Richard D. Wolff

The differences between how the American and Chinese governments regulate capitalism

Russia’s war on Ukraine both reflects and deepens a global split that should remind us of Karl Marx’s famous remark: “No social order ever disappears before all the productive forces, for which there is room in it, have been developed; and new higher relations of production never appear before the material conditions of their existence have matured in the womb of the old society.” The United Kingdom already lost its particular social order—its empire—while the United States is now losing its. Despite differences, both of these social orders shared a mostly private form of capitalist relations of production (the organization of enterprises centered around private employers and employees). That social order has given way to a different, mostly public form of capitalist relations of production where state officials are major employers. The latter form of capitalism is developing most dramatically in China.

This article was produced by Economy for All, a project of the Independent Media Institute.

As defined by its core productive relation of employer/employee, capitalism is now developing its productive forces and its gross domestic product (GDP) growth faster in China’s public form of capitalism than in the United States’ private form of capitalism.

The role of the state is central to this decline of capitalism in one area and form and its ascent in another area and form. In the West, the relation between capitalism, and especially its defenders and ideologues, on one side, and the actuality of the state apparatus, on the other, is hypocritical. Endless hostility toward and denunciations of the state match systematic reliance on and support for strong state apparatuses and the economic interventions imposed by them (especially to help manage capitalism’s endlessly recurring crises). Consider the parallels with the endless rejections of racism in societies that institutionally reproduce that racism or with celebrations of family within societies that systematically undermine them.

The need to denounce what the system relies on has tangible effects. Western capitalist economies are declining in good part because they throw obstacles in the way of their states’ participation in managing their economies. The developing economies, such as China, have strikingly avoided that pattern. Their defenders and ideologues celebrate their states’ powerful economic management position even when they criticize a particular policy or official. It is how they explain China’s ability to grow its GDP three times faster than the United States consistently over the last generation.

Part of China’s embrace of a strong state emerged from its affiliations with the USSR and the history of socialism in the 19th and 20th centuries. Most socialists then ascribed to one or another version of the idea that the transition from capitalism to socialism required the workers to seize the state via ballots or bullets. The state became key to this transition to a socialist system. Many socialists advocated strong state apparatuses on the basis of what they hoped such states might then do, namely make the social transition to socialism beyond capitalism, i.e., beyond the employer/employee production relationship. Yet those states, where and when socialists achieved power, proved to be limited. They never accomplished that transition beyond short-lived experiments. Ever since, socialists have analyzed and debated the lessons of those experiments.

A more basic and important cause of today’s developing state capitalism is the history of capitalism itself. Its earliest incarnations in Western Europe emerged from and against the strong states of dying feudalism (as seen in Europe’s “absolute monarchies”). Early capitalisms had thus strongly advocated against strong state commitments in concepts such as “laissez-faire,” “free enterprises,” and “free markets.” When British and then U.S. capitalisms achieved profitable global empires, they credited their professed success to their anti-statism. The hypocritical tendency of this claim resurfaces in the fact that it was their state apparatuses whose military arms acquired and secured their colonies and whose administrative arms ruled them.

Competing capitalist empires produced catastrophic world wars and global economic crashes. They learned the need to increasingly rely on, fund, and legitimize strong states. That learning found expression in various fascistic impulses and movements, in Keynesian economics, and in the ever-greater popularity of socialist interpretations of what strong states could and should do. As the earlier Western capitalisms accommodated ever-stronger states, their ideologues’ anxiety and ambivalence about doing so generated imaginary reasons for rejecting what was happening. Ayn Rand’s influence, libertarianism, and free market advocacy spread and got louder in proportion to the system’s movement in the opposite direction. Where socialists today decry the global economy as “capitalist,” these libertarians insist that it is not genuinely capitalist enough (or not capitalist at all) precisely because the state has so much power over the economy.

After World War II, the majority of the world that broke free of colonial subjugation immediately embraced strong states in their Keynesian or socialist forms to accomplish the “economic development” that they prioritized. Western capitalism was yet again torn in its ambivalence. Capitalists wanted to grab the profits of rapid growth. Ideologues warned against the strong states in the “emerging economies” as the leaders of that growth. The result was a global resurgence of both strong-state-led economic growth on the ground and intense ideological reversion to anti-statism. No wonder the name “neoliberalism” stuck to the time.

Both old Western capitalisms and the newer mostly Eastern capitalisms have evolved considerably over the last generation. Those evolutions are now offering a limited resolution for the inherited tension between actually enhanced social tendencies toward strong state capitalisms and the remaining ideological objections thereto. Everywhere, even in the United Kingdom and the United States, those ideological expressions are weakening. The strong states are now increasingly advocated by “conservatives” such as former U.S. President Donald Trump and current British Prime Minister Boris Johnson, as well as social democrats and liberals. China’s economic performance has carried the day even as Western capitalists try not to admit that publicly.

Russian-born economic historian Alexander Gerschenkron noted in his 1962 Economic Backwardness in Historical Perspective that the state becomes more crucial to capitalist development the later capitalism settles in as a region’s dominant economic system. His notion needs to be amended and extended globally in light of the last 60 years of history. In China, a powerful state apparatus combines with a powerful political party apparatus to supervise and control an economy divided into private capitalist enterprises (private individuals as employers and employees) and public capitalist enterprises (state officials as employers and private individuals as employees). China’s performance not only of economic growth but also of remarkable initial control over containing the spread of COVID-19 suggests that the final stages of capitalism may well be in the state-capitalist forms such as the form the Chinese have developed. The state can transform “backward” forms of capitalism into more “advanced” forms.

Before a post-capitalist system (where the employer/employee relation gives way to democratized workplace organizations that reject the employer/employee division) can take hold, the state-capitalist form enables the system’s productive forces to be most fully developed. We are living through that period right now. We might add that the social left thus finds itself in a situation rather like what it faced at the end of the 19th and early 20th centuries with an important difference: The socialist left now, as during earlier centuries, advocates for an economic system that does not yet exist in any nation.

However, the socialist left does so with the knowledge of what happened to those experiments in socialism that turned out to be and still are forms of state capitalism. Hopefully, 21st-century socialism will not need to repeat those experiments. It can attend to what they lacked, namely the transition at the micro level of workplace organization. That means transitioning enterprises (factories, offices, and stores) from the employer-versus-employee organization to the democratic community (or worker cooperative) organization. The state that achieves that transition will thereby accomplish the end of the capitalist social order. With it might then come that decline of a social necessity for the state that Vladimir Lenin theorized as its “withering away.”

Author Bio: Richard D. Wolff is professor of economics emeritus at the University of Massachusetts, Amherst, and a visiting professor in the Graduate Program in International Affairs of the New School University, in New York. Wolff’s weekly show, “Economic Update,” is syndicated by more than 100 radio stations and goes to 55 million TV receivers via Free Speech TV. His three recent books with Democracy at Work are The Sickness Is the System: When Capitalism Fails to Save Us From Pandemics or Itself, Understanding Marxism, and Understanding Socialism.

The role of capitalism in the war in Ukraine

To the motives for war in human history, capitalism added another: profit. That motive drove technological advancement and created a genuine world economy. It also built new capitalist empires such as the Spanish, Dutch, British, French, Belgian, Russian, German, Japanese, and American empires. Each of these countries built its empire by various means including wars against prior systems operating on their own territories, in their colonies, and in foreign “spheres of influence.” Wars likewise characterized interactions among empires. Global warfare (“world wars”) accompanied the globalization of capitalism and its profit motive. The war in Ukraine is the latest chapter in the history of capitalism, empire, and war.

This article was produced by Economy for All, a project of the Independent Media Institute.

Capitalism means enterprises run by small groups of people—employers—who preside over large groups—hired employees. Employers are driven to maximize profits: the excess of the value added by hired workers over the wages paid to them. Employers are likewise driven to sell outputs at the highest price the market will bear and buy inputs (including workers’ time) at the lowest possible market price. Competition among capitalist enterprises pressures all employers to plow profits as much as possible back into the business to help it grow and to gain market share as means to maximize profits. They each must do this in order to survive because competition’s winners tend to destroy and then absorb the losers. The social result of this competition among enterprises is that capitalism as a system is inherently driven to expand quickly.

That expansion, inside every capitalist nation, inevitably overflows its boundaries. Capitalist enterprises seek, find, and develop foreign sources of food, raw materials, workers, and markets. As competition becomes global, competing capitalist enterprises seek help from their nations’ governments to expand. Politicians quickly learn that companies in their nations that lose in global competition will blame those politicians for insufficient support. Meanwhile, companies that win in the global competition will reward such politicians for their help. The social result of this is that capitalism entails national competition alongside enterprise competition. Wars often punctuate capitalism’s national competition. The winners in those competitions thereby often tended to build empires, historically.

For example, in the 17th and 18th centuries, wars helped British capitalism to build a global empire. In the 19th century, more wars punctuated the completion and consolidation of that empire. Empire growth had itself stimulated all manner of challenges and competition, eventuating in more wars. For example, as capitalism took root and grew in Britain’s American colony, colonial enterprises eventually encountered obstacles (limited markets, taxes, and limited access to inputs). These obstacles eventually grew into a conflict between them and their colony’s leaders, on one side, and Britain’s capitalists and King George III, on the other. The war of independence resulted. Later, British leaders went to war against the United States in 1812 and also considered siding with the enslavers in the South against the capitalist North in the American Civil War.

The 19th century saw countless efforts by other nations to compete with, challenge, undermine, or reduce Britain’s empire. Competitive capitalist enterprises engendered competitive colonialism and many wars. The United States and Germany grew into the major national competitors for Britain. Wars punctuated the growth of capitalism across the 19th century, within the United States and Germany, as well as elsewhere across the globe. As capitalist enterprises combined, centralized, and grew—resulting from the competition among them—so too did many nations consolidate into fewer numbers of nations. Wars became larger too, culminating in the devastating first of the two world wars.

The British Empire fought the German Empire in World War I. That destroyed them both as contenders for global dominance. Having been far less damaged by World War I, U.S. capitalism grew fast in replacing the global capitalist positions that Britain and Germany had lost because of the war. World War I also established capitalism’s responsibility for the tens of millions who died, were injured, and were made refugees in what was then considered the worst war ever. Germany tried to regain its global dominance a few years later, allied with the newest capitalist empire, Japan, to undo the results of World War I. It failed, as the United States defeated Germany and Japan to demonstrate its economic and military (nuclear) superiority. A consolidated U.S. global empire prevailed from 1945 until recent years.

The United States then learned what the British had discovered earlier. Building and consolidating a capitalist empire provokes an endless succession of challengers. Among capitalist enterprises, competition’s losers’ employees move to work for the winners; the winners’ enterprises grow, and the loser’s decline. Winners’ growth often entails still greater profits and more competitive victories. That growth invites and promotes new competitors. Fended off for a while, eventually one or more new competitors discover how seriously to challenge the older dominant firm and displace it. Capitalist empires and their challengers exhibit parallel histories. As the competitive new enterprise destroys the old, the same happens with empires. That has been capitalism’s history, and that is what is now being seen in Ukraine.

Britain, after the end of the reign of Napoleon Bonaparte, won a century of global dominance. The United States after World War I did so too. Both empires provoked endless challenges. Nations large and small developed enterprises, industries, and political leaders who wanted to make changes or move in directions that differed from/challenged the U.S. global capitalist hegemony after World War I. For example, across Latin America, references to “manifest destiny” resulted in small wars to remove competing challenges in the region. Likewise, when Iran’s prime minister in the early 1950s, Mohammad Mosaddegh, or Patrice Lumumba, the first democratically elected prime minister of the Democratic Republic of the Congo, showed signs of breaking away from the U.S. empire’s control, both were removed. The one repression attempt by the U.S. that failed was in Cuba. The United States then isolated and economically hobbled Cuba via sanctions and embargoes. Warfare could be economic as well as military. Ukraine is another example, but with a peculiarity: U.S. support for Ukraine is an effort to repress another country that challenges U.S. hegemony, namely Russia. And repressing Russia too is a peculiar indirect way to get at the greatest threat to the U.S. capitalist empire, namely China.

The USSR’s survival after 1917, its World War II victories, and its development of nuclear weapons after 1945 created a potential challenger for the U.S. capitalist empire that had to be confronted. Former U.S. President Franklin D. Roosevelt and former Prime Minister of the United Kingdom Winston Churchill had accommodated the USSR’s control in Eastern Europe after 1945, but that represented a “loss” for U.S. global dominance. Thus, Eastern Europe quickly became the site of an ideological or “cold” war that pitted freedom and democracy against communism and totalitarianism in the USSR and its “satellite states.” It had to be a “cold” war because the consequences of a nuclear war would have been extreme. Before World War II, U.S. wars against other communist challengers of its empire had not demonized them as “evil communists.” During World War II, the United States even allied with the USSR to jointly defeat the immediate challengers (Germany and Japan). But after 1945, that was the preferred ideological terminology used for the USSR to justify protecting the U.S. empire. Then, when the USSR and its hold on Eastern Europe collapsed in 1989/1990, the old terminology faded in favor of a new terminology, used to begin a new war on a new challenger: Islamic terrorism.

The 30-plus years since 1989/1990 have changed both the U.S. empire and its challenges. Russia proved too weak to hold on to most of Eastern Europe. The United States reintegrated much of that region into Western capitalism via EU and NATO memberships, trade agreements, and Western investments. Slowly, over the last 20 years, Russia overcame some of its post-1989 weaknesses. The meteoric rise of the People’s Republic of China (PRC) brought new challenges for the U.S. empire, including a Russia-China alliance. Russia is now a capitalist economic system allied with the PRC (whose economy has a larger private capitalist sector than at any time since the Chinese Revolution of 1949). These two powerful capitalist economies are the largest globally by geography (Russia) and by population (China). They present a major problem for the U.S. global empire.

