Oath Keepers Billboard, Pine River, Minnesota, July 2015 | Image: Joe Hoover
We live in a neoliberal world. Neoliberalism is the set of policies instituted by Republicans and Democrats alike, mostly since 1980, to kickstart the economy by transferring more wealth to corporations and rich by: crippling unions, cutting incomes to workers, reducing taxes on the rich, minimizing regulations costly to businesses, and shrinking the state’s economic sphere in order to further lower taxes. The goal was to reverse the economy’s declining growth rates by increasing profits at the expense of wages.
The plan both worked and didn’t work. While it did make the rich quite a bit richer, and income inequality soared, growth rates, whose decline in the 1970s started neoliberalism, have continued to decline through the present and at an even sharper rate. It is this deepening fall in the rate of growth that explains the country’s current political crisis, where we sit on the edge of fascism and an end to the electoral system and the rule of law. This essay will explain how a previous decline in the growth rate led to the New Deal, and how neoliberalism, responding to a new decline in growth responded with an attempt, ongoing, to undo the New Deal. However, a half century of failure to kick start the economy has tightened its economic grip, necessitating a radical transformation in American politics, which is our current political crisis. Although neoliberalism has a global reach, and in fact got its start in South America, this article will concentrate on its homeland, the United States, even though the parallels with other western powers will be obvious.
Periods of high growth fading to low growth then returning to high growth led many economists to turn to the idea of economic cycles. In Chapter 13 of Volume 3 of Capital, Karl Marx argued that competition would drive individual capitals to employ increasing amounts of technology to increase productivity to lower their costs and become more competitive. This would increase the overall proportion of constant to variable capital, or in non-Marxist terms, more stuff and less people, in the production process. Since the labor theory of value posits that profits emanate from living labor, a decline in its relative proportions should produce a decline in the rate of profit. In Chapter 14 he then presented countervailing forces that might slow or reverse the decline.[1]
The two chapters together can serve as an explanation of the relatively short business cycle, studied since the early nineteenth century when Jean Charles Léonard de Sismondi and Robert Owen began their work. It is much better understood today than in Marx’s time. Arthur Burns and Wesley Mitchell systematized the modern version in 1946 and research in this area has advanced substantially since then. As far back as 1913, the U.S. government established the Federal Reserve, one of whose tasks is to manage what were then considered financial panics, now, business cycles.[2]
In the 1920s the Soviet economist, Nikolai Kondratiev, developed a theory of long cycles of capitalist growth, of some 40- 60 years, much longer than the normal business cycle of five and half years. In 1935, while in prison, he published “The Long Waves in Economic Life,” in The Review of Economic Statistics.[3] The article, largely quantitative and statistical in nature, never mentions Marx. By the time it was published, he had been in prison for some time, sent there by Stalin in 1930, and later executed in 1938 during the Great Purge. The rise of Keynes in response to the Great Depression eclipsed Kondratiev, rarely mentioned in economics until resurrected by Ernest Mandel in the early 1970s.
Ernest Mandel was a Belgian Jew and Trotskyist whose father had been a member of Rosa Luxemburg’s Spartacist League. During World War II, Mandel fought in the Trotskyist underground against Hitler. He was twice arrested (and escaped) before ending up in the Dora concentration camp, which he survived to become a leader of the Fourth International after the war and a prolific writer and theoretician. When he first published (in German) Late Capitalism in the early 1970s, he merged Marx’s ideas in Vol 3 with Kondratiev’s long cycles to argue that we were entering a new phase of capitalism which he termed Late Capitalism, characterized by a declining rate of profit relative to the high rates of profit and growth of the postwar years, the downward phase of a long cycle.[4]
What pushed Kondratiev, Keynes and Marx to consider cycles was the 1929 Depression. Before the Depression, the U.S. had already emerged as the world’s dominant economy, and many working people enjoyed, relative to the rest of the world, a fairly adequate standard of living.
