggests that this belief rests on extremely shaky foundations, and a case can be made that adhering to it uncritically could easily lead to serious policy errors.” Central banks should note.

So we have three mainstream theories of inflation: monetarism; Keynesian cost-push and ‘excess demand’; and expectations, none of which is convincing or borne out by the empirical evidence.  No wonder the mainstream has ‘no general theory of inflation’.

In the next part, I shall discuss heterodox and other Marxist theories of the cause of inflation. 

With Karim Khan's dismissal, the elimination of the war crimes court is near-complete

Millions of people around the world will now find themselves even more exposed to the criminal actions of predatory states. Unlike Khan's accuser, they are unlikely to ever get their day in court.

Johnathan Cook July 30 2026.

Johnathan Cook on Substack

The most important question we should be asking after Karim Khan’s dismissal last week as chief prosecutor of the ICC – the international war crimes court in The Hague – is not whether he is guilty of “sexual misconduct” against another staff member, identified as “Sarah”.

That can only be decided through a legal process – one, let us note, that has already taken place. A fact-finding body carried out a lengthy investigation of Sarah’s allegations over more than a year; its thousands of pages of evidence were then evaluated in detail by three senior judges.

Though you would not know it from the media coverage, they concluded that there was no evidence to suggest any kind of misconduct by Khan, sexual or otherwise.

Strangely, that determination was largely confirmed by an extraordinarily deferential “exclusive” CNN interview with Sarah, aired earlier this month.

She declined to give any meaningful details of what Khan had allegedly subjected her to, and celebrity interviewer Christiane Amanpour delicately avoided pressing her for any clarification.

No matter. The purpose of the CNN interview was never about excavating facts. It was designed to offer face-saving cover as an entirely political body called the Assembly of States Parties, comprising diplomatic representatives of the 125 states signed up to the ICC, entirely ignored the legal findings and dismissed Khan.

Paradoxically, it was the Assembly of States Parties that appointed the judges who had concluded that there was no evidence of misconduct or breach of duty by Khan. That inconvenient judgment was simply reversed, despite the Assembly members being in no position to weigh the evidence themselves. 

We should not forget that many of these states have an investment in weakening the only international court that can bring their own senior officials to trial for war crimes. 

In May 2024 – shortly before Sarah made her allegations – the ICC demonstrated that it was finally ready to prosecute western leaders for war crimes, not just those from the Global South or from the West’s official enemies, such as Russia’s Vladimir Putin.

Khan finally issued an arrest warrant for Israeli prime minister Benjamin Netanyahu and his former defence minister Yoav Gallant. Both are accused of crimes against humanity for starving the people of Gaza through a prolonged blockade of food, water and power.

Were Netanyahu ever to face trial – and found guilty, as he almost certainly would be – a lot of other leaders would have good reason to fear they might be found culpable next, not least for their complicity in Israel’s mass slaughter of Palestinians in Gaza. 

The question that needs answering now is not whether Khan is guilty of misconduct – that has been decided at a political level, not a legal one. No, we need an answer to an equally political, and far more troubling, question.

“Cui bono?” Or “Who benefits?”

The evidence is hiding in plain sight. The evidence is revealed both in the deeply politicised process that led to Khan’s downfall, and in what that process means for the future of the court.

Covert war

Khan is not the first ICC chief prosecutor to face extreme pressures – and, as with Khan, those pressures surfaced at the very moment Khan’s predecessor tried to take on Israel over its war crimes.

Fatou Bensouda faced a “covert war” waged against her by Israel for the best part of a decade, according to an investigation by the Guardian in May 2024, just as Khan issued his arrest warrant for Netanyahu.

The Guardian’s report, published nearly three years after Bensouda had completed her nine-year term at the ICC, revealed that, during that time, she had faced threats to herself and her family, the monitoring of her communications, and an intimidating visit to her home. 

More recently, Bensouda has confirmed these accounts in an interview with Al Jazeera. Bensouda notes that she repeatedly reported Israel’s campaign of intimidation to the Dutch authorities, but they did nothing to investigate the threats or protect her. 

She also says certain “authorities” – she does not name them – warned her that she was going too far in investigating Israeli crimes and that “you could be harmed or you could be killed, or family members could be harmed in some way.”

The campaign of threats – instigated by Yossi Cohen, then the director of Israel’s spy agency, Mossad – intensified as Bensouda considered whether to open a formal investigation into Israeli war crimes and crimes against humanity in the illegally occupied Palestinian territories.

Israel’s crimes against the Palestinian people, we should remember, predate – by decades – Hamas’ attack on 7 October 2023. In fact, though no one is supposed to mention it, Israel’s sustained crimes of occupation are the self-evident cause of that Hamas attack.

An Israeli source told the Guardian that “the Mossad’s objective was to compromise the prosecutor or enlist her as someone who would cooperate with Israel’s demands”– that is, scrap the ICC’s investigation into Israeli crimes. Another source admitted that Cohen was acting on Netanyahu’s instructions.