Russia evidently felt finally strong enough and allied with a much larger economic entity so it could hope to challenge and stop further “losses” in Eastern Europe. Thus, it invaded Crimea, Georgia, and now Ukraine.

In stark contrast, the U.S. empire’s ability to suppress challenges to its global dominance shrank. It lost wars in Vietnam, Afghanistan, and Iraq, as well as its intervention in Syria’s civil war. Its global economic footprint decreased in relation to that of the PRC. It proved unable to bring nations like Venezuela and Iran to heel despite trying hard for many years.

In Ukraine, on one side is an effort led by nationalists who would bring another nation further back into the U.S.-led global capitalist empire. On the other side is Russia and its allies determined to challenge the U.S. empire’s growth project in Ukraine and pursue their own competitive agenda for part or all of Ukraine. China stays with Russia because its leaders see the world and history in much the same way: They both share a common competitor in the United States.

Ukraine, per se, is not the issue. It is tragically a war-ravaged pawn in a much larger conflict. Nor is the issue about either Russian President Vladimir Putin or U.S. President Joe Biden as leaders. The same history and confrontation would prevail upon their successors. Meanwhile, former U.S. President Donald Trump’s effort to force change on the PRC by imposing the biggest sanctions action in history (i.e., a trade war and a tariff war) utterly failed. Trump was caught up in the same history as Biden, even if each focused on attacking the Russian-Chinese alliance differently.

Eventually some compromise will end the Ukraine war. Both sides will likely declare victory and blame the war on the other among propaganda blizzards. The Russian side will stress demilitarization, denazification, and protection of Russians in eastern Ukraine. The Ukraine side will stress freedom, independence, and national self-determination. Meanwhile, the tragedy goes beyond Ukraine’s suffering. The entire world is caught up in the decline of one capitalist empire and the rise of yet another. Conflicts between the capitalist empires can occur anywhere where differences between them flare up.

Perhaps the greatest tragedy lies in not recognizing the responsibility of the capitalist system with its markets of competing enterprises run/dominated by the minorities we call employers. That system lies at the root of these historic repetitions. The minority employer class controls or is the leadership of the nations that have absorbed and reproduced the competition that capitalism entails. The majority employee class pays most of the costs on both sides (in dead, wounded, destroyed properties, refugee lives, and taxes). A different economic system not driven by a profit motive offers a deeper solution than any on offer at present. Perhaps the war in Ukraine can awaken an awareness of its capitalist roots and teach people to explore alternative systemic solutions. If so, this war and the resulting devastation from it could lead to an important turning point that eventually results in some positive outcomes in the future.

Author Bio: Richard D. Wolff is professor of economics emeritus at the University of Massachusetts, Amherst, and a visiting professor in the Graduate Program in International Affairs of the New School University, in New York. Wolff’s weekly show, “Economic Update,” is syndicated by more than 100 radio stations and goes to 55 million TV receivers via Free Speech TV. His three recent books with Democracy at Work are The Sickness Is the System: When Capitalism Fails to Save Us From Pandemics or Itself, Understanding Marxism, and Understanding Socialism.

How the growing disconnect between US capitalism and real-world economic realities threatens its very future

The growing disconnect between the capitalist system and the economic realities plaguing the United States is now nearing completion. On the ground, the accumulated problems of U.S. capitalism undermine its empire and challenge its very future. Meanwhile, the ever-deepening inequalities of wealth and income conjure up images of ancient Egypt’s pharaohs. Three economic crashes opening the new century (2000, 2008, and 2020) have shaken the system; so have the two wars America lost against very poor countries in the Middle East: Afghanistan and Iraq. The worst public health crisis in a century during the COVID-19 pandemic has further exposed how unprepared U.S. capitalism was and is, thereby imposing massive new human and financial costs lasting into the future.

A government that serves U.S. capitalism first and foremost borrowed trillions and enabled trillions more of new debt (corporate and household) that was used to fight long, losing wars and shore up a faltering economy. Now, after two terrible years of COVID plus an economic crash, with 3 million fewer jobs in 2022 than before COVID hit, a sharp inflation looms. Meanwhile, aided partly by profit-driven U.S. capitalists who moved their operations to China, the Asian country is now in a position where it is challenging U.S. capitalism globally.

Above the troubled ground sit two old political parties, the GOP and the Democratic Party, which are formed by and are stuck in the old political economy before all these problems accumulated into crises. From 1820 to 1970, U.S. capitalism experienced cycles, but these cycles were securely anchored in a long-term upward trend. Real wages rose every decade, at least for white workers. Recessionary downturns only interrupted the long trend up (and even then not for long). The Republican Party and the Democratic Party rarely went beyond the routine rituals of orderly contests over who deserved the credit for economic growth and who deserved the blame for the interruptions during recessions.

The one big exception resulted from the one super big interruption: the 1930s Great Depression. This shook U.S. capitalism to its core. Mobilized and led by a coalition of militant unions (CIO), socialist parties, and a communist party, the U.S. working class shifted sharply to the left. This shift won a New Deal from the administration of President Franklin D. Roosevelt. That deal taxed corporations and the rich significantly more. It then poured much of those funds into the new Social Security system, unemployment compensation, and a massive federal jobs program. Because of the New Deal, Roosevelt was reelected three times, and was the most popular president in U.S. history. Correspondingly, U.S. corporations and those they enriched felt seriously threatened during this period.

The GOP reacted strongly. Once FDR died and World War II ended, the Republican Party took the lead to undo the New Deal. It did this by splitting the coalition (which included the CIO, socialists, and communists) from the Democratic Party and the coalition partners from one another. Anti-communism, McCarthyism, and the Cold War served as the weapons of choice for the Republican Party. The GOP succeeded partly because the Democrats offered mostly weak opposition or none at all. Postwar Democrats were largely complicit in destroying most of what the New Deal had achieved (with the help, ironically, of many of the Democratic Party’s own prewar efforts). After 1945, the White House, Congress, and state and local governments resumed orderly political contests between the GOP and the Democratic Party. Both endorsed a musical chairs type of rotation of public authority personnel between them (until this system was undone by former President Donald Trump in 2020).

The old, established leaders of both parties still do not grasp or accept that the orderly rotation of public authority personnel is now over. Unable or unwilling to critically evaluate U.S. capitalism, these leaders missed the signs leading up to the accumulation of capitalism’s problems that now overwhelms them. The Bushes, Clintons, President Joe Biden, and their ilk want the old political system to persist. After all, for them this old political system did well. But now their disconnect from the capitalist reality that ultimately controls them threatens to render them blatantly ineffective, sadly out of their element. Because they cannot or dare not criticize that reality, its increasing difficulties and resulting mass disaffection are beyond their reach with the old tools, arguments, and spins that used to work.

Given the disconnected mainstreams of U.S. politics, mass disaffection provokes escapism and scapegoating. The GOP eagerly validates many of them (anti-immigration, white supremacy, quasi-fascism, culture wars, and anti-leftism) to enlarge its voter base. The Democrats, meanwhile, try to fight the extreme forms of that escapism and scapegoating (as in “basket of deplorables”) without offering any real alternative to it. The socialism represented by politicians like Senator Bernie Sanders (I-VT) and Representative Alexandria Ocasio-Cortez (D-NY) is so soft-pedaled by them that, given mainstream media biases, it only marginally hovers at the edges of the national political conversation.

What people increasingly need is protection from a beleaguered capitalist system itself, from its intrinsic instability (the accumulated crashes and their effects), intrinsic inequalities of wealth and income (and their effects), devastating ecological damages, and profit fetishism. But the GOP and the Democratic Party have long ago lost the ability to see or contend with any of that. They keep repeating neoliberal ideology (and its reframing of a U.S. empire as “globalization”) so often that they actually believe and are thereby imprisoned within the system.

Thus, a peculiar political theater of disconnectedness has emerged. The Republican and Democratic leaders cannot see what most of us can. They see “the big issues” as not being about capitalism. Yet what they do see and the solutions they propose will in fact be their response as capitalism’s crisis deepens. Thus, under Trump, the Republican Party has moved toward fascism. His GOP has used and will continue to use government to enforce capitalism as it totters by extinguishing what remains of unions, crushing the left, and militarizing media and culture, much as other dictators have, including Adolf Hitler in Germany after January 1933 and Benito Mussolini in Italy after October 1922. Like them, Trump has used hyperpatriotic nationalism mixed with racial superiority to justify all his actions. That is the real meaning behind Trump’s campaign slogans and his audiences’ cheers of “save America” and “Make America Great Again.” How far down the German and Italian fascist paths Trump and others like him will go depends on circumstances.

Capitalism’s crisis exists neither for Biden nor the Democratic establishment he leads, just as it does not for Trump and the GOP. The Democratic establishment defines itself over and against Trump. It is not about to go down the fascist road. It proposes instead to “protect democracy” from what Trump represents. That difference will frame many electoral campaigns in 2022 and 2024; it already does. The Democrats will “protect democracy” by “returning to the pre-pandemic normal.” The Democratic Party’s version of “Make America Great Again” is a resurrected post-World War II political economy, complete with U.S. global dominance based securely, they imagine, on a fast-growing U.S. capitalism.

Both the Republican and Democratic establishments warn their megadonors and the public that allowing the other to take political power will disrupt civil society and prevent America from becoming great again. The GOP screams that antifa and the Black Lives Matter movement will destroy white America and will result in a civil war. The Democrats counter that Trump and January 6 type “insurgents” will dissolve social peace inside the United States, provoke counteractions, and thereby lead to civil conflict. Social peace, each side insists, requires political war to defeat the other side. Neither side glimpses the absurd contradiction of its claims.

Which way U.S. politics will go depends less on the two parties or their disconnected rhetoric. What matters far more are the actualities of U.S. capitalism as the U.S. empire continues to decline and U.S. capitalism’s accumulated problems worsen. These latter factors will determine how the public views the parties’ disconnected policies. Today’s inflation offers an example of this. As a further slap in the face of the U.S. working class who have dealt with two years of economic crash plus the health catastrophe of COVID-19, inflation and the rising interest rates aimed to stop it will ultimately shake capitalism and shape politics.

How many angry working families will now sympathize with a politician who offers big changes versus a politician who offers “stay the course”? The business community wants inflation stopped. The responsive Fed will thus resort to quantitative tightening and raising interest rates. The responsive Biden will applaud the Fed. Those Fed actions can and likely will threaten jobs. So Biden must choose between the electoral risks of inflation versus those of job deterioration. That is the risky dead-end “choice” that the problems of capitalism will dump on Biden. And if 2022 proves to be the year when capitalism’s crisis breaks into the explicit open, will most Americans tilt toward Trump-type fascism or the “democracy protection” offered by the Democrats to protect themselves from capitalism’s crisis?

Hitler’s and Mussolini’s fascist solutions to crises in their nations’ capitalisms did not end well. Yet today’s leading U.S. capitalists seem not to know or care about historical precedents. They continue to perform their disconnected politics comfortably, oblivious to the imploding capitalism and the resulting damage to Americans. In that, they resemble the upper classes in Russia (up to 1917), in Germany (up to 1933), and in Italy (up to 1922). The most important questions thus become whether or not and how soon a new left can emerge that targets capitalism per se, proposes an alternative system, and charts a transition to this alternative system.

How American politicians are papering over the social problems caused by profit-driven capitalism

The declines of U.S. capitalism and of its imperial position provoke fear among its mainstream politicians. Their response, in large part, has been to deny that any such decline is happening. These politicians do this partly by acting as though the U.S. remains in the globally dominant position it occupied in the second half of the 20th century. Thus, to maintain this illusion, they start wars in the Middle East, maintain military bases in dozens of countries, intervene in other countries at will and describe the U.S. as the global guarantor of peace, security, and democracy.

Yet these U.S. politicians also sense what the population feels: that decline of capitalism and U.S. hegemony is actually happening. So repeated denials, while comforting the citizens of the country, do not suffice to control popular opinion and thereby common sense. Mainstream politicians in both Republican and Democratic establishments work to anticipate and deflect these popular feelings at any chance that they might evolve into a systemic critique. These politicians, who have seen the critics of U.S. capitalism grow in number and become increasingly vocal over the last decade, are slowly turning popular feelings relating to the decline of capitalism into anti-capitalism. The critics, meanwhile, blame capitalists and their established systems for this decline.

To forestall the success of the critics of capitalism, U.S. mainstream politicians promote popular rages against a series of “causes” relating to the very decline of capitalism they cannot admit or openly acknowledge. Their goal is to displace popular anger and to redirect people’s desire to protest the economic and social decline impinging on them due to this decline of capitalism. This is accomplished by loudly and repeatedly blaming certain scapegoats: immigrants, China, Russia, Black and Brown people, secularists, women, and liberals.

Mainstream politicians have divided their labor in this regard. Some politicians focus on the denial of the decline of capitalism, and others focus on the displacement and deflection of the anger being felt by people over the crumbling system. Some do both. Few recognize and even fewer admit the contradiction involved: what is denied ought then not be displaced, or what gets displaced entails an admission (not a denial) that there is something that needs displacement.

READ: How unchecked capitalism and massive inequality made America a bully nation

Because the U.S. lost its wars in Vietnam, Afghanistan, and Iraq, these wars must be denied, displaced onto someone else, or perhaps both. The same applies to the shrinking U.S. ability to control the politics of Latin America as evidenced by Cuba, Venezuela, Chile, and many more countries in the region. Similarly, because China’s rapid rise challenges U.S. global hegemony (after being long denied), the country is now treated as a “threat.” Blame for that threat must thus be displaced onto the Chinese, China’s ally Russia, or U.S. politicians who came before and failed to adequately prevent or dispose of the threat. Ironically, the fact that capitalist corporations, the U.S., and others profited greatly by moving production and other related facilities to China is rarely mentioned as causing the threat to U.S. global hegemony.