| Table 1[5] | |||
| Gross Domestic Product Per Capita 1900 | |||
| Country | GDP per capita (1900) | ||
| United States | $5,202 | ||
| United Kingdom | $3,767 | ||
| Germany | $2,819 | ||
| France | $2,496 | ||
| Japan | $1,105 | ||
| China | $652 | ||
| India | $625 | ||
Then 1929 hit. The Great Depression was the longest, most severe depression to strike the western, industrialized world. Profits, production and GDP plummeted while unemployment and suffering soared. Labor short was gone and then some. In the U.S., real per capita GDP dropped 8.5% in 1930, 6.4% in 1931, 12.9% in 1932, and 1.24% in 1933. Overall unemployment rose to 8.7% in 1930, 15.9% in 1931, 23.6% in 1932, and 24.9% in 1933, which is to say, a quarter of the labor force was out of work……and mostly without income. Unemployment in specific sectors was even worse. The American Federation of Labor estimated 1934 unemployment as 65% in construction, 38% in service industries, and 27% in manufacturing.[6]
Coming on the heels of World War I, the shock came at a particularly difficult moment for capitalism. The war, the first global conflict of its kind, left 20 million dead along with another 20 million wounded. It shattered the old nation-state order, and three empires – the Russian, Ottoman, and Austro-Hungarian – simply disappeared. There were revolutions and revolutionary movements around the world, Ireland, Russia, Germany, Turkey, Egypt, Italy, Hungary, and Mexico. It radically uprooted the Middle East, which today still suffers violence from its consequences. Of these, none was more consequential than the Russian Revolution, explicitly anti-capitalist and which promised an alternative to the ills of market society. The Depression multiplied capitalism’s critics and more dangerous still, pushed millions of protestors into the streets.
Under pressure from both the left and the right, Franklin Roosevelt abandoned laissez-faire economics and turned government into an instrument to reduce the suffering of the poor while also kick-starting the market. His New Deal implemented a number of dramatic measures. To save the banks, the 1933 Glass-Steagall Act regulated banking investment and provided oversight. The Securities Exchange Act of 1934 created the Securities and Exchange Commission (SEC) and authorized it to govern the secondary market trading of company securities. That year he also created the Federal Housing Administration (FHA) to regulate mortgages and housing conditions. There were several acts to revive the economy, including the Agricultural Adjustment Act, the National Industrial Recovery Act and the Tennessee Valley Authority. The New Deal was especially important in helping the working class. The NIRA included provisions to help working people, including fair compensation and collective bargaining. It was soon struck down by the courts, but Roosevelt persisted, introducing a range of labor measures, especially the National Labor Relations Act and Fair Labor Standards Act, both of which enshrined collective bargaining and other rights into law. The Revenue Act of 1934 initiated a series of measures that by 1941 gave the country the most progressive taxation system in its history. And, of course, not the least of the New Deal achievements was the Social Security Act of 1935.[7]
The New Deal was widely popular among working people and the poor, though much hated by Republicans and the wealthy. They immediately launched legal challenges, some to the Supreme Court. A few their attacks were successful, though the New Deal Congress re-wrote some of the measures to get them into law. Despite this opposition, the New Deal became so popular as to become embedded in the American political system. Republican Dwight D. Eisenhower expanded Social Security and implemented the New Deal-like interstate transportation system. He famously said, “Should any political party attempt to abolish social security unemployment insurance and eliminate labor laws and farm programs you would not hear of that party again in our political history.” Democrat Lyndon B. Johnson established Medicare and Medicaid, which also became extremely popular and also embedded in American life.
But opposition persisted. The word neoliberalism first came to the fore in 1938 during a conference in Paris. The set of ideas that came together under that rubric matured in the 1940s, guided by Ludwig von Mises and Friedrich Hayek. Their anti- “collectivist” ideas flourished in well-funded right- wing think tanks (American Enterprise Institute, the Heritage Foundation, the Cato Institute) along with some academic economic departments, notably the University of Chicago.