During one contact, Cohen reportedly issued a Mafia-style threat to Bensouda: “You don’t want to be getting into things that could compromise your security or that of your family.”

The Guardian reported that the Mossad “took a keen interest in Bensouda’s family members and obtained transcripts of secret recordings of her husband, according to two sources with direct knowledge of the situation. Israeli officials then attempted to use the material to discredit the prosecutor”.

The paper also noted that there were fears among senior ICC officials that “Israel had cultivated sources within the court’s prosecution division” – the division Khan would inherit from Bensouda.

Cohen was described as “stalking” Bensouda, and personally “ambushed” her in a hotel room in New York in 2018. Afterwards he repeatedly phoned her, in a threatening manner that was said to have escalated over time. When Bensouda asked Cohen how he had obtained her phone number, he reportedly replied: “Did you forget what I do for a living?”

According to the Guardian: 

On one occasion, Cohen is said to have shown Bensouda copies of photographs of her husband, which were taken covertly when the couple were visiting London. On another, according to sources, Cohen suggested to the prosecutor that a decision to open a full investigation would be detrimental to her career.

Between 2019 and 2020, the Mossad had been actively seeking compromising information on the prosecutor and took an interest in her family members.

The spy agency obtained a cache of material, including transcripts of an apparent sting operation against her husband.

Israel used the materials to mount a “smear campaign” against her, but one that ultimately proved unsuccessful.

Concerted backlash

When Khan took up the role of ICC chief prosecutor in June 2021, he proved reluctant to pick up where Bensouda had left off on the Palestine case. Presumably, he was only too aware of the retaliation from Israel against her.

Bensouda had announced in December 2019 that she had grounds to open a full criminal investigation into allegations of war crimes in Gaza, the West Bank and East Jerusalem.

However, in the face of a concerted backlash from western states, she delayed opening the investigation. She first sought a ruling from a pre-trial chamber of ICC judges – presumably in the hope that it would serve as some kind of insurance policy – on whether the court had jurisdiction over the occupied Palestinian territories.

By February 2021 the judges confirmed what was already self-evident. The court did have such jurisdiction because Palestine had been signed up to the court since 2015.

Bensouda stepped down a few months later.

The door was now open for Khan to prosecute Israeli officials for war crimes. However, the new chief prosecutor gave every appearance – perhaps understandably – of preferring to sit on his hands.

It was not just Israel that had been fearsomely opposed to its officials being tried for war crimes. Washington was equally incensed at the prospect – sometimes, it seemed, more so than over the possibility that US officials might also face arrest warrants for crimes committed by the US military in Afghanistan and Iraq.

Between 2019 and 2020, during Trump’s first presidency, the US imposed severe visa restrictions and financial sanctions on Bensouda. Mike Pompeo, then US secretary of state, linked the sanctions to the Palestine case: “It’s clear the ICC is only putting Israel in [its] crosshairs for nakedly political purposes.” 

Khan might well have avoided pursuing Israel indefinitely had it not been for the events that followed October 7 2023.

Israel’s mass slaughter of Palestinian civilians in Gaza, its devastation of the enclave’s homes and infrastructure, and its starvation of the entire population were actions so criminally abhorrent that UN agencies, major human rights groups and Holocaust scholars were soon all in agreement that they amounted to genocide.

In May 2024, Khan announced arrest warrants against Netanyahu and Gallant, as well as three Hamas leaders subsequently killed by Israel.

Tsunami of threats

Shortly before Khan made that announcement, 12 senior US Senators had sent a threatening letter to the ICC: “Target Israel and we will target you.” The letter ended: “You have been warned.” 

Describing Israeli and US sovereignty as inseparable, the senators reminded Khan that Washington had demonstrated “the lengths to which we will go to protect [our] sovereignty.”

A 2002 law, popularly known as “The Hague Invasion Act”, authorises the US president “to use all means necessary and appropriate” to bring about the release US persons and any allies imprisoned or detained by the ICC. Those allies, it goes without saying, include Israeli leaders. 

Such threats, it should be noted, are a violation of Article 70 of the Rome Statute.

Following the issuing of the arrest warrants, there followed a tsunami of similar threats – and presumably more that have yet to become public – against Khan and the ICC.

A British-Israeli lawyer within the ICC – one known to have ties to Netanyahu’s legal adviser – warned Khan "they will destroy you and they will destroy the court" if the warrants were not rescinded. He urged Khan to “climb down the tree" and drop the case.

The UK’s foreign secretary of the time, David Cameron, phoned Khan to tell him Britain would defund the court and withdraw from the Rome Statute that founded the ICC if Khan did not back down.

Cameron warned Khan that he was “on the brink of making a huge mistake” and urged him to “take a step back and consider things”. He added that applying for arrest warrants for Israeli officials was tantamount to “dropping a hydrogen bomb”.