U.S. politicians’ program of denying and displacing is borrowed from the corporate sector (as is so much else that the government does). The profit-driven fossil fuel companies long denied that burning these fuels causes climate change or that their monopolistic practices destabilize and often inflate global markets. At other times or places, these corporations have blamed climate catastrophes and fluctuating energy prices on everything they can think of other than themselves and the profit-driven organizations representing the energy industry.

U.S. political leaders in both major parties failed utterly to anticipate, prepare for, and cope successfully with the ongoing COVID-19 pandemic. With the United States accounting for about 4 percent of the world’s population, the country suffered approximately 16 percent of the world’s COVID-19 deaths as of the end of January 2022 (despite its national wealth and developed health care system). Many other countries like Singapore and South Korea performed far more successfully in curbing the spread of the virus. Once again, mainstream politics on this issue is divided between deniers and displacers. Those who chiefly deny the failure relating to the handling of the pandemic by the United States do so by focusing instead on the rising and falling COVID-19 statistics relating to infections and deaths and celebrating whatever little progress is made regarding testing, masking, and vaccinating Americans, while carefully avoiding any comparisons to foreign efforts to combat COVID-19. Various displacers choose to blame the rising number of COVID-19 cases on the nation’s leading infectious disease expert Dr. Anthony Fauci, the Centers for Disease Control and Prevention, former President Donald Trump, President Joe Biden, or the Chinese. One major displacement project stresses opposition to government or private mandates (to mask, vaccinate, or follow other public health guidelines) as a matter of personal freedom. Such displacers irrationally shift blame for the virus onto blame for the mandates and those who issued the mandates. Carefully exempted from blame is the profit motive that drove producers of tests, masks, and ventilators, as well as hospital operators, to invest elsewhere and not in the production and safe storage of tests, masks, and ventilators. U.S. capitalism failed to produce what is needed to manage pandemics known to cause menace to societies from time to time. Likewise, exempted from blame is the private profit motive that delayed investments in vaccine development and still further delays in the global distribution of COVID-19 vaccines. Denial and displacement work well to keep capitalism out of and away from public discussion, and from being targeted as the problem to be solved.

READ: Explaining 21st-century capitalism in a way everyone can understand

More recently, mainstream U.S. politicians—again, establishment figures from both major parties—applied the denial and displacement mantra to the problem of inflation in the U.S. economy. The denial with which they confronted inflation was oddly focused on the future. Americans were officially assured that the inflation would be limited in extent and would be merely transitory. Its possible depth and duration were denied. Federal Reserve Chair Jerome Powell and others down the bureaucratic ladders confidently predicted inflation’s future decline. When the lack of evidence behind such denials about possible future decline in inflation became clear when the real inflation data were announced, attempts at displacements by politicians and bureaucrats grabbed the limelight. The no longer deniable inflation was dutifully blamed on supply chain disruptions, Federal Reserve monetary policy, the Democrats’ fiscal policies, the Chinese, Trump, or Biden.

Yet again, virtually nowhere did politicians or media commentators refer to capitalism’s role in causing this inflation. As every business school teaches its students and as capitalists have repeatedly admitted, profit is the bottom line, the goal of business decisions. One such decision is setting prices to maximize profits. After nearly two years (2020 and 2021) of a depressed profit situation for most businesses, employers across the U.S. wanted to recoup their lost profits. They hoped to do so by raising their prices as much as the market could bear. In capitalism, employers (a tiny minority of the population) exclude employees (the vast majority) from making price decisions. Especially in the latter half of 2021, many employers raised prices of their goods and services. They thereby caused an inflation to improve their profit situation: what they are in business for. For the employees, who are in the majority and were already hurt badly during the two years of the ongoing pandemic plus the 2008 economic crash, an inflation, especially one outrunning their wage increases, was unspeakably bad news.

Denial and displacement serve mainstream politics in capitalist societies. The politicians who are part of the system hide, as far as possible, the complicity of profit-driven capitalism in causing social problems. They obstruct (or actively undermine) public policies that might solve these problems and ignore the systemic changes that might be needed to resolve these inherent issues that form part of the capitalist system.

Richard D. Wolff is professor of economics emeritus at the University of Massachusetts, Amherst, and a visiting professor in the Graduate Program in International Affairs of the New School University, in New York. Wolff’s weekly show, “Economic Update,” is syndicated by more than 100 radio stations and goes to 55 million TV receivers via Free Speech TV. His three recent books with Democracy at Work are The Sickness Is the System: When Capitalism Fails to Save Us From Pandemics or Itself, Understanding Marxism, and Understanding Socialism.

This article was produced by Economy for All, a project of the Independent Media Institute.

How the troubled U.S. empire could quickly fall apart

The U.S. wars lost in Iraq and Afghanistan showed imperial overreach beyond what even 20 years of war could manage. That the defeats were drawn out for so many years shows that domestic politics and the funding of the domestic military-industrial complex were, more than geopolitics, the key drivers of these wars. Empires can die from overreach and sacrificing broadly social goals for the narrow interests of political and economic minorities.

The United States has 4.25 percent of the world's population yet accounts for about 20 percent of global deaths from COVID-19. A rich global superpower with a highly developed medical industry proved to be badly unprepared for and unable to cope with a viral pandemic. It now wrestles with a huge segment of its population that seems so alienated from major economic and political institutions that it risks self-destruction and demands the "right" to infect others. Refusing to accept lifesaving COVID-19 vaccine and mask mandates in the name of "freedom" mixes a frightening stew of ideological confusion, social division, and bitterly rising hostility within the population. The January 6 events in Washington, D.C., showed merely the tip of that iceberg.

Levels of debt—government, corporate, and household—are all at or near historical records and rising. Feeding and thereby supporting the rising debts is the Federal Reserve with its years of quantitative easing. Officials at the highest levels are now discussing the possible issuance of a trillion-dollar platinum coin to have the Fed give that sum in new credit to the U.S. Treasury to enable more U.S. government spending. The purpose goes far beyond political squabbling over the cap on the national debt. The goal is nothing less than freeing the government to inject still more massive amounts of new money into the capitalist system to sustain it in times of unprecedented difficulty. The Fed learned that today's capitalism needs such quanta of monetary stimulus thanks to the three recent crashes (2000, 2008, and 2020) witnessed by the capitalist system. A desperate empire approaches a version of the Modern Monetary Theory that empire leaders mocked and rejected not very long ago.

Extreme inequality, already a distinguishing feature of the United States, worsened during the pandemic. This inequality fuels rising poverty and rising social divisions among the haves, the have-nots, and the increasingly anxious think-they-haves. Attempts by employers to recoup the profits lost to the pandemic and to the capitalist crash during 2020 and 2021 have led many to impose additional squeezes on employees. This has led to official and unofficial strikes that continue amid a reawakening labor movement. On an individual level, the rate of workers who have been quitting their jobs has been hitting record highs.

Attempts by employers to recoup profits lost over the last two years also show up in the ongoing inflation besetting the empire. Employers set prices for what they sell. They know the Fed has juiced up the potential purchasing power by flooding markets with new money. Demand, pent up by the pandemic and the economic crashes, will help, at least for a while to support inflation. But even if temporary, the inflation will further worsen income and wealth inequalities and thereby set the U.S. up for the next crash. On top of this new century's three crashes (2000, 2008, and 2020), each worse than the one before, another crash, which could be still worse, could challenge the capitalist system's survival.

Fires, floods, hurricanes, droughts: the signs of climate catastrophe—not to mention its fast-climbing costs—add to the sense of impending doom provoked by all the other signs of empire decline. Here too, the tiny minority of fossil fuel industry leaders has succeeded in blocking or delaying the social action needed to cope with the problem. Empires decline when their long habits of serving minority elites blind them to those moments when the system's survival requires overriding those elites' needs, at least for a while.

For the first time in over a century, the United States has a real, serious, ascending global competitor. The British, German, Russian, and Japanese systems never reached that status. The People's Republic of China now has. No settled U.S. policy vis-à-vis China has proven feasible because of internal U.S. divisions and China's spectacular growth. Political leaders and "defense" contractors find China-bashing attractive. Denouncing China serves as popular scapegoating for many politicians in both parties and as support for an ever-increasing defense spending by the military. However, major segments of large corporate business have invested hundreds of billions in China and in global supply chains linked to China. They do not want to risk them. In addition, for decades, China has offered one of the world's lowest-cost, better educated and trained, and most disciplined labor forces coupled with the world's fastest-growing market for both capital and consumer goods. Competitive U.S. firms believe that global success requires their firms to be well established in that nation with the world's largest population, among the world's least-costly workers, and with the world's fastest-growing market. Everything taught and learned in business schools supports that view. Thus the U.S. Chamber of Commerce opposed former President Donald Trump's trade/tariff wars and now opposes President Joe Biden's hyped-up program of China-bashing.

There is no way for the United States to change China's basic economic and political policies since those are precisely what brought China to its now globally envied position of being a competitor to a superpower like the U.S. Meanwhile, China is expected to catch up to the United States with equality of economic size before the end of this decade. The problem for the U.S. empire grows, and the United States remains stuck in divisions that preclude any significant change except perhaps armed conflict and an unthinkable nuclear war.

When empires decline, they can slip into self-reinforcing downward spirals. This downward spiral occurs when the rich and powerful respond by using their social positions to offload the costs of decline onto the mass of the population. That only worsens the inequalities and divisions that provoked the decline in the first place.

The recently released Pandora Papers offer a useful glimpse into the elaborate world of vast wealth hidden from tax-collecting governments and from public knowledge. Such hiding is partly driven by the effort to insulate the wealth of the rich from that decline. That partly explains why the 2016 exposure of the Panama Papers did nothing to stop the hiding. If the public knew about the hidden resources—their size, origins, and purposes—the public demand for access to hidden assets would become overwhelming. The hidden resources would be seen as the best possible targets for use in slowing or reversing the decline.

Decline provokes more hiding, and that in turn worsens decline. The downward spiral is engaged. Moreover, attempts to distract an increasingly anxious public—demonizing immigrants, scapegoating China, and engaging in culture wars—show diminishing returns. Empire decline proceeds but remains widely denied or ignored as if it did not matter. The old rituals of conventional politics, economics, and culture proceed. Only their tones have become those of deep social divisions, bitter recriminations, and overt internal hostilities proliferating across the landscape. These mystify as well as upset the many Americans who still need to deny that crises have beset U.S. capitalism and that its empire is in decline.

Richard D. Wolff is professor of economics emeritus at the University of Massachusetts, Amherst, and a visiting professor in the Graduate Program in International Affairs of the New School University, in New York. Wolff's weekly show, "Economic Update," is syndicated by more than 100 radio stations and goes to 55 million TV receivers via Free Speech TV. His three recent books with Democracy at Work are The Sickness Is the System: When Capitalism Fails to Save Us From Pandemics or Itself, Understanding Socialism, and Understanding Marxism, the latter of which is now available in a newly released 2021 hardcover edition with a new introduction by the author.

This article was produced by Economy for All, a project of the Independent Media Institute.

Explaining 21st-century capitalism in a way everyone can understand

Now that so many people have realized that the capitalist system is riddled with problems, they want a clear explanation about the functioning of the system. They are dissatisfied and impatient with how school courses, politicians' statements, and mainstream media treat the subject. Basic economics literacy is notoriously low in the United States even as its citizens show great interest in the financial aspects of their lives. So this short article aims to present the system's essentials.

Capitalism is just one particular way of—a system for—organizing the production and distribution of goods and services. It differs from other systems such as slavery and feudalism but also shares some similarities with them. Capitalism, like slavery and feudalism, divides those engaged with the production and distribution of goods and services into two groups, one small and the other large. Slavery had masters (few) and enslaved people (many), while feudalism divided the groups into lords (few) and serfs (many). Employers are capitalism's smaller group. They control, direct, and oversee the economic system. The employers use production and distribution to grow their wealth. Capital is wealth engaged in self-expansion. As the systemic agents who are socially positioned to perform that expansion, employers are capitalists.

Capitalism's much larger group comprises the employees (or workers). As the majority in the system's workplaces, they do most of the work. Employees are divided into two groups. One group, often called "productive workers," are those directly involved in producing goods or services. In a company that produces chairs, for example, they are the makers of the chairs (people directly transforming wood into chairs). The second group of employees, often called "unproductive workers," are not directly involved in contributing to the workplace's output. Rather, unproductive workers provide the conditions and the context that enable the productive workers to directly produce the output. Examples of unproductive workers in a workplace include clerks who keep records and sales and purchasing departments' employees who secure inputs and market outputs.

Capitalist employers alone decide the mix of productive and unproductive workers they hire, what each of them does, what technologies each deploys, where their work is done, and what happens to the fruits of their labor. While productive and unproductive workers are excluded from participating in those decisions, they live with the consequences of these decisions.

Productive workers use tools, equipment, and buildings that are paid for and provided by the employers who hire them. Productive workers transform raw materials likewise purchased and provided by their employers. These "means of production" (tools, equipment, facilities, and raw materials) bought by employers contain a certain value that carries over into the finished product. The productive workers add more value by expending their transformative labor and utilizing those means of production provided to them by the employers. Thus, the finished output of each capitalist workplace contains the values of the used-up tools, equipment, and raw materials, plus the value added by the productive workers.

The key point to grasp here is that the value added by the productive workers is significantly more than the value of the wages paid to them by their employer. For example, an employer may agree to pay a productive worker $20 per hour because—and only because—during each hour, that productive worker's labor adds more value than $20. That key difference between value added and value of the wage payment is often called the "surplus value." The capitalist employers receive (or better, take) that surplus value and withdraw from it a portion that they call "profit."