Nonetheless, the prosperity and high growth rates of the 1940s, 1950a, 1960s, consolidated the Keynesian consensus and neoliberal thinking most existed in the margins. Then things headed south. In the 1970s the growth rated dropped to 3.2% and stayed at that level (3.1%, 3.2%) in the 1980s and 1990s. This slowing of growth led to a resurgence of neoliberal ideas, whose proponents argued they would restore growth and prosperity. The core demand was cutting taxes on the wealthy and the corporations, which became a consistent policy from Ronald Reagan to Donald Trump. Next came reducing government regulatory costs, which came to include not just fewer regulations but also smaller government. This would include an attack on anti-poverty measures as well as public education. Reducing labor costs was essential, so that neoliberals sought to weaken unions and unionization along with measures that weakened protections for workers at work. This overall set of measures is what we know as neoliberalism.
In short, while a precipitous decline in growth rates in the 1930s set off the New Deal, a smaller but still significant decline in the 1970s set off an attack on the New Deal.
Table 2[8]
While conservatives had long dreamed of a return to laissez faire capitalism, one unfettered by the progressive era reforms of the Gilded Age and Franklin Roosevelt’s hated New Deal (bolstered by John Maynard Keynes), it was the economic travails of the 1970s that gave them new relevance. There was a preview of the new world they desired when Henry Kissinger and the CIA sponsored two military coups in South America in 1973. In June the Uruguayan military deposed the government and installed a military regime that liberalized (deregulated) trade and commerce, forbid strikes and implemented a harsh wage policy that cut costs to companies, reduced the share of wages in GDP, and dropped real wages 50% between 1973 and 1984.[9] Then in September of that year, Augusto Pinochet led a military coup that deposed the civilian government of Salvador Allende. The military then issued a set of emergency decrees that halted collective bargaining and strikes. Pinochet appointed the Chicago Boys, students of Milton Friedman, the leading apostle of neoliberalism, to positions of power in the new government, which they used to privatize the state-controlled pension system, state industries, and state-owned banks, while reducing taxes. These actions were followed in 1976 when General Rafael Videla led a military coup that deposed President Isabel Peron, and installed Jose Martinez de Hoz as the Economic Minister, who then brought in his own Chicago Boys. They then implemented the appropriate neoliberal measures, privatizing state enterprises, freezing wages, restricting unions and collective bargaining, and lowering tariffs.[10] In all three cases, neoliberal policies, which savaged the poor and the working class, were implemented through CIA supported mass torture of leftists and trade unionists. [11]
The United States is not Latin America. There was no fascist coup here nor mass torture of dissidents. The crisis of the 1970s convinced elites of the need for austerity programs to restore profitability, and they used their control of the means of communication to convince the electorate. They sold trickle down economics and were able to elect the apparently affable Ronald Reagan, and it was morning in America.
He began, predictably, with an assault on labor. On August 5, 1981, shortly after taking office, he fired 11,345 striking air traffic controllers and prohibited them from ever working for the federal government. This attack, in combination with subsequent policies – free trade, deindustrialization, right to work legislation, increasingly aggressive anti-union actions by businesses – led to a declining labor movement. In 1929, the U.S. private-sector union membership rate was 12.4%. Labor and political activism combined with Roosevelt’s new labor laws elevated this to 24.3% in 1940. A high point of private sector unionization was reached in 1954 at 35.6%. Despite some erosion, it stayed high through the 1960s and in 1968 was almost a third of the labor force, 29.9%. The rate of private sector unionization was still above 20% in 1980. Then it fell through the floor, dropping to 9% in 2000 and barely 6.2% in 2019.[12] Weaker unions naturally led to lower wages and benefits.