Meanwhile, Trump issued an executive order imposing aggressive financial sanctions against Khan and other ICC officials, including several of its judges.

Khan himself received warnings that Israel’s Mossad was continuing its operations in The Hague, where the ICC is located, to monitor and compromise the court’s investigators as they compiled evidence on Israel – just as it had done earlier under Bensouda. 

Khan publicly stated that retaliatory threats and intimidation were explicitly targeting members of his own family.

Untouchable criminals

What conclusions should we draw from all of this?

Quite aside from the matter of whether Sarah’s allegations of “sexual misconduct” are true or not, it is clear that Israel and the US have been digging for dirt – and apparently ready to fabricate such dirt – on any chief prosecutor who tries to hold them to account for their crimes.

Both have indicated that they are ready to manipulate legal and political processes to ensure the outcome they desire: that they remain untouchable .

We have a template for how this plays out. Julian Assange, founder of the whistle-blowing site Wikileaks, published details in 2010 of US and British war crimes in Afghanistan and Iraq. Almost immediately he found himself entangled in accusations of sexual misdemeanours – in his case in Sweden – that were similarly amplified by an uncritical western media. 

Assange faced years in various forms of confinement while the US and UK pressured Sweden to keep alive an investigation against him Swedish prosecutors at least twice sought to drop for lack of credible evidence. 

In fact, the US and UK never wanted the evidence tested – they were quite happy with a permanent, unresolved “investigation” – precisely because they knew it would have been unlikely to withstand judicial scrutiny. 

The point was simply to generate constant headlines about “rape”, turning Assange into a pariah, justifying his effective disappearance from public life, severely weakening Wikileaks as a whistleblowing platform, deflecting attention from the all-too-real crimes committed by the US and Britain, and paving the way to a political show trial to extradite him to the US on entirely confected “espionage” charges. 

This has been repeated in the case of Khan and the ICC. In Khan’s case, the evidence was tested and found inadequate. So the legal process has been replaced by a flagrantly political one. 

Khan has been turned into a legal pariah, even stripped of his right to work as a lawyer in the UK by the British Bar Association. 

The ICC has been further weakened, just as Israel and the US have expressly stated they wanted it to be. Marco Rubio, Trump’s secretary of state, has recently launched an official campaign to dismantle the ICC “brick by brick”. 

He says: “Now they [the ICC] are going to see the consequences”. Consequences of what? Of seeking to enforce international law against a key US client state. 

Meanwhile, accountability for the all-too-real crimes being committed by Israel in Gaza, Lebanon and the West Bank – and actively supported by western states like the US, Germany and Britain – recedes yet further into the background. 

Subscribed

As each brick protecting the ICC is dismantled, a brick is added to the wall of protection around Netanyahu and Israel’s genocidal war machine. 

Israel, meanwhile, is barely concealing that it has been masterminding the effort to destroy the ICC. 

According to Guy Azriel, the diplomatic correspondent for i24 News, Israeli foreign Minister Gideon Sa’ar “oversaw a dedicated task force and employed intensive diplomatic efforts aimed at securing Khan’s removal from office”.

Hillel Neuer, director of the Israel apologist group United Nations Watch, cheered what he called “our campaign to remove” Khan, and warned Francesca Albanese, the UN’s legal expert on the occupied Palestinian territories, “you’re next”. 

Like Khan, Albanese has been searching for practical, legal ways – not just rhetoric – to hold Israel and its western allies to account for the crimes in Gaza. 

Predatory states

The ICC claims its work will not be affected by Khan’s removal and that the arrest warrants against Netanyahu and Gallant will still be pursued under new stewardship. That seems doubtful. 

Israel and the US are cranking up the intimidation of the ICC, which has no tools to enforce its rulings or protect itself from the hostility of a rogue superpower.

Currently the court appears paralysed, allowing Israel to muddy the waters with interminable, and vexatious, appeals against the arrest warrants. 

Any lawyer who takes up the post of ICC chief prosecutor will be only too aware of the fate that befell Khan and the campaign of intimidation against Bensouda as soon as each tried to enforce accountability on Israel and its western patrons. 

It will take a very brave individual indeed to renew that task. Khan’s successor will understand that, in any further confrontation with Israel and Washington, the US will not hesitate to crush the ICC and, with it, remove the only effective restraint on criminality by powerful states. 

More likely, however, the Assembly of States Parties – the political body that ousted Khan – will privately require from his successor reassurances that the new chief prosecutor reliably defer to the principle of Israeli and western impunity. Only someone less willing to ruffle feathers stands any chance of being appointed. 

That was the clearest of messages sent by the Assembly when a majority of member states voted to be rid of Khan. The short-lived experiment in creating a mechanism for enforcing international law is over. We are back to the law of the jungle. 

Hundred of thousands of people around the world – more likely millions – will now find themselves even more exposed to the criminal actions of predatory states. Unlike Khan’s accuser, they are unlikely to ever get their day in court