The simple arithmetic of capitalist production can clarify its structure. First, the value of used-up means of production plus the value added by productive labor equals the total value of the output. The employer receives, owns, and sells that output in the market. Second, the excess of the value added by productive labor, over and above the value of the wages paid to the productive worker, provides employers with the surplus value. Part of that surplus value is used by employers to hire unproductive workers and to provide the conditions that enable productive workers to generate that surplus value. Included in these conditions is the interest paid to creditors who lend to the capitalist and the dividends paid to those who purchased shares in the enterprise.

The rest of the surplus value is what capitalists call profit. They use profit to grow their enterprises and support their own levels of consumption. In the modern capitalist corporation, the capitalists are the boards of directors who retain the profits in their hands and use them chiefly to grow the corporation and enable enhanced consumption by leading corporate officials (such as CEOs) as well as directors.

Capitalists get surplus value while employees get wages or salaries. That difference is crucial. Because employers occupy the dominant decision-making position in workplaces (enterprises), they use that position to ensure that enterprises produce profits as their first priority, their "bottom line." Employers seek to reduce, as far as possible, the wages or salaries they need to pay to hired workers, both productive and unproductive. The more they repress wages or salaries of productive workers, the more surplus value they can take. The more they repress the wage or salaries of unproductive workers, the greater the share of the surplus they can take in profits.

Capitalism's high priests—the professional economists—spin the tales (they prefer to call them theories) that justify the system. Thus they seek to persuade us that capitalists' "profit maximization" achieves the greatest efficiency, economic growth, and the greatest good for the greatest number. We are to believe that the self-serving (profit-driven) behavior of the employer class is, magically, the best for employees. In parallel fashion, earlier priests insisted that slavery and its self-serving masters were the best possible social arrangement for enslaved people. The priests during feudalism likewise praised it and its self-serving lords as the best possible social arrangement for serfs.

Because profit maximization serves capitalist employers, mainstream economics celebrates profits. In recent decades, that mainstream borrowed from mathematics the abstract notion (model) of a simplified system in which maximizing one aspect of it automatically maximizes many of its aspects. They then insisted that such a model captures (adequately represents) how capitalism works. Don't be fooled; it does not. The mathematical model is simple, but capitalism is not. Maximizing and taking the profits out of each capitalist enterprise is how capitalists accumulate wealth. That is good for them but not at all for the rest of us. Keeping profits away from employees keeps them needing employment from capitalists. That too is good for employers. The profit system reproduces capitalism over time by reproducing the capitalists at one end and the workers needing jobs at the other. Capitalists and workers have never been equal beneficiaries of the system.

The market is another institution capitalism utilizes to reproduce itself. Markets had existed long before modern capitalism arose to become today's globally dominant economic system. Slavery and feudalism had markets, but not in a unique way and not to the extent that capitalism does. Capitalism inserts the market into the core relationship between the system's two major positions: employer and employee. The employer purchases the labor power of the employee from the latter (who owns it). In contrast, enslaved people were purchased in markets, but their labor power was not theirs to sell. Neither serfs nor serf labor power was purchased by feudal lords. Only when slavery and feudalism declined did some markets emerge for labor power and, thereby, signal some transition toward capitalism.

For capitalism, markets provided the means to secure its crucial ratio: the difference between the value paid for labor power (the wage) and the value added by the laborer's work effort. That difference is the prerequisite for surplus value to be produced by the productive laborer and then appropriated and socially distributed by the capitalist.

Profit maximization and markets were always carefully limited and designed to serve the reproduction of capitalism. That is how markets evolved once the capitalist organization of production and distribution displaced the systems of slavery and feudalism that preceded it. Those other systems had either rejected markets or else shaped markets to reproduce those different, noncapitalist systems. Only a narrow, ideological fundamentalism raises markets, profits, or capitalism itself to a status above history as if any of them had the power to stop the flow of change.

Capitalism's profit and market systems do not represent a suprahistorical absolute of maximal efficiency or optimality (favorite words in mainstream economics). Let's remember that previous economic systems always spawned powerful ideologies insisting that they too were permanent, optimal "ends of history." That alone ought to have imbued contemporary economists with some self-critical disciplinary consciousness. Instead, most of these economists merely advanced yet another set of absolutist claims on behalf of capitalism. Mainstream economics has had great difficulty including any such self-criticism. Capitalists' demands for ideological loyalty from their workers may have played a role in that difficulty.

History has not stopped. Every other economic system in human history was born, evolved, and ceased to exist at some point. The most reasonable expectation is that capitalism, having been born and evolved, will also cease to exist one day. Human beings have often been impatient with the economic systems they had and eager for something better. The number of people feeling that way about capitalism is rising globally. Clarifying the basics of capitalism, which is to be superseded, can help move society forward now.

Richard D. Wolff is professor of economics emeritus at the University of Massachusetts, Amherst, and a visiting professor in the Graduate Program in International Affairs of the New School University, in New York. Wolff's weekly show, "Economic Update," is syndicated by more than 100 radio stations and goes to 55 million TV receivers via Free Speech TV. His three recent books with Democracy at Work are The Sickness Is the System: When Capitalism Fails to Save Us From Pandemics or Itself, Understanding Marxism, and Understanding Socialism.

This article was produced by Economy for All, a project of the Independent Media Institute.

Why the neoliberal drive to privatize everything is running out of gas

Most Chileans recently voted out the remnants of military dictator Augusto Pinochet, along with Milton Friedman's policies and many U.S. interventions. They are at work on a radically new Constitution. In the United States, former President Donald Trump and President Joe Biden gave diminishing lip service to (or just ignored) neoliberal orthodoxy to push for and get massive government interventions into U.S. capitalism. Most of what remains of private capitalism is surviving on unprecedented, massive government life support, monetary and fiscal. A tired rerun of Cold War-style demonizing provides the ideological cover for the fading neoliberalism. Both major parties endorse huge and growing government economic interventions as urgently needed, homeland security-driven, anti-China policies.

Pity the poor libertarians. Their audience fades because the same intrusive government they blame for all economic ills demands loyalty in its fight with China. Former President Richard Nixon was less dishonest 50 years ago when he reportedly said, "We are all Keynesians now." In contrast, today's GOP mouths "conservative economics," yet merely quibbles over details of the government's gigantic money creation and deficit financing.

Today's declining U.S. capitalism can no longer repeat its previous bland celebrations of private enterprises and free markets. Too much is going wrong, provoking criticism, and deepening divisions across U.S. society. The last time U.S. capitalism stumbled this badly—the Great Depression of the 1930s—public health did not suffer massive failure at the same time. Yet, then too, criticism of capitalism reached far, wide, and deep. It was expressed in the unionization by the Congress of Industrial Organizations (CIO) of millions alongside zooming enrollments in two socialist parties and one communist party.

Yet, the New Deal negotiated by former President Franklin Delano Roosevelt and the employer class, on the one hand, with the coalition of unionists, socialists, and communists, on the other hand, achieved then much more than what President Biden seeks now. The pendulum then swung much farther from private enterprise and free markets to broad and deep economic interventions by the government—exemplified by Social Security, unemployment compensation, the minimum wage, and the federal hiring program. The pendulum now swings likewise, if less far, from the neoliberal tradition of Margaret Thatcher and Ronald Reagan to the government-led and government-regulated capitalism focused on "winning" the competition with China (or, as Trump promised, punishing the "cheating" performed by U.S. trading partners).

Then, the poles of economic debate mirrored the policy oppositions. It was private self-regulating and self-healing capitalism versus government regulatory interventions to save capitalism from self-destruction. Now, something basic has changed. The three capitalist crashes in 2000, 2008, and 2020, each much worse than the previous one, plus the failures to prepare for or cope with COVID-19, ushered in massive, ongoing government economic intervention. The Federal Reserve has smashed all prior records of money creation. The Treasury has smashed all prior records of financing government budget deficits with an expanding national debt. The private versus government parameters of economic debate are gone, replaced by de facto debates over the size, duration, and appropriate beneficiaries or targets of government interventions, monetary and fiscal.

Of course, government interventions in the economy were needed, solicited, and obtained across U.S. history by its private capitalists. But the latter feared that widening and eventually universal suffrage could turn government toward serving the interests of labor (the majority) rather than capital (the minority). So it was important to demonize the government's economic interventions, to compare their effects unfavorably to what private capitalism had accomplished and could yet achieve. But now what remains of private capitalism increasingly depends upon and expects government interventions as the equivalent of life support in medically extreme situations. The old demonization of government economic intervention sounds increasingly hollow and out of touch with reality. To modernize Nixon, we might say, "We are all interventionists now." And this has its inevitable effects on economic debates in academia, politics, and the media.

The die-hard libertarians and other supporters of free-market, private capitalism increasingly lump together liberals, social democrats, insufficient "conservatives," Keynesians, socialists, and communists. They comprise an evil, awful bloc of "the other," advocates for government economic intervention. While there are gradations among them, ranging from Xi Jinping to Donald Trump to Joe Biden, they are all viewed as advocates of massive government economic intervention. By articulating such a perspective, the die-hards inadvertently isolate and marginalize themselves as well as the economic debates defining them.

Contradictory discourse proliferates. U.S. officials denounce Chinese private megacorporations for their close ties to the Chinese government and military, as if their U.S. counterparts do not have comparable ties to the U.S. government and military. Chinese officials have celebrated their "socialist" achievements over the last 25 years, as if China had not invited and enabled private capitalist enterprises to enter and fuel those achievements. Increasingly, spokespersons in economies with greater degrees of private capitalism refer to economies with greater government intervention as "models" to be learned from. Thus, "we" must "learn" from "them" in order to better compete with them.

Slowly, the realization dawns that maybe it never was appropriate to center analytical attention and doctrinal disputation on the private versus public sectors of capitalist economies. Maybe all capitalisms mixed private enterprises and free markets with public enterprises and publicly regulated enterprises, markets, and economic planning activities. We do know that slave economic systems mixed private slave enterprises with public slave enterprises and state regulations of slave enterprises. We know that the same applies to feudal economic systems. It was a distraction to focus on the private versus public dispute as if it were central to understanding capitalism's place in history and in modern society.

Perhaps economics as a discipline is shifting gears to focus on a different basic discourse and debate. At the micro level, this debate would contrast and compare the functioning and effects (economic, political, and cultural) of two alternative organizations of workplaces. One of them, contemporary capitalism—embodied in both private and public enterprises—entails a version of the dichotomies inherited from slavery and feudalism. In these dichotomies, a small minority—enslavers in slavery, lords in feudalism, and employers in capitalism—makes all the key workplace decisions, holds the major power positions, and accumulates disproportionate wealth relative to what the majority—slaves, serfs, and employees—gets. The alternative workplace organization now struggles to emerge from the shadows and margins of those dichotomous discourses and realities. It exhibits a communal, collective, or cooperative organization of the workplace. Instead of hierarchy, this alternative is a horizontal organization that makes all workplace participants equally powerful. Each has one vote to decide democratically what to produce, how and where, and what to do with the surplus or profits to which all workplace participants contributed. These are called worker self-directed enterprises, or WSDEs (see Democracy at Work: A Cure for Capitalism).

At the macro level, the emerging debate would focus on how key institutions—markets, planning apparatuses, relations between workplaces and residential communities, schools, government, political parties, and so on—would link differently to the alternative enterprise organizations. The whole capitalism versus socialism debate would then be reorganized around this question: which enterprise organization—capitalist versus WSDE—best serves the interests of the communities engaged in such a debate.

Capitalism versus socialism debates would then stop being about private versus public ownership and free versus government-regulated (or planned) markets. They would refocus instead on hierarchical-capitalist versus democratic-collectivist organizations of workplaces (factories, offices, and stores). The original notion of socialism as a basic critique of and an alternative to capitalism would thereby return to displace its detour into debates over private versus public.

This article was produced by Economy for All, a project of the Independent Media Institute.

Why we need to democratize wealth

Throughout its history—wherever it arrived and settled in as the dominant economic system—capitalism provoked struggles over the redistribution of wealth. In other words, this system always distributes wealth in a particular way and likewise produces dissatisfaction with that particular distribution. Those dissatisfied then struggle, more or less, consciously or not, peacefully or violently to redistribute wealth. The struggles are socially divisive and sometimes rise to civil war levels.

The French Revolution marked the end of French feudalism and its transition to capitalism. The revolutionaries' slogans promised the transition would bring with it "liberté, égalité, fraternité" (liberty, equality and fraternity). In other words, equality was to be a key accompaniment to or product of capitalism's establishment, of finally replacing feudalism's lord-serf organization of production with capitalism's very different employer-employee system. Transition to capitalism would erase the gross inequalities of French feudalism. The American Revolution likewise broke not only from its British colonial master but also from the feudal monarchy of George III. "All men are created equal" was a central theme of its profound commitment to equality together with capitalism.

In France, the United States and beyond, capitalism justified itself by reference to its achievement or at least its targeting of equality in general. This equality included the distribution of wealth and income, at least in theory and rhetoric. Yet from the beginning, all capitalisms wrestled with contradictions between lip service to equality and inequality in their actual practices. Adam Smith worried about the "accumulation of stock" (wealth or "capital") in some hands but not in others. Thomas Jefferson and Alexander Hamilton had different visions of the future of an independent United States in terms of whether it would or would not secure wealth equality later dubbed "Jeffersonian democracy." There was and always remained in the United States an awkward dissonance between theoretical and rhetorical commitments to equality and the realities of slavery and then systemic racist inequalities. The inequalities of gender likewise contradicted commitments to equality. It took centuries of capitalism to achieve even the merely formal political equality of universal suffrage.

Thus, there should be no surprise that U.S. capitalism—like most other capitalisms—provokes a widely troubling contradiction between the actual wealth inequality it produces and tendentially deepens (as Thomas Piketty has definitively shown) and its repeatedly professed commitment to equality. Efforts to redistribute wealth—to thereby move from less to more equal distributions—follow. Yet, they also disturbingly divide societies where the capitalist economic system prevails.