Along with going after workers, Reagan pursued other neoliberal goals, reducing tax rates, deregulation, moving the Supreme Court to the right, and developing political support for racist ideas that could be used to gain popular support, knowing that making the rich richer by itself would not win enough votes. He loosened regulation of the financial sector, deregulated natural gas, and reduced controls over airfares and interest rates. He began to construct a Supreme Court hostile to the New Deal, while denouncing affirmative action, busing, welfare queens. The public took notice and the racist South went solidly Republican, where it remains today.[13]
Bill Clinton, who sought office as a progressive, solidified Reagan’s accomplishments. He implemented the North American Free Trade Agreement (NAFTA) and championed the World Trade Organization, leading to a deindustrialization that further weakened the trade union movement. Where Reagan loosened financial regulation, Clinton eliminated Glass-Steagall. Where Reagan deregulated natural gas, Clinton deregulated the telecommunications industry. Where Reagan went after welfare queens, Clinton imposed work requirements on welfare recipients, one of the politically most marginalized sectors of the population. Clinton culminated the neoliberal revolution by making it a two-party consensus, leaving the American population with no alternatives. Since then, it has been a neoliberal world.
The ostensible goal of neoliberal policies was to unleash growth, which it simply didn’t do. Instead it put a tight lid on wages, producing several decades of wage stagnation. Whatever productivity gains remained in the system then went upwards to owners rather than being shared with workers, and inequality soared.
Chart 1
A half century of wage stagnation
Chart 2
The Wage Productivity Gap[14]
As with wages, the evidence on tax cuts is also abundant. Nothing has been as dear to the neoliberal ruling class as cutting their taxes. A century ago and before the Great Depression, in 1925 the top marginal federal tax rate was 25%. There’s no free lunch in government, so financing the New Deal required significant increases in the top marginal tax rate, to 63% in 1932 and 79% in 1936. The demands of World War II increased it again to 88% in 1942 and 94% in 1944. After the War, the top marginal tax rate remained above 90% through the golden years of high growth. There was a slow descent, to 91% 1951-1963, then 70% 1965-1980. When Reagan took office, he implemented one of the sharpest cuts in history, 50% 1982-1986. Since then, neoliberal presidents of both parties continued to cut the top marginal tax rate, to 28% in 1990. Following that low, the top rate slowly moved upwards to 39.6% in 2016. Once in office, President Trump’s most successful measure was to drop the top tax rate, to 37% in 2018, where it has remained since.[15] Along with that, he cut the corporate rate from 35 percent to 21 percent, the largest drop in its history. One study of 379 Fortune 500 companies showed that they paid an average of 11.3% of income, while 91 companies paid no federal income tax at all.[16]
Republican state legislatures followed suit and reduced state taxes on the wealthy. North Carolina is a good example. Long a divided state, the Republicans took total political control in 2013. In that year, the top state income tax rate was 7.75%. By 2023, the Republicans reduced the state tax code to a flat rate 4.75%. In 2010, the top North Carolina capital gains tax was 5.8%. It is now 0%, as Republicans eliminated the capital gains tax in the state.
Trickle-down economics is an old idea, in his 1896 Cross of Gold speech, William Jenning Bryan said, “There are two ideas of government. There are those who believe that, if you will only legislate to make the well-to-do prosperous, their prosperity will leak through on those below. The Democratic idea, however, has been that if you legislate to make the masses prosperous, their prosperity will find its way up through every class which rests upon them.” In the 1980s, the neoliberals pulled out trickle down once again in order to sell their proposed income shift upwards. In arguing for his 1982 tax cut, Reagan said “our purpose was to provide incentive for the individual, incentives for business to encourage production and hiring of the unemployed, and to free up money for investment,” the traditional argument. From Reagan through Trump, neoliberal Republicans cut taxes on the rich, and money predictably trickled up to make the wealthy wealthier. Meanwhile, the neoliberal attack on unions and poor assured that working Americans would receive almost no benefits from productivity growth, and that real wages after 40 years grew almost not at all. All the fruits of productivity growth went upwards, creating a new social class, the billionaires.[17]
Such policies inevitably led to the creation of a new social class, the billionaires.
