Earlier this week, I responded to an opinion piece in the Australian Financial Review by John Kehoe about the Reserve Bank.

In the piece Kehoe says that the RBA shares some of the blame for One Nation’s rise because they didn’t increase interests rates enough to get inflation down.

John Kehoe is correct to say a large part of the blame for the recent rise of One Nation can be laid at the Reserve Bank’s feet. However his prescription of more wage moderation for workers is exactly what central bankers have cheered on for the last century. Reducing living standards and wages has always helped the rise of the far-right.

Montague Norman, the famous governor of the Bank of England cheered on Mussolini’s fascists, saying “Il Duce was the right man at a critical moment”. Federal Reserve Chairman Benjamin Strong was also a Mussolini fan, describing fascism as “little short of miraculous”. Janet Yellen in 1996 said increasing unemployment “serves as a worker-discipline tool” to produce “sufficient fear of job loss” to not demand better living standards. More recently Federal Reserve Chairman Jerome Powel said the Fed must use its tools to “bring some pain” on American workers in order to have “less upward pressure on wages”. The RBA itself in February said it wanted to get unemployment up to 4.6 percent, which would require the mass sacking of 80,000 people — which would hardly reduce the cost of living crisis for those people.

Kehoe views the RBA’s failure to keep inflation low as a key reason that One Nation has surged. However, central bankers have routinely looked favourably on far-right parties to ensure, as Norman wrote, “the pendulum does not swing too far”.

The mechanism for the RBA to tackle the cost-of-living crisis is to increase interest rates.

This “cools” the economy by increasing the cost of borrowing for individuals and business. For individuals it means more of their income is diverted to banks as mortgage or rent payments (pumping money upwards to the financial elite and billionaires). For businesses, increased interest rates similarly decrease their economic activity due to higher costs and reduced demand — subsequently they reduce their spending and, critically, sack workers or don’t hire workers. Reduced economic activity thereby lowers the rate at which prices go up.

That’s the economic theory.

Read more: Why the market wants you unemployed

This engineered economic violence is the true face of monetary policy under capitalism. It is the prescription that Kehoe is demanding the RBA force upon Australian workers. Maintain price stability and capital accumulation by consciously destroying the livelihoods of the working class.

It is utter nonsense to imagine that sacking 80,000 workers, or increasing the mortgage payments for a worker on $70,000 income will have any impact on the cost-of-living crisis or inflation — which is largely caused by corporate profiteering and international “shocks” to supply chains.

Of course, the Reserve Bank and AFR aren’t arguing that 80,000 people need to be sacked because they’re ill informed or have made a terrible spreadsheet error. They make these arguments because they have a specific class agenda to defend: they must preserve the existing, collapsing neoliberal order.

A little far-right authoritarianism is a more than acceptable price to pay for maintaining corporate power.

When central banks intentionally inflict this pain, they trigger a predictable political crisis. As working-class and anxious middle-class people lose faith in the state’s capacity to protect them from brutal market forces, a massive emotional and political vacuum is created.

The crisis cannot be managed away with technocratic band-aids. Instead, this vacuum is readily filled by far-right populism — indeed, as Bank of England governor Montague Norman highlighted, a bit of fascism is sometimes exactly what the economy needs to keep those uppity workers in their place.

Central banks are structurally designed to insulate the economy from popular will. They ensure that regardless of electoral outcomes, the imperatives of corporate profits and market-driven governance remain completely untouched.

Pauline Hanson may look and sound to some like an outsider, but her entire political project is about protecting the billionaires. Demonising migrants, privatising the ABC, cutting penalty rates, banning abortion, are all actions that reinforce the hierarchy of billionaires at the top.

Historically, central bankers have not only anticipated this fascist pivot, they have actively welcomed it to prevent any kind of genuine working-class power. The rise of One Nation is a toxic by-product of the classical liberal economics practised by the RBA to protect capitalism.

So is the Reserve Bank to blame? In large part, as I said in my letter to the AFR, yes, but not for the reasons Keheo says.

The anger out there is not a technical glitch to be fixed by the bankers at the RBA tweaking an interest rate up or down a point or two. Thinking that this kind of tinkering would solve the cost-of-living crisis or the rise of far-right political parties utterly, wilfully misunderstands what the capitalist state and economy is and how it operates.

Widespread disillusionment and anger is the by-product of the capitalist dystopia being forced on Australians, where the state protects capital accumulation above all else.

Rather than trying to “manage away” inflation with interest rate increases, we need to realise that social conflict is integral to a healthy democracy. Democracy is not a polite procedural ritual and we shouldn’t bemoan “divisiveness”. Instead, we must recognise — as the billionaires and financial elite do — that politics is as a struggle for material power. We need to organise together and build institutions that can challenge the billionaires.