Wealth redistributions take from those who have and give to those who have not. Those whose wealth is redistributed resent or resist this taking, while those who receive during the redistributions of wealth develop rationales to justify that receipt. Each side of such redistributions often demonizes the other. Politics typically becomes the arena where demonizations and conflicts over redistribution occur. Those at risk of being deprived due to redistributions aim either to oppose redistribution or else to escape it. If the opposition is impossible or difficult, escape is the chosen strategy. Thus, if profits of capitalists are to be taxed to redistribute wealth to the poor, big businesses may escape by moving politically to shift the burden of taxation onto small or medium businesses. Alternatively, all businesses may unite to shift the burden of such redistributive taxation onto higher-paid employees' wages and salaries, and away from business profits.

Recipients of redistributions face parallel political problems of whom to target for contributing to wealth redistribution. Will recipients support a tax on all profits or rather a tax just on big business with maybe some redistribution flowing from big to medium and small business? Or might low-wage recipients target high-wage workers for redistributive taxation?

All kinds of other redistributions between regions, races and genders display comparable strategic political choices.

Conflicts over redistributions are thus intrinsic to capitalism and always have been. They reflect but also deepen social divisions. They can and often have become violent and socially disruptive. They may trigger demands for system change. They may function as catalysts for revolutions. Because pre-capitalist economic systems like slavery and feudalism had fewer theoretical and rhetorical commitments to equality in general, they had fewer redistribution struggles. Those finally emerged when inequalities became relatively more extreme than the levels of inequality that more frequently provoked redistribution struggles in capitalism.

No "solution" to divisive struggles over wealth redistribution in capitalism was ever found. Capitalisms keep reproducing both theoretical and rhetorical appeals to equality as self-celebrations alongside actualities of deep and deepening wealth inequalities. Criticisms of capitalism on grounds of wealth inequality dog the system everywhere. Divisive social conflicts over capitalism's unequal wealth distributions persist. Endless efforts to find and implement a successful redistributive system or mechanism continue. The latest comprises various proposals for universal basic incomes.

To avoid divisive social conflict over redistribution, the solution is not to distribute unequally in the first place. That can remove the cause and impetus for redistributive struggles and thus the need for endless and so far fruitless efforts to find the "right" redistribution formula or mechanism. The way forward is to democratize the decision about distributing wealth as it emerges from production. This can be accomplished by democratizing the enterprise, converting workplaces from their current capitalist organization (i.e., hierarchical divisions into employers—public or private—and employees) into worker cooperatives. In the latter, each worker has one vote, and all basic workplace issues are decided by majority vote after a free and open debate. That is when different views on what distribution of output should occur are articulated and democratically decided.

No redistribution is required, necessitated, or provoked. Workplace members are free to reopen, debate and decide anew on initial wealth distributions at any time. The same procedure would apply to workplace decisions governing what to produce, which technology to deploy, and where to locate production. All workers collectively and democratically decide what wage the collective of workers pays to each of them individually. They likewise decide how to dispose of or allocate any surplus, which is above the total individual wage bill and replacement of used-up inputs, that the enterprise might generate.

A parable can illustrate the basic point. Imagine parents taking their twins—Mary and John—to a park where there is an ice-cream vendor. The parents buy two ice creams and give both to Mary. John's wails provoke a search for an appropriate redistribution of ice creams. The parents take away one of the ice creams from Mary and hand it to John. Anger, resentment, bitterness, envy and rage distress the rest of the day and divide family members. If affection and emotional support are similarly distributed and redistributed, deep and divisive scars result. The lesson: we don't need a "better" or "right" redistribution; we need to distribute more equally and democratically in the first place.

Richard D. Wolff is professor of economics emeritus at the University of Massachusetts, Amherst, and a visiting professor in the Graduate Program in International Affairs of the New School University, in New York. Wolff's weekly show, "Economic Update," is syndicated by more than 100 radio stations and goes to 55 million TV receivers via Free Speech TV. His three recent books with Democracy at Work are The Sickness Is the System: When Capitalism Fails to Save Us From Pandemics or Itself, Understanding Marxism, and Understanding Socialism.

This article was produced by Economy for All, a project of the Independent Media Institute.

American capitalism has passed its peak — and the signs of decline are piling up

Like all previous economic systems in recorded history, capitalism is on track to repeat the same three-step trip: birth, evolution, and death. The timing and other specifics of each system's trip differ. Births and evolutions are commonly experienced as positive, celebrated for their progress and promise. The declines and deaths, however, are often denied and usually feel difficult and depressing. Notwithstanding endlessly glib political speeches about bright futures, U.S. capitalism has reached and passed its peak. Like the British Empire after World War I, the trip now is painful.

Signs of decline accumulate. The last 40 years of slow economic growth have seen the top 10 percent take nearly all of it. The other 90 percent suffered constricted real wage growth that drove them to borrow massively (for homes, cars, credit cards, and college expenses). Their creditors were, of course, mostly that same 10 percent. College costs rose as graduates' prospects for good jobs and incomes fell. Those without college degrees faced worse prospects. Inequalities of wealth and income soared. To protect their positions atop those inequalities, the 10 percent increased their donation-fueled sway over politics and culture. Compliant politicians then reinforced the deepening inequalities of wealth and income in that typical spiral of systems in decline.

The relentlessly deepening inequality is especially painful and difficult for the United States because it had been temporarily reversed in the 1930s and 1940s. The sharply reduced inequality then—celebrated as the rise of a vast "middle class"—led to renewed affirmations of American exceptionalism and capitalism's virtues. We lived, it was said, in a post-1930s "people's capitalism." The claim had its grain of truth, if no more than that. It made expectations of "middle class" jobs and incomes seem to be birthrights of most (white) Americans. The ever-deepening inequality since the 1970s first frustrated and then collapsed those expectations. A kind of bitterness at a fading American dream has settled in and agitated popular consciousness. Capitalism became increasingly a disappointment, a sign of system decline. Another sign is the increasing interest in socialism and elections of socialists despite the relentless anti-socialist drumbeats of the Cold War and since.

The nation's response to COVID-19 displays more signs. With 4 percent of the world's population, the United States accounts for 20 percent of the world's COVID-19 deaths. Despite being a rich country with a well-developed medical apparatus, the system as a whole has failed to cope. Its response compares unfavorably with that of many less rich, less medically equipped nations. In the United States, testing, prevention, treatment, and vaccination remain uneven, inadequate, and slow.

During the last capitalist crash of comparable scope, the 1930s Great Depression coupled with World War II, the pre-1930s' extremely unequal distributions of wealth and income were reduced by over a third. In sharp contrast, this latest capitalist crash coupled with a pandemic increased already extremely unequal distributions. U.S. capitalism's flexibility from 1930 to 1945 compares with the rigidity of its income and wealth distributions now. Then a nation rallied in the face of massive dangers. Now that nation splits. A capitalism still ascending back then became ossified, and decline set in.

The last 40 years of redistributing income and wealth upward from the poor and middle class to the top culminated with Trump's 2017 tax cuts. Over the 30-plus years before 2017, corporations and the richest 10 percent (who own more than 80 percent of stock market securities) had enjoyed unprecedented gains, absolutely and relative to the other 90 percent. They "needed" a massive tax cut less than ever. But the GOP's control of the U.S. government could and therefore did gift it to them anyway. This worsened the already fast-rising reliance on deficits and national indebtedness that followed the 2008-09 crash. The unprecedented and continuing explosion of money and national debt increases are the public finance signs of capitalist decline.

When the Roman Empire declined, many blamed the resistances arising within its far-flung areas for the decline. They were called "barbarians," denounced as "invaders," and generally scapegoated to distract attention from plentiful signs of internal decay. Today, the anxiety about and demonization of immigrants and all manner of foreigners "cheating" the United States, economically and politically, are likewise signs of decline. The United States' remarkable economic growth across its history "solved" its labor problems by a combination of rising wages for workers already here plus massive immigration of lower-wage workers. A rising capitalism needed and could accommodate both parts of that solution. Today's U.S. capitalism can accommodate neither.

The United States' recent wars in Afghanistan and Iraq were neither necessary nor successful in military terms. They did enable massive government spending and justified rising "defense" outlays in federal budgets. The Soviet Union as a great enemy had gone. A limitless, global war on "terrorism" provided an interim foreign danger until today's pivot toward a new Cold War with China could settle in as a prime justification. But whatever global protection the U.S. military provides to today's global and vulnerable supply chains, huge military spending also helped cause neglect of infrastructure maintenance. That has now become urgent. The old guns versus butter problem typically attends economic system declines.

As the U.S. government tries desperately to manage the mushrooming costs of its foreign and domestic programs, it resorts to a modern version of the ancients' "debasing of the coinage." The Federal Reserve System monetizes deficits in fast-growing magnitudes. Given unemployment, constricted wages, and excessive personal debt levels, the money creation does not flow into real investment but rather into stock markets. Inflation there has thus been real, fueling ever-deepening wealth inequality. We get promises that money creation will never shift its focus onto goods and services, thereby provoking classic inflation. We get assurances that the Fed will register and control such an inflation if it threatens. Those promises and assurances aim to help prevent what those in charge know are terrifying possibilities.

The January 6 assault on the Capitol made a shocked nation more aware of how deep its social divisions have become and how its social cohesion has disintegrated. Those who attacked the Capitol reacted to the decline of capitalism by desperate resistance: to an election result, to political liberalism, to multiculturalism, to secularism, and so on. Like Trump, they tried to reverse capitalism's decline. Because their ideology precludes them from recognizing that decline, they reason otherwise. They blame and therefore seek to dismantle the government. Yet, the U.S. government, via the two-party oligopoly in U.S. politics, has single-mindedly supported U.S. capitalism. The parties differ partly and only on how best to do that. As decline proceeds, despite the parties' efforts to stop it, building frustration eventually boils over. Efforts become extreme and thereby worsen rather than solve the problem. Trump's Cabinet members often devoted themselves to destroying their respective departments. The January 6 attackers sought to destroy as well. Such self-destruction is a sign of advanced system decline.

Throwing money now at the long-neglected U.S. infrastructure runs a risk of failure parallel to what happened to U.S. foreign aid and many U.S. military adventures. The U.S. federal spending involved always goes either to private corporations for contracted goods and services or else it goes to governments, foreign or domestic, local, regional or national. The recipient governments likewise use them for contracts with private corporations. Large private corporations will, for example, carry out most of the work of U.S. infrastructure repair and updating.

The contracted corporations will in turn use the money paid to them just as they use all their revenues from all their other contracts. Some of the money will go to employees' wages and salaries, but much of it will go to all the other "normal costs of doing business." These include high salaries for middle management and luxurious pay packages for upper management, machines for automation, relocating facilities from higher-wage areas to lower-wage areas to enhance profits, dividend increases for shareholders, interest on and repayment of corporate loans, and fees paid to outside consultants (hired to help plan corporate growth, overseas investments, and defeating union drives). In short, federal spending will flow into corporate hands who will then reproduce the very system that neglected infrastructure and deepened income and wealth inequalities over recent decades.

The system's decline is reproduced because its leaders cannot see the internal production structure of U.S. capitalism as a central problem, let alone change it. U.S. factories, offices, and stores are nearly all divided into a dominant minority of owners and boards of directors versus a dominated majority of employees. That structure is deeply undemocratic. Employers are not accountable to employees. They use their position to enrich themselves relative to employees, increasingly so over the last half-century. The minority's unstable investment decisions (driven by irreducible uncertainty and what John Maynard Keynes called "animal spirits") impose recurring, costly business cycles on society. The tensions and antagonisms between employers and employees upset and undermine physical and mental health and the vaunted "efficiency" of the system at every turn.

Because the signs of U.S. capitalism's decline are denied or misunderstood, they lead individuals and groups often to resort to frustrated, misguided, and desperate acts. They are blind to the structural problem of an economic system no longer capable of dealing with its contradictions. Thus, the decline accelerates: like a train rushing down a track toward a stone wall. Most of its conductors and passengers either see no signs or else note them but without connecting them to their basic problem: being on a moving train on track to hit a stone wall.

Richard D. Wolff is professor of economics emeritus at the University of Massachusetts, Amherst, and a visiting professor in the Graduate Program in International Affairs of the New School University, in New York. Wolff's weekly show, "Economic Update," is syndicated by more than 100 radio stations and goes to 55 million TV receivers via Free Speech TV. His three recent books with Democracy at Work are The Sickness Is the System: When Capitalism Fails to Save Us From Pandemics or Itself, Understanding Marxism, and Understanding Socialism.

This article was produced by Economy for All, a project of the Independent Media Institute.

The fake debate about the minimum wage

Capitalism's "conservative" defenders yet again oppose raising the minimum wage. They fought raising it in the past much as they tried to prevent the Fair Labor Standards Act (1938) that first mandated a U.S. minimum wage. The major argument opponents have used is this: setting or raising a minimum wage threatens small employers. They may collapse or else fire employees; either way, jobs are lost. What is conveniently assumed here is a necessary contradiction between minimum wages and small business jobs. That assumption enables opponents to claim that not setting a legal minimum wage, like not raising it, saves jobs. The system thus presents very poorly paid workers with this choice: low wages or no wages.

"Liberals" in the United States have mostly accepted the assumption of that contradiction, the necessity of that final choice. However, they try to demonstrate that the social gains from a higher minimum wage would exceed the social losses from the reduced employment they admit. Their idea, in effect, is that a higher minimum wage would increase demand for goods and services. Any workers fired because of the minimum wage would be rehired elsewhere to meet the rising demand. Countless empirical studies by conservatives and liberals yield, as usual, correspondingly conflicting conclusions.