Four decades of neoliberalism concentrated wealth to a degree not seen since the Gilded Age.[18] In 1982, the U.S. had 13 billionaires, today it has 735.[19] While true that the value of money has changed so it is now easier to be a billionaire, that is still striking growth, more than 5000%. The original thirteen had wealth equivalent to 2.8% of U.S. G.D.P. The 2022 billionaires share of wealth was 17.5% of U.S. G.D.P., which is to say, in forty years, the billionaire class has gone from controlling an important but small part of the U.S. economy to owning almost a fifth. Furthermore, we’re now moving into the terrain of centibillionaires. Elon Musk is worth approximately 219 billion, jeff Bezos, 171 billion, Bill Gates 129 billion, Warren Buffet 118 billion, Larry Page, 111 billion, and Larry Ellison, 107 billion.[20] This extreme wealth concentration is a direct result of the neoliberal project to cut taxes on the rich. As conservative a magazine as Fortune argued “What all Americans whose wealth has passed the $100 billion threshold have in common, besides being male and white, is tax avoidance. Between 2013 and 2018, none made federal income tax payments greater than 11% of their wealth growth–and all but two paid less than 5%. Why do we have multiple centibillionaires today–and why are we on a path to have trillionaires in the not-too-distant future? Because our federal tax system is failing to adequately impede the accumulation of massive fortunes. It’s that simple: if you don’t sufficiently tax the super-rich, they’ll accumulate unhealthy sums of wealth. Then they’ll use a small slice of that obscene wealth to buy power, including the power to accumulate even greater wealth.”[21]
And power they bought, especially the power to shape social thought. By and large, the ruling class owns the means of mental production. In The German Ideology, Karl Marx wrote that “The ideas of the ruling class are in every epoch the ruling ideas, i.e. the class which is the ruling material force of society, is at the same time its ruling intellectual force. The class which has the means of material production at its disposal, has control at the same time over the means of mental production, so that thereby, generally speaking, the ideas of those who lack the means of mental production are subject to it.” Though not published until 1932, Marx wrote the German Ideology in the 1840s. Since then, the ruling class is immensely wealthier, larger, with more powerful technologies to determine social thought. These tools now include film and the ownership of studios, TV and the ownership of networks, newspaper, magazines and other print media, the Internet and ownership of digital technology (Amazon, Microsoft, Apple, Facebook, X/Twitter, etc). The wealthy are overrepresented in institutions of though, such as the governing boards of universities. They finance numerous think tanks that coordinate their intellectual efforts. There is no sphere of mental activity free of ruling class domination. Once the ruling class turned to neoliberalism, a half century of intellectual work has guaranteed a rather large work class support for the very policies crushing the working class.
Billionaire power goes beyond the means of intellectual production and directly into control of the political system. They disproportionately fund political candidates, political parties and the political system itself. According to Open Secrets, in 2024, the top five political donors are all billionaires who also gave almost exclusively to republicans, Timothy Mellon (14.1 billion), Jeffrey Yass (27.6 billion), Richard Uihlein (6.6 billion), Kenneth Griffin (37.6 billion), Rob Bigelow (1 billion). Together the five gave $309,362,000 to the Republicans during the 2023-34 campaign season. Number six was Reid Garret Hoffman (2.5 billion) was the top Democratic donor with almost 18 million. Overwhelmingly the billionaire class not only supports neoliberalism, as we shall see later, they intend to deepen it, witness the Heritage Foundation 2025 Project. Another example, The two wealthiest billionaires, Musk (Space X) and Bezos (Amazon) have filed lawsuits arguing that the National Labor Relations Board, which enforces labor law, is unconstitutional. The billionaire class is trying to eliminate unions.[22]
The closest parallel to the current period is the Gilded Age and its Robber Barons, about whose spending Thorsten Veblen coined the term conspicuous consumption. By 1890, the wealthiest 1 per cent of Americans owned a quarter of the nation’s assets.[23] Cornelius Vanderbilt was one of the great railroad tycoons and amassed a fortune of more than 100 million dollars, almost three billion in 2022 dollars. He left a considerable fortune to his family, and his grandson, George Vanderbilt, built the Biltmore Estate, a 250-room home on 8,000 acres in Asheville, North Carolina. Today’s billionaires also have nice homes and often private islands, but their conspicuous consumption tends towards yachts. Jeff Bezos, centibillionaire at $114 billion, spent half of one of those billions, 500 million on the world’s largest sailing yacht, the 417 feet long Koru. Larry Ellison (107 billion) has a 288-foot yacht with a swimming pool (in case ocean temperature is not quite right), movie theater, and outdoor and indoor gyms.[24] Some of the American billionaire yachts pale in comparison with the international billionaire class. Roman Abramovich, Russian/Israeli oligarch (14.5 billion) has a yacht worth 1.5 billion with its own submarine and bullet proof glass. Malaysian billionaire Robert Kuok (10.3 billion) has a yacht reportedly worth $4.8 billion, made with 10,000 kilograms of solid gold and platinum, and a master bedroom with a wall “made from meteorite rock and a statue made from genuine Tyrannosaurus Rex bones.”[25] It’s a billionaire’s world, from yachts to politics to media.