In the actual history of U.S. capitalism, the minimum wage has been undercut from the outset. In real terms (what the minimum wage can actually buy), its long-term decline began from a peak in 1968. It was last raised in 2009 (to $7.25 per hour) despite a rising consumer price index every year since then. U.S. business interests plus the "conservative" politicians, media, and academics they support have inundated the public with the idea that raising the minimum wage will hurt poorly paid workers (by losing mostly small business jobs) more than help them. This debate over the minimum wage, intensified whenever proposals to raise it gain public attention, has been "won" chiefly by the conservative/business side.

Despite its political effectiveness for conservatives and big business till now, their argument—like the entire debate—is flawed logically. Its underlying, shared assumption is unnecessary and inaccurate. It serves chiefly to undercut the level, purpose, and social effects of the minimum wage in the United States.

Paying a decent living wage to workers by raising the minimum wage need not threaten the viability of small businesses. The latter need not collapse nor fire workers when minimum wages are raised. Indeed, raising the minimum wage can and should be one basis for a mutually beneficial alliance between wage workers and small businesses.

Few dare quarrel with the notion that in the U.S. today, paying the federal minimum wage of $7.25 per hour is an outrage against decency. It is among the very lowest minimum wages of industrialized economies: quite the achievement for one of the "richest countries in the world." So the defense of such an outrage has always begun by focusing attention elsewhere. We are asked to sympathize with the small businesses whose profits and thus viability will be undone if they are required to pay a raised minimum wage. We are asked likewise to sympathize with the plight of minimum wage workers who will become jobless when their employer cannot pay a raised minimum wage. Thus the conclusion beloved by opponents of raising the minimum wage: it lies in the interest of low-paid workers and small businesses to join the opposition to raising the minimum wage.

So many flaws attend such logic that it is not easy to decide where to begin its demolition. We might note that it clearly implies that were we to drop the minimum wage even further, below $7.25 per hour, we might achieve lower unemployment rates. But that is so gross an idea that right-wingers rarely go there. They don't dare.

There is a parallel example we can draw from the history of wage workers when they included children as young as five years old. The parallel logic then held that allowing child labor (with the oppression and abuses it entailed) was doing poor families a favor. Were child labor to be outlawed, capitalism's defenders then insisted, two tragedies would necessarily follow. First, poor families would suffer an income loss because they could no longer sell their children's labor power to capitalist employers for a wage. Second, businesses whose profits depended at least partly on low-wage child labor would collapse and render adults jobless too.

It is important to note that after sustained political agitation, child labor was in fact outlawed. The logic of its defenders was rejected and rarely resurfaced afterward even in right-wing and "conservative" literature. Former capitalist employers of children found other means (paying adults more, improving productivity, economizing on other inputs, and so on) to profit and grow. As we know, U.S. capitalism over the last century prospered without child labor. And where U.S. capitalists relocated abroad to employ children, opposition there has replicated what happened in the United States, albeit slowly. What happened to child labor can and likely will happen as well to abysmally low minimum wages.

How then might a civilized society raise its minimum wage to provide a decent livelihood to workers and protect its small businesses? The solution is straightforward. Offset the extra labor costs for small businesses from a higher minimum wage by providing them with some combination of the following: a new and significant share of government orders, tax breaks, and government subsidies. Such supports now overwhelmingly favor big business and thereby facilitate its many efforts to destroy and replace small businesses. Those supports should be reapportioned with special consideration/targeting for small businesses. To be eligible, small businesses would need to show how raising the minimum wage increased their total wage bill. In this way, society can concretely support small business and a decent minimum wage as twin, shared social values.

In effect, this proposal changes the terrain of the minimum wage debate. It brings into stark relief that raising the minimum wage leaves open the question of which part of the employer class will bear the burden of compensating for that in the short run. An effective political coalition of low-wage workers and small businesses could require big business to pay by losing some of its government business, paying higher taxes, or obtaining lower subsidies—all to compensate small businesses for a raised minimum wage. For decades, an alternative political coalition—of big and small business—blocked or delayed minimum wage increases. Nothing requires this latter coalition to always or, indeed, ever prevail over a competing coalition of labor and small business that seeks a higher minimum wage for one plus greater state supports for the other. Likewise, nothing warrants continuing the current debate over raising the minimum wage as if only small business would always have to absorb its possible costs.

The debate over the minimum wage has been lopsided for a very long time. Uncritical media coverage of the debate has allowed big business to evade its proper share of paying to sustain a viable small business sector. Meanwhile, workers and small businesses pay taxes that favor big business. Most Americans want a thriving small business sector. Most also increasingly criticize big business: "antitrust" remains part of government regulation as well as a part of popular ideologies. We can and should correct the old debate now to enable a different political coalition to shape minimum wages in a different way from the past.

Richard D. Wolff is professor of economics emeritus at the University of Massachusetts, Amherst, and a visiting professor in the Graduate Program in International Affairs of the New School University, in New York. Wolff's weekly show, "Economic Update," is syndicated by more than 100 radio stations and goes to 55 million TV receivers via Free Speech TV. His three recent books with Democracy at Work are The Sickness Is the System: When Capitalism Fails to Save Us From Pandemics or Itself, Understanding Marxism, and Understanding Socialism.

This article was produced by Economy for All, a project of the Independent Media Institute.

The centers of global capitalism are migrating away from the US, Europe and Japan

Modern capitalism began in England in the 17th century and spread eventually throughout the world. Its particular evolution produced a global economy organized around centers and a periphery (colonized economically and often politically as well). In those centers—chiefly Western Europe, North America, and Japan—capitalism concentrated its accumulating assets. Factories, offices, stores, distribution centers, and transport networks built fast-growing cities. Supporting institutions of government, schools and universities, and hospitals likewise grew into the centers of urban capitalism especially in the 19th and most of the 20th century.

However, new centers of capitalism have emerged and grown especially quickly over the last half-century. China, India, and Brazil are leading examples where jobs, real wages, consumption, profits, and investments are growing. Their size and global impact not only make them the new centers of capitalism but also require attaching the adjective "old" to capitalism's earlier set of centers.

The blunt truth of modern economic development is this: capitalism is leaving its old centers and relocating to its new centers. About this leaving we can and should borrow the phrase: this changes everything.

U.S. capitalism achieved global dominance during the 20th century after two world wars plus anti-colonial movements destroyed the European empires that might have contested for such dominance. Impressive as it was, U.S. capitalism's dominance did not last long. With no little irony, it was the big capitalists of the old centers whose profit motives led them to leave and help create new centers. The latter's much lower wages and fast-growing mass consumer markets drew them. Many of the biggest capitalist corporations relocated (or expanded) from the old to the new centers. As those corporations that moved early profited mightily, competitive pressures accelerated other corporations' decisions to follow their example. Capitalism's relocation of its centers continues.

The U.S.'s economic footprint in world trade and capital flows has been giving way steadily to other countries' rising footprints. The global dominance of the U.S. dollar confronts increasing transactions using other currencies. Trump's wholesale attacks on China via trade wars, tariff impositions, and persecutions of individual Chinese corporations and executives did not stop or change China's economic development. Neither did the hostile denunciations of China's policies on Hong Kong, its Uighur minority, intellectual property, and so on. Across 2020, China's economy grew 2.3 percent while that of the United States fell by 3.5 percent. China's record on containing COVID-19 proved far superior to that of the United States. In short, no end, let alone reversal, of the relative decline of the United States vis-à-vis China occurred.

The aspects and implications of such relocating capitalist centers touch almost every aspect of our lives. The costs and debts plaguing U.S. higher education contrast sharply with the huge expansion of Chinese higher education. Even starker has been the contrast between China's preparedness and containment of COVID-19 and that of, say, the U.S. and the UK. Of course, in terms of public health, India and Brazil show that even new centers of capitalism can experience severe difficulties when their governments fail to mobilize both private and public resources to achieve prioritized social goals (like defeating a virus or maximizing sustained economic growth).

Old and new centers of capitalism deserve the same key noun—capitalism—because both organize their enterprises/workplaces in the same dichotomous way. A minority are employers while a majority are employees. The minority decide exclusively what the product will be, what technology will be used, where production will occur, and how net revenues will be distributed (to whom and for what). While old and new centers of capitalism usually display different mixtures of private and state enterprises, it is noteworthy that both types of enterprises in both centers are organized in the same employer/employee dichotomy that defines capitalism.

Declining capitalisms' problems differ from those of rising capitalisms. In the United States, Western Europe, and even Japan, many capitalist corporations pursue defensive strategies (relocating elsewhere, merging, or shrinking). Cost-saving automation is often the more attractive profit-raising strategy than output expansion. Thus, communities agonize over "runaway shops" and joblessness cutting tax revenue: must they reduce public services or impose rising government debt burdens? Real wages stagnate. The jobless move or emigrate looking for work and disrupting their and their families' lives. Inequality soars as the top 5 percent (major shareholders, top executives) get most of the profits from relocating capitalism to low-wage countries and from automation. The other 95 percent struggle to minimize the costs and burdens on them from capitalism's relocating centers and other profit-driven strategies.

In contrast, China, India, and Brazil have the problems of fast-growing capitalism, rather like the problems that beset 19th and early 20th-century capitalism in its old centers. Resistance, unions, and socialist movements arise from workers streaming into cities and industrial jobs and adopting correspondingly new ways of thinking and being. Crowding, environmental pollution, and inadequate housing and sanitation trouble the new centers more or less. Ruthless competition produces horrific working conditions as does internationally mobile capital seeking quick profits. Business cycle instability and deeply embedded tendencies to ever-greater income and wealth inequality provoke social criticisms. The latter are often borrowed and adapted from the labor, socialist, and communist movements that grew in capitalism's old centers.

On the one hand, the movement of capitalism from old to new centers plunges the old into a long-term decline evident in decaying industries and cities. Politics shifts away from prioritizing growth, adjudicating internal conflicts in ways that reproduce growing capitalism, and shaping the world into a distinctive center-periphery pattern. Instead, policies shift toward maintaining the global status quo against the many forces eroding it. For many politicians that shift of focus degenerates into scapegoating amid cascading social divisions and decay.

On the other hand, capitalism finds profitable new territory in its new centers. Growth there offsets a decline in the old centers. The global 1 percent get richer because they draw increased wealth from both the old and new centers. What happened inside capitalist countries—movements, say, from old Rust Belt centers to new high-tech centers—has been transposed onto the world as a whole.

The great social question is whether the different problems of capitalism in both its old and new centers will cumulatively undermine the system or provide it with a further lease on life. Perhaps growing conflict between old and new centers—expressed, for example, in the struggle between the United States and China—will follow the ancient path from economic to military conflict. Then the great social question will go unanswered and global capitalism would have fulfilled one prophecy of its critics: that its internal contradictions will prove self-destructive.

Richard D. Wolff is professor of economics emeritus at the University of Massachusetts, Amherst, and a visiting professor in the Graduate Program in International Affairs of the New School University, in New York. Wolff's weekly show, "Economic Update," is syndicated by more than 100 radio stations and goes to 55 million TV receivers via Free Speech TV. His three recent books with Democracy at Work are The Sickness Is the System: When Capitalism Fails to Save Us From Pandemics or Itself, Understanding Marxism, and Understanding Socialism.

This article was produced by Economy for All, a project of the Independent Media Institute.

The Biden Democrats already show they learned little from Trump's loss

The spectacle of political "leaders" disconnected from basic social realities survived Trump's defeat. He and his GOP had shown little grasp of the two great crises of 2020: the crash of capitalism and the COVID-19 pandemic. Trump's resulting political defeat did not reconnect them. The Biden Democrats already show they learned little from Trump's loss; disconnection governs them too.

A basic social reality of the United States is its capitalist economic system that organizes enterprises internally into a small minority (employers) dominating the majority (employees), with markets to distribute resources and products. Like capitalisms everywhere, the U.S. version crashes recurringly. Variously called crises, recessions, or depressions, they have happened, on average, every four to seven years throughout capitalism's history. With three in this century's first 20 years ("dot-com" in 2000, "subprime mortgage" in 2008, and "COVID-19" in 2020), the United States illustrates that four-to-seven-year schedule. The 2020 crash is second only to the Great Depression of the 1930s in its social impact. That fact alone demands major policy interventions on the scale, at least, of what was done then (including the creation of Social Security, federal unemployment insurance, the first minimum wage, and the creation of millions of federal jobs). Moreover, the 1930s were not simultaneously a time of deadly viral pandemic. Given the uniquely immense challenge of 2020's two crises, no remotely adequate policies were undertaken nor even contemplated by Trump, Biden, Republican or Democratic establishments. They just don't get it.

The COVID-19 pandemic replicates past viral outbreaks: from the deadly 1918 influenza pandemic to recent SARS, MERS, and Ebola outbreaks. Coping with them requires having ready (or quickly acquiring) adequate supplies of tests, masks, ventilators, hospital facilities, and trained personnel. Where supplies of these essential resources were left mostly to the private capitalist sector, fatal failure resulted. It was not privately profitable (and far too risky) to produce, stockpile, and maintain these supplies for years until a pandemic enabled them to be sold. Private capitalists chose other more profitable and/or less risky investments. Private capitalism, as many had forewarned, was unreliable for protecting public health.

Of course, the government could have intervened to offset private capitalism's failure to safeguard public health. It could have purchased tests, masks, and ventilators as fast as private capitalists produced them at prices profitable for those capitalists. The government could then have stockpiled them at taxpayers' expense for use when the next dangerous virus threatened. In fact, the U.S. government already does that, but not for public health. It buys and stockpiles missiles, warships, and tanks from private capitalists because profit-driven capitalists would not stockpile them. In the United States, Republican and Democratic establishments promote the government's full socialization of military costs as patriotism while they demonize and block an equivalent socialization of public health costs as "socialism."

Inadequate preparation for COVID-19 was followed by failure to contain it. Trump and the GOP never considered, let alone implemented, massive government intervention. Many other countries did, mobilizing private and public resources effectively against COVID-19. Crude laissez-faire ideology plus corrupt political calculation drove Trump and the GOP. As to the pandemic's effects, they just did not get it.

Either a capitalist crash or the COVID-19 pandemic alone would have been a critical challenge for the United States. Having both occur together, a staggering combination, requires just what Trump did not and Biden is not doing: a similarly unprecedented government response. Thus, House Speaker Nancy Pelosi and Senate Majority Leader Mitch McConnell are not even trying for an adequately large stimulus. Their joint product promises to be a prime example of too little, too late. Neither party leadership advanced policies enlarging upon what worked well in the 1930s: a massive federal jobs program to end unemployment, a Green New Deal, and a national system of COVID-19 testing, tracking, and treatment in additionally constructed hospitals and clinics. Nothing suggests Biden's centrist Cabinet sees the magnitude of the need. They just don't get it.

For both Republican and Democratic establishments, political strategies are similar. Each endorses, privileges, and supports private capitalism. Each blames the other party for negative results that flow from the social dominance of private capitalism. Neither dares blame private capitalism for social problems like unemployment and pandemic casualties. Instead, each has its preferred set of scapegoats to blame. Republicans blame immigrants, foreign trading partners (especially China), non-whites, pro-abortion rights activists, mainstream media, liberals, and socialists. Democrats blame Russia and Russians, China, gun enthusiasts, white supremacists and racists, Fox News, and Trump and his supporters.

A solution would be a genuinely level political playing field. It would include a new political party that criticizes and opposes the capitalist system because of its responsibility for critical social problems. It would break the political monopoly run by Republicans and Democrats just as many economic monopolies have ended in the nation's past. Today's crises, inequalities, divisions, and the sufferings of so many deserve no less. Yet the political monopolists want to keep their control.

They just don't get it.

Richard D. Wolff is professor of economics emeritus at the University of Massachusetts, Amherst, and a visiting professor in the Graduate Program in International Affairs of the New School University, in New York. Wolff's weekly show, "Economic Update," is syndicated by more than 100 radio stations and goes to 55 million TV receivers via Free Speech TV. His three recent books with Democracy at Work are The Sickness Is the System: When Capitalism Fails to Save Us From Pandemics or Itself, Understanding Marxism, and Understanding Socialism.

This article was produced by Economy for All, a project of the Independent Media Institute.

How Biden could pave the way for the next Trump

Since the 1970s, U.S. real wages have largely stagnated. After a century of real wages rising every decade, that stagnation changed the lives of the U.S. working class in traumatic ways. Likewise, since the 1970s, labor productivity grew steadily, aided sequentially by computers, robots, and artificial intelligence. The combination of stagnant real wages and rising productivity lowered labor's share of national income in favor of capital's. Profits consequently soared and took the stock markets with them. Income and wealth were redistributed sharply upward.

The post-1970 trauma of the working class was worsened, as traumas often are, by being minimally recognized and even less discussed in the media, among politicians, or in the academy. Workers thus encountered the end of the century of rising real wages individually as a mysterious evaporation of the American Dream or loss of an earlier American Greatness. They also reacted individually. More members of households (especially adult women) undertook more hours of paid labor outside the home to compensate for stagnant real hourly wages. Households also compensated by borrowing more heavily than any working class anywhere had ever done. Workers wanted so desperately to hold on to that American Dream.

Capital obliged: mortgage and auto debts spread more widely and deeply throughout the U.S. population. Credit cards were newly promoted to consumers who filled millions of wallets with many of them. Toward the end of the 20th century, capital added massive student lending that now exceeds total U.S. credit card debt. Capital thereby supplemented its profits from production (boosted by stagnant wages) by adding interest on consumer and student debts (undertaken because of stagnant wages). No wonder the U.S. stock market boomed in the 1980s and 1990s. No wonder that the Clintons and other centrist Democrats celebrated that debt boom for their political advantage instead of attending to its immense risks and disruptive social costs.

Late 20th-century U.S. capitalism boomed until it could no longer support rising debt levels. Households stressed, families dissolved, and individuals exhausted by ever more hours of labor added severe anxieties to their burdens as rising debts exceeded capacities to service them. Deepening loneliness, divorce, opioid and other addictions, and suicides were among the social costs. Three crashes of U.S. capitalism in the 21st century (2000, 2008, and 2020), each far worse than its predecessor, brought home to the U.S. working class how far its social situation had deteriorated. Individual responses no longer sufficed for millions. They were ready to participate in social movements to express their accumulated anger, bitterness, and rage. They needed such populist movements to do something—or at least to support politicians—to reverse the downward economic and social spiral so many felt trapped in and by.

Donald Trump opportunistically tapped enough of the U.S. working class's bitterness to swing the votes needed to win the presidency in 2016. However, the interconnected finances and ideologies of the centrist Democrats who had taken over the party after the 1970s shared with Republicans the responsibility for that bitterness. They led the Democratic Party into increasing dependence on donations from the capitalist class. They likewise drifted ever further from the working-class base that had rallied for the Democrats during the Great Depression of the 1930s. The neoliberal turn in U.S. capitalism under Ronald Reagan had two key impacts on the U.S. working class. First, neoliberalism endorsed capitalist globalization and the export of jobs—especially the better-paying, more-unionized jobs—after the 1970s. Second, by accelerating the deregulation of industries and markets, neoliberalism facilitated automation and weakened or removed various labor protections. In short, the neoliberal turn was and remains a major cause of the U.S. working class's decline and its resulting bitterness and anger.

With progressive leaders, Democrats might have shown the working class that its distress followed from how capitalism functions. Capital flows to where the profits are greatest (where wages are far lower and regulations far fewer than in the United States, for example). Capitalists fund politicians like Reagan to turn policies toward neoliberalism. However, centrists in the Democratic Party shied away from such explanations. The centrist leaders of the Democratic Party were those closest to the party's capitalist donors (and vice versa). Centrist control of the party blocked it from offering a powerful voice to mobilize working-class opposition to neoliberal job exports, deregulations, attacks on unions, etc. The centrists wanted and depended on capitalists' donations; that dependence only increased as the party's working-class support ebbed.

Workers turned away first from activity in and for the Democratic Party; eventually many stopped voting for its candidates. For them, the Democratic Party had failed to advance beyond the New Deal's achievements. Worse, the party had failed even to protect workers against the multiple ways that neoliberalism undid the New Deal. Many workers felt betrayed. In protest, often unspoken, some began to cross over to vote Republican. Unions increasingly had to downplay or reduce their traditional links to the Democratic Party because growing portions of their members had shifted toward the GOP.

The Republicans, traditionally the employers' party, had long tried to counter the Democratic Party's appeal to workers as the traditional employees' party. Republicans dared not use economic issues, and so they used religion, regionalism, and racism. They could pry portions of the working class away from the Democratic Party by appealing to such noneconomic concerns among workers. Their prime targets included evangelical Christian and other religious fundamentalists portrayed as victims of secularists, the South's and other regions' sense of unfair treatment by Washington and coastal elites, and white supremacists portrayed as threatened by rising Black and Brown populations including immigrants.

The centrist Democrats countered by trying to carve out other portions of the working class: women, Black and Brown people, immigrants, and various other minorities. Trump went further than previous Republicans in prying workers away from the Democrats. Joe Biden went further than previous Democrats (including Barack Obama) in focusing his campaign and his new administration on those portions of the working class Democrats prioritized. In these ways, each party's strategy provoked more extreme versions of the other party's strategy. Hence the increasingly harsh and rageful tones of major party discourse and behavior generally.

Both major parties, following the dictates of the Cold War, together eviscerated the class-based politics stressed from the 1930s to 1945. An integral part of the undoing of the New Deal was canceling a politics where Republicans confronted Democrats as representatives of employers versus employees. Instead, class conflict quickly faded from both parties' statements and thinking. They focused instead on carving up the same working class into different, competing portions. Employers are chief funders of both parties, who then limit themselves to minimal references to class issues except for occasional, fleeting campaign rhetoric.

However, the class silence of the major parties created the need and the opportunity for a revival of what they had repressed. Progressives such as Bernie Sanders, Alexandria Ocasio-Cortez, and a growing number of others across U.S. politics are riding the wave of protest against all that was lost when centrists took over the Democratic Party. That takeover presumed the undoing of the New Deal, the repression of the strong communist and socialist parties built in the 1930s and early 1940s, and the neoliberal turn that came to dominate public policy. Many (not all) of today's progressives—inside and outside the Democratic Party—want to reconstruct U.S. politics as once again a class politics.

Both major parties are now stuck with their commitments to a system that has failed spectacularly. Private and public sectors were unprepared for and could not contain a deadly virus handled far more successfully in many other countries. U.S. capitalism likewise failed to prepare for or contain the social damage from the latest in its regularly recurring cyclical crashes. These new failures compounded earlier, ongoing failures to overcome global warming and the crisis of U.S. race relations. These and other systemic failures are eroding mass support for those parties just as the mounting sufferings of the working class seek political expression and solutions.

Trump's right-wing Republicanism solved none of the United States' basic economic problems; it did worsen income and wealth inequalities. Yet it spoke to millions of working-class people who feel betrayed by the Democrats and attracted by the usual Republican references to religion, region, and race. Obama's regime had likewise solved nothing in the United States' basic economic problems while worsening income and wealth inequalities and barely overcoming the 2008 capitalist crash in ways that set up the next one. Obama did speak to millions of working-class people gathered around issues of gender, race, ethnicity, and sexual orientation. Biden gives every sign—in conditions of even worse economic and political decline—of repeating these oscillating failures. In so doing, he prepares the way for the next Trump.

The key question then revolves around progressives inside and outside the Democratic Party. Do enough of them have the needed clarity of understanding, courage to act, and wisdom to see their deficit in terms of strong organization? Can those who do seize the opportunity to ride a return of class politics into U.S. society? Will they effectively resist both major parties' efforts to silence and destroy them? Meanwhile, the establishment Democrats and Republicans will continue their oscillating failures as the U.S. system's mode of decline.

Richard D. Wolff is professor of economics emeritus at the University of Massachusetts, Amherst, and a visiting professor in the Graduate Program in International Affairs of the New School University, in New York. Wolff's weekly show, "Economic Update," is syndicated by more than 100 radio stations and goes to 55 million TV receivers via Free Speech TV. His three recent books with Democracy at Work are The Sickness Is the System: When Capitalism Fails to Save Us From Pandemics or Itself, Understanding Marxism, and Understanding Socialism.

This article was produced by Economy for All, a project of the Independent Media Institute.

Why capitalism was destined to come out on top in the 2020 election

No matter who "won" the U.S. election, what will not change is the capitalist organization of the country's economy.

The great majority of enterprises will continue to be owned and operated by a small minority of Americans. They will continue to use their positions atop the capitalist system to expand their wealth, "economize their labor costs," and thereby deepen the United States' inequalities of wealth and income.

The employer class will continue to use its wealth to buy, control, and shape the nation's politics to prevent the employee class from challenging their ownership and operation of the economic system. Indeed, for a very long time, they have made sure that (1) only two political parties dominate the government and (2) both enthusiastically commit to preserving and supporting the capitalist system. For capitalism, the question of which party wins matters only to how capitalism will be supported, not whether that support will be a top governmental priority.

No matter who won, the private sector and the government will continue their shared failure to overcome capitalism's socially destructive instability. Economic crashes ("downturns," "busts," "recessions," and "depressions") will continue to occur on average every four to seven years, disrupting our economy and society. Already in this young century, we have endured, across Republicans and Democrats, three crashes (2000, 2008, and 2020) in 20 years: true to the historic average. Nothing capitalism tried in the past ever stopped or overcame its instability. Nothing either party now proposes offers the slightest chance of doing that in the future.

No matter who won, the historic undoing of the New Deal after 1945 will continue. The GOP and Democrats will both keep reversing the 1930s' reduction of U.S. wealth and income inequalities (forced from below by the Congress of Industrial Organizations [CIO], socialists, and communists). As usual, the GOP reverses these gains for Americans further and faster than Democrats, but both parties have condoned and managed the upward redistribution of wealth and income since 1945.

The GOP will likely celebrate explicitly the wealthy they serve so slavishly. The Democrats will likely moan occasionally about inequality while serving the wealthy quietly or implicitly. The GOP will "economize on government costs" by cutting social programs for average people and the poor. The Democrats will expand those programs while carefully avoiding any questioning, let alone challenging, of capitalism.

No matter who won, what U.S. politics lacks is real choice. Both major parties function as cheerleaders for capitalism under all circumstances, even when a killer pandemic coincides with a major capitalist crash. Real political choice would require a party that criticizes capitalism and offers a path toward social transition beyond capitalism. Countless polls prove that millions of U.S. citizens want to consider socialist criticisms of capitalism and socialist alternatives to it. The mass of voters for Bernie Sanders, Alexandria Ocasio-Cortez, and other socialists provided yet more evidence. However, the system allowed and enabled a near-fascistic right wing to take over the GOP and the presidency. At the same time, it aided and abetted the Democrats in excluding a socialist from even running for that presidency. Trump and Biden are long-standing, well-known cheerleaders for capitalism. Sanders was, in contrast, a critic.

A new political party that offered systemic criticisms of capitalism and advocated for a transition to a worker-coop based economic system would bring real choice into U.S. politics. It would place before the electorate a basic question of vital importance: what mix of capitalist and worker-coop organized enterprises do you wish to work for, buy from, and live with in the United States? Voters could thereby genuinely participate in deciding the range of job descriptions from which each of us will become able to choose. Will we mostly have to accept positions as employees whose jobs are designed exclusively by and for employers? Or will all job descriptions include at least two basic tasks: a specific function within an enterprise's division of labor plus an equal share (alongside all other enterprise workers) of the powers to design and direct the enterprise as a whole?