One might argue that it is the billionaire class that now rules America.
“Man is by nature a political animal,” said Aristotle, pointing to our social nature. We are primarily social creatures whose individuality is framed by our sociality. For example, nobody learns an individual language, such doesn’t exist. Everybody learns the language of a group, and along with that, they learn the culture, values, and meanings of the group. As Vygotsky noted, “The true direction of the development of thinking is not from the individual to the social, but from the social to the individual.”
Society is not, however, a collection of roughly equal individuals. Soon after the development of sedentary agriculture, society divided into social classes, generally a class that ruled (kings and emperors, the rich and powerful and their political puppets), and the ruled (peasants, slaves, workers). In each of those societies, the rulers had the wealth and power to control not only politics but political ideas, in which the ruled generally participated as recipients rather than actors. The modern development of electoral democracies hasn’t changed the fundamentals, just the specific mechanisms. For example, after President Biden’s disastrous debate against Donald Trump, many attribute his declining to run, after vehemently arguing he would stay in the race, to George Clooney NYT article urging him to drop out of the contest.[26] Clooney is of course a superstar and highly acclaimed actor, but that’s not what gave him the power to bring down Biden. He may not be a billionaire but at 500 million he’s a half billionaire and one of Hollywood’s most successful fundraisers. Big money brought down Joe Biden. Real politics is of the moneyed class.
There are two exceptions to this, neither of which we can develop here but are worth mentioning. True social revolutions, which sweep away the ruling class, are moments when the underclasses speak. The Haitian slave revolt of 1791 and the Russian Revolution of 1917 are two examples that eliminated the then-existing ruling classes. The second is a less glamorous and often invisible process of resistance. All stable social systems require some minimal level of legitimacy to function, otherwise constant turmoil would drag them down. Though extremely important, resistance is too vast a topic to discuss here. In the normal course of affairs though, the ruling class rules. They rule through their direct command of the institutions of power and also of the other key institutions of society. They finance numerous think tanks that coordinate their intellectual efforts. There is no sphere of mental activity free of ruling class domination.
In modern societies, particularly those of great wealth, the ruling class is not small and is not homogeneous, either in composition or in its political interests. Nonetheless, it is a class defined by, as others, its source of income, so technically, the ruling class are those who derive most of their income from owning capital. They can range from Bill Gates whose net worth from Microsoft is about 125 billion dollars, to, let’s say, an owner of an apartment building who lives from the rents he/she collects. Gates’ wealth derives from the almost quarter of a million workers employed by his company and whose labor he commands. But the owner of the small apartment building may also qualify. On the other hand, small apartment owners vote but don’t determine the direction of society the way Bill Gates and his friends do.
In 2022, Forbes, which takes great pride in such measurements, listed 735 U.S. billionaires, worth 4.7 trillion dollars.[27] That same year, the U.S. counted 9,730 centi-millionaires, those with at least US $100 million in investable assets.[28] These 10,465 individuals are almost certainly the core of America’s ruling class. There may be some with significantly less assets but with an extraordinary interest and passion in politics who dedicate time, energy and money to it. And there may be a few at the top who totally disdain politics. Be that as it may, it is these wealthy individuals and their corporations who provide/control the major funding not just of political parties and politicians, but the commanding political, mental, educational spheres that move society and thought. Their employees range into the many millions, not just their direct employees like the quarter million who work for Gates, but the many millions who work for foundations, universities, think tanks, media companies and other institutions that carry out their bidding.
What do they want? Well the answer to this is both simple and complex. Without questions, individuals and factions can have distinct interests. Throughout American history, most of the ruling class has formally interacted with the political system through a two-party hegemonic system. Political issues have generally been filtered through that system in such a way that alternatives could be presented that allowed the ruling class to sort through alternatives without killing each other, the lone exception until now the Civil War, when the two-party party system failed to mediate conflict.
During the Great Depression the ruling class was sharply divided but nonetheless held together. The profitability of World War II and the postwar world provided unprecedented opportunities for the wealthy to become wealthier and more powerful than ever. When in the 1970s the crisis of profitability hit, the ruling class as a whole moved towards neoliberalism.
Which brings us our fascist moment.
We’re at a crossroads.
American elites adopted neoliberalism in the 1970s as an answer to a problem. The problem was declining growth/profits, the neoliberal solution was to cut workers’ incomes, reduce the state and regulations, and shift wealth upwards. The idea was to kickstart the profit-making machine, which should restore growth.
The plan both succeeded and failed. It succeeded in shifting wealth upwards. If you made an investment in the stock market in 1980, your return today would be 14,857%, or an inflation-adjusted of 3,822%. If you got a job in 1980 and were still working today, your wage today, adjusted for inflation, would be the same now as it was then. Neoliberalism rewarded capital and punished labor, and the rich got richer, quite a bit richer. For working people, though, along with stagnant wages, housing has become unaffordable in many parts of the country, the semi-privatization of public education has left many with huge and unpayable student loans, and the American dream, a better life in the future, has given way to despair, suicides, and cynicism. So there is for many a crisis of the working class.
Although some in the ruling class have benefited greatly – we’re closing in on a thousand billionaires, and more than 3,000 worldwide – the fact is that growth rates continue to fall. They dropped from 4.5% in the 1960s to 3.2% in the 1970s, bringing on neoliberalism. After half a century of austerity policies, growth rates plummeted from 3.2% in the 1990s to 1.7% in the current decade.
So what now?
Before we move to the immediate future, we need to take up possible counter arguments. One is that the data is wrong, that growth rates are not actually falling. While any system of measurement can be questioned, particularly the quality of the categories in measuring phenomena, the system of national accounts on which growth rates are based has a long and distinguished history. First developed in 1948 by Richard Stone for the nascent United Nations, it is now the measurement of choice for most governments, including the United States, as well as the United Nations, the International Monetary Fund, the World Bank, the Organization for Economic Co-operation and Development, and Eurostat. It is such a key and widely scrutinized benchmark, it is highly unlikely that such an important indicator, product of the work of thousands of scholars and researchers, is mistaken.
The second is that once you have such a large GDP, and the U.S. is more than 25 trillion dollars, growth simply cannot continue at a high rate. While debatable, it is also irrelevant. Companies, corporations, the stock market are premised on growth rates, and their slowing has a negative impact on them, on their investments, and through that, on jobs, wages and profits. Capitalism is not a steady state but rather a competitive growth system. It is more plausible that declining growth rates are the direct cause of our current political crisis.
To this, we must add two outside and outsized monsters lurking in the background. One is Artificial Intelligence. There is no question that AI will radically transform the economy and the labor market. It’s hard to think of any job that will be untouched by AI. Some argue that AI has already increased productivity, and others that it will ignite unprecedented economic growth. While no doubt AI has increased productivity and will improve in the future, it has to date not had a significant impact on growth rates. And it may not in the future because of the complicated nature of labor displacement. Optimists argue that it will but so far the numbers do not support them.
The second is climate change, which is not coming but is here and threatens absolute catastrophe in the near future. As carbon pollution heats the planet, we are close to natural thresholds being crossed that will radically alter life on this planet: “The collapse of big ice sheets in Greenland and the West Antarctic, the widespread thawing of permafrost, the death of coral reefs in warm waters, and the collapse of one oceanic current in the North Atlantic….Triggering these planetary shifts will not cause temperatures to spiral out of control in the coming centuries but will unleash dangerous and sweeping damage to people and nature that cannot be undone.”[29]
In response to this, a good portion of the ruling class has decided to organize itself as a fascist movement. It engaged in a successful takeover of the Republican Party behind Donald Trump. Their main goal is to further enrich themselves via more tax cuts, further shrinking the state, and further declining workers incomes. They deny climate change.
While some have questioned whether they are truly fascist, their rhetoric is indeed fascist and extremely violent. Trump’s speeches are notoriously violent, in one he declared “We will cast out the Communists, Marxists, and Fascists, and we will throw off the sick political class that hates our country. We will rout the fake news media, and we will defeat crooked Joe Biden. We will liberate America from these villains once and for all.” He has labeled immigrants “animals” who are “poisoning the blood of our country,” and has promised to deport all of them, millions. His followers have followed suit, so for example, Michelle Morrow, the Republican candidate for North Carolina State Superintendent of Public Instruction, has called for the “televised execution of former President Barack Obama and suggested killing then-President-elect Joe Biden.”
Another fascist maneuver has been to delegitimize the state, beginning with denying the legitimacy of the 2020 election. Although Joe Biden won the 2020 presidential elections decisively, 81,283,501 votes to 74,223,975 for Trump, Trump argued that victory was stolen from him, and on November 7, 2020, tweeted “I WON THIS ELECTION, BY A LOT!.” That position has swept the Republican Party, 70% of whose members believe it, even though Fox News lost a billion-dollar suit for promoting it. Trump has also demonized and mocked Joe Biden, Kamala Harris and Nancy Pelosi. This attack on the state includes the Republican majority on the Supreme Court, whose ruling placing the president above the law lacked any precedent and was easily fabricated to undermine the legal system.
Is this however truly fascist and will the threats – deport millions, bomb Mexico, end elections, impose violence – actually come about? When Leon Trotsky defined fascism, he argued “The fascist movement in Italy was a spontaneous movement of large masses, with new leaders from the rank and file. It is a plebian movement in origin, directed and financed by big capitalist powers. It issued forth from the petty bourgeoisie, the slum proletariat, and even to a certain extent from the proletarian masses; Mussolini, a former socialist, is a “self-made” man arising from this movement.”[30]
Trump’s fascist base is Christian Nationalism, the evangelical movement, the gun rights, NRA folks, and the racist/anti-immigrant movement. It is large, perhaps 30% of the population, with strong roots in portions of the working class along with “the petty bourgeoisie, the slum proletariat.” Trained as a successful TV personality and totally narcissistic, Trump is their unquestioned leader. But classic fascism arose in response to a threat to capital by an active, organized working class with an anti-capitalist ideology, in Italy, Germany, and Spain. Those conditions today do not prevail. So why fascism?
The only plausible answer is that it is a pre-emptive fascism for the coming assault on the working class and possible resistance. Confronted with a prolonged decline in the rate of profit/growth, there will be a heightening of class warfare – wages, benefits, unions, health care (Medicare) , retirement (Social Security) – and a portion of the ruling class is preparing its troops beforehand to be ready once the assault and its resistance takes place. That is why it is undoing the Constitution, preparing to eliminate the separation of Church and State, dispose of the electoral system, and pander to the ultra-right portion of the populace that desires to eradicate women’s liberation and the new LGBT expressions of sexuality. New troops for the coming class warfare.
Of course the ruling class is not at all united on this project. A good portion supported Biden and now supports Harris. They realize the insanity of the Trump project, of climate change denial, the tariffs, the deportation of ten million, of replacing civil servants with partisan loyalists, unraveling the rule of law. Many are aware of the urgency and necessity of transiting to a green economy. They are aware that the U.S. has the largest, wealthiest economy in the world and do not want to risk that. Furthermore, with the exception of the Civil War, the American political system has served them well, allowing them to become the predominant power on the planet. Why throw this overboard for a narcissistic madman?
There is also the resistance question. 67 million Americans, about a fifth of the population receive Social