Any community that wishes to call itself a "democracy" for more than rhetorical, self-promotional reasons should welcome a one-person, one-vote decision-making process governing how work is organized.

Most adults spend most of their lives at work. How that work is organized shapes how their lives are lived and what skills, aptitudes, appetites, and relationships they develop. Their work influences their other social roles as friends, lovers, spouses, and parents. In capitalism, the work experience of the vast majority (employees) is shaped and controlled by a small minority (employers) to secure the latter's profit, wealth accumulation, and reproduction as the socially dominant minority. In a real democracy, the economy would have to be democratically reorganized. Workplace decisions would be made on the basis of one person, one vote inside each enterprise. Parallel, similarly democratic decision-making would govern residential communities surrounding and interacting with workplaces. Workplace and residential democracies would have significant influences over one another's decisions. In short, genuine economic democracy would be the necessary partner to political democracy.

Many "capitalist" societies today include significant sites of enterprises organized as worker cooperatives. What they need but lack are allied political parties to secure the legislation, legal precedents, and administrative decisions to protect worker coops and facilitate their growth. Early capitalist enterprises and enclaves within feudalism likewise had to find or build political parties for the same reasons. Anti-feudal and pro-capitalist parties contested with feudal lords and their monarchs first to protect capitalist enterprises' existence and then to facilitate their growth. Eventually, pro-capitalist parties undertook revolutions to displace feudalism and monarchies in favor of parliaments in which those capitalist parties could and did dominate.

Today, pro-capitalist parties publicly deny but privately fear that their political dominance is threatened. Mass disaffection from capitalism is growing. One reason is the relocation of capitalism's growth from its old centers (Western Europe, North America, and Japan) to new centers (China, India, and Brazil). Globalization—the polite but confused term for that relocation—generates economic declines in the old centers that destabilize communities unable to admit let alone prepare for them. There, vanishing job opportunities, incomes, and social services provoke increasing questions and challenges confronting capitalism. These are now leading to broad and growing disaffection from the capitalist system. Polls and other signs of that disaffection abound. In the United States, on the one hand, the Republican Party lurched to the right. Trump-type quasi-fascism wants to impose a nationalist turn to "save" U.S. capitalism. On the other hand, the old, pro-capitalist establishment running the Democratic Party blocked Bernie Sanders and other socialists from any real power or voice. Saving capitalism was and also remains that establishment's goal.

Capitalism eventually defeated and displaced feudalism by combining micro-level construction and expansion of capitalist enterprises with macro-focused political parties finding ways to protect those enterprises and facilitate their growth. Capitalists' profits funded their parties' activities. Socialism will defeat and displace capitalism by a parallel combination of expanding worker coops and a political party using government to protect them and facilitate their growth. The worker coops' net revenues will finance their parties' activities.

The emergence of politically significant socialist parties is well underway in the United States. Besides the small remainders of past socialist parties, Occupy Wall Street, the recent growth and prominence of the Democratic Socialists of America, the two Sanders campaigns, and the rise of other socialist politicians such as Ocasio-Cortez are all signs of socialist renewal. But those signs also reveal a huge remaining problem: disorganization on the left. The social movements, labor unions, and the new socialist initiatives need to coalesce into a broad, new socialist party. If that party could also become the political voice of a growing worker-coop sector of the economy, many key conditions for a transition beyond capitalism will have been achieved.

Richard D. Wolff is professor of economics emeritus at the University of Massachusetts, Amherst, and a visiting professor in the Graduate Program in International Affairs of the New School University, in New York. Wolff's weekly show, "Economic Update," is syndicated by more than 100 radio stations and goes to 55 million TV receivers via Free Speech TV. His three recent books with Democracy at Work are The Sickness Is the System: When Capitalism Fails to Save Us From Pandemics or Itself, Understanding Marxism, and Understanding Socialism.

This article was produced by Economy for All, a project of the Independent Media Institute.

How capitalism is leading us to instability, inequality, and fascism

The looming election has brought forward intensifying debates over a capitalism in crisis, rising nationalism and state power, and the possibility of a renewed fascism. Polarized politics and ideologies alongside long-accumulated social problems and movements shape the objects and tones of debate. Can fascism happen here; is it underway? Or can current capitalism avoid a return to fascism? Such questions reflect the high stakes of the election and this moment in history.

Should the state—the institution that organizes, enforces, and adjudicates the rules governing our behavior in society—exist in capitalism? That question has been important chiefly for certain ideologues who defend capitalism. Their major idea is that the problems of modern society are caused by the state. They are not caused by the employer-employee structure of capitalist enterprises or the markets, unequal distributions of wealth, and other institutions those enterprises support. Those ideologues imagine a pure, perfect, or good capitalism undistorted by any state apparatus. The capitalism they seek to achieve is very utopian. They conclude that by reducing the state (bad by definition), modern capitalism's problems can also be reduced. By eliminating the state, a thereby purified capitalism will solve those problems. From libertarians to Republican Party hacks, this ideology serves to deflect the justified resentment and anger of capitalism's victims away from capitalism and onto the state.

A contrary view holds that the state always existed throughout the history of societies in which the capitalist economic system prevailed. In them, the state—like other institutions—reflected each society's particular conditions, conflicts, and movement. The capitalist economy rested on a foundation of enterprises whose internal organization divided participating individuals into a minority (employers) and a majority (employees). The minority owned and operated the enterprises, making all of its basic decisions: what, how, and where to produce and what to do with output. The majority sold its labor power to the minority, owned little or nothing of the enterprise, and was excluded from the basic enterprise decisions. One result of that basic economic structure was the existence of a state. Another result was a pattern of state interventions in society that reproduced its prevailing capitalist economic system and the employers' dominant position within it.

Of course, the many internal contradictions of societies in which capitalism prevailed also influenced and shaped the state. Employees, for example, could and often did press the state for interventions that employers did not want. Struggles over the state and its interventions ensued. Individual outcomes varied, but the pattern that emerged over time was a state that reproduced capitalism. Likewise, in pre-capitalist societies such as slavery and feudalism, parallel patterns characterized their states. For considerable periods, those states also reproduced their class structures: masters and slaves in slavery and lords and serfs in feudalism. Usually, when a state no longer reproduced a particular class structure, its end was near.

The evolving conditions and conflicts in each society determined the size, activities, and history of its state. This includes determining whether state power is decentralized, centralized, or a mix of both. Social conditions and conflicts also determined the closeness, the intensity of collaboration, and even the possible merger between the state apparatus and the dominant class within each society. In European capitalism, initial decentralization gave way to a strong tendency toward state centralization. In certain extreme conditions, a centralized state merged with a capitalist class of large, concentrated employers into a system called fascism. The 20th century saw several major examples of fascism rise and fall. Now again fascism looms as a possible resort of capitalisms in trouble.

Usually, the transition from decentralized to centralized states reflected social conditions in which dominant classes needed strengthened state power to reproduce the system they dominated. They feared that otherwise, social conditions would provoke a collapse of their system and/or movements to a different economic system. In either case, their social dominance was at stake. Because that situation now looms on our historical agenda, so too does fascism.

Slave systems could persist in decentralized conditions. State power, perhaps localized within each slave master's hands, oversaw the reproduction of the system's two production positions: master and slave. Eventually, when reproduction was threatened—by disruptions to slave markets, slave revolts, or divisive struggles among masters—a separate state was created, given an apparatus, and strengthened. It often had slaves of its own ("state" slaves we might differentiate from "private" slaves owned by persons outside the state). Such a strengthened state was often more closely integrated with masters in a tighter, more coordinated reproduction of slavery. Violence by masters and the state conjointly against slaves recurred often.

In decentralized feudalisms, lords wielded state-type powers alongside their economic positions directing production by their subordinated serfs. Eventually, when pandemics, long-distance trade, serf revolts, or divisive warfare among lords (as dramatized in Shakespeare's plays) threatened feudalism, a centralized state arose from among contending lords. That state—a supreme lord or king—shared social power with the hierarchy of what we might call "private" lords to reproduce feudalism. In medieval Europe, strengthened feudal states evolved into absolute monarchies. Those were tight alliances between kings and hierarchies of lords within boundaries defining different nations. Those tight alliances deployed violence against serfs, serfs' revolts, rebellious lords, external threats, and one another.

Capitalism, like its slave and feudal predecessors, emerged in small, decentralized units of production. Capitalist enterprises, like slave and feudal production units (plantations, manors, or workshops), also displayed a system of two basic production positions. In the case of capitalism, those two positions were employer and employee. The differences were that in capitalism, no person owned another (unlike slavery), nor did one person owe religiously sanctioned labor obligations to another (unlike feudalism). Instead, a market in labor power was established over time. Employers were buyers and employees were sellers in a market exchange.

When problems eventually threatened the reproduction of early capitalism, it strengthened its state apparatus much as slavery and feudalism had done. One such problem was opposition by centralized slaveries and feudalisms to the capitalism that had emerged from them. Likewise, as capitalism grew and expanded across the globe, it disrupted other systems in ways they resisted. Violent interventions by strengthened state apparatuses subdued and reorganized them into what eventually became capitalism's formal and informal colonies. Such interventions encouraged a strong capitalist state and vice versa. The demands and revolts of employees also drove capitalists to construct state apparatuses that could discipline and suppress them. Likewise, "cutthroat" competition among employers required a powerful arbiter to manage and control them.

Even as capitalism spawned a strong state, there was a remarkable hesitancy in doing so that has confused the history of capitalism to this day. The hesitancy arose because early capitalism—the period when emerging capitalist enterprises were relatively small and hampered by powerful slave or feudal states—saw those states as its enemy. Capitalists and their spokespersons wanted the state kept out of the economy, blocked from favoring noncapitalist over capitalist enterprises. They wanted capitalist enterprises and the markets they increasingly dominated to be left alone by the state. Hostility to and thus hesitancy about strong states went from advocating "laissez-faire" in the 17th century to celebrating "the free market" in modern times. In the latter form, it is utopian, an imaginary construct useful for ideological projects justifying capitalism (as "efficient") and for libertarian slogans. No actual capitalism in recent centuries ever had a free market without state interventions and regulations.

From the 18th through the 20th centuries, capitalism spread globally from its initial centers in western Europe. The state was crucial to that spread via warfare ("opening" regions to trade) and colonizations. Conflicts among capitalists, especially the endemic struggles between competitive and monopoly capitalists and between capitalists from different nations, necessitated state interventions. Capital-labor conflicts and battles were always goads to state strengthening and interventions. Massive standing military establishments, routinized after World War II, generated military-industrial complexes. Those complexes, especially in the leading capitalist and military power after 1945, were just the kind of mergers of state and big capitalists that became models for parallel mergers among other industries and the state.

In the United States, one such parallel merger yielded the medical-industrial complex. There the role of the state was to protect a monopoly shared among four industries: doctors, hospitals, drugmakers and medical device-makers, and health insurance companies. The government enabled and sustains its merger with the medical-industrial complex. It does so in multiple ways. It exempts the complex from antitrust action. Government-subsidized Medicare and Medicaid—public health insurance for the elderly and the poor—carefully leave the younger, healthier, and more profitable clientele to the private health insurance companies. The government avoids buying pharmaceuticals in bulk and passing savings onto the public. Finally, the government has usually blocked and mostly denounced genuinely progressive reforms of this privately profitable medical system as "socialism."

De facto, if not de yet de jure, mergers of state and capitalist industry punctuated the growth of state power alongside the concentration and centralization of capital.

Now we have much the same happening in finance. Central banks—largely state institutions—long marched in close formations with major private banks in capitalist countries. The Federal Reserve has responded to the three capitalist crashes so far this century by not only greatly increasing its money creation and interest rate reductions but also by extending credit to nonfinancial corporations. The Fed buys corporate bond exchange-traded funds, corporate bonds in the secondary market, and asset-backed securities based on corporate debts. The Fed likewise now owns a third of residential mortgages. Government credit becomes ever more important relative to private credit. The government will soon coordinate its decisions on who gets how much government credit with other government policies including which Chinese companies get banned and which European companies get sanctioned. These financial developments mark more milestones on the road to state-capitalist merger.

Behind the racism, nationalism, and war-mongering that Hitler championed lay the core economic system of fascism. That involved a merger of the state and private big capitalists. The former enforced the conditions of profitability for the latter. In turn, the capitalists accommodated the running of their enterprises to finance, produce, price, and invest in ways supportive of the fascist state's policies. Expropriation of privately owned means of production targeted selected social sub-groups (such as Jews). Aryanization—not abolition—of private capitalism was the state's objective.

In contrast, socialists favored the socialization of private capitalists' enterprises. It was not the merger of the state with private capitalism that socialists sought; it was rather the dispossession of private capitalism. The state was to seize sole possession of means of production to operate a state capitalism. Most socialists saw state capitalism as an intermediate stage necessary to enable the transition to communism. That communism was understood as capitalism's antithesis: social (not private) property in means of production, government planning (not markets) to organize distribution of resources and products, workers' control of and running of enterprises, and distribution of output based on need as socially determined.

Fascism's economic organization is where economic development is now taking capitalism in general and U.S. capitalism in particular. U.S. capitalism now replicates a parallel tendency toward merger with a strong state that characterized slavery and feudalism earlier. Systemic challenges to capitalism's reproduction are met with growing state power, growing big capitalist business, and eventually their merger into a fascism. Exactly how and when capitalism evolves into fascism varies with the particular conditions and challenges of each national context. Likewise, the internal contradictions of capitalism—for example, its cyclical instability and its tendency toward deepening wealth and income inequality—can provoke mass resistances that can slow, stop, or reverse the evolution, at least for a while, or even redirect economic transition to socialism.

But the tendency of capitalism is toward instability (its cycles), inequality (its upward redistribution of wealth), and fascism (state-capitalist merger). The first 20 years of this new century display these tendencies in stark relief.

This article was produced by Economy for All, a project of the Independent Media Institute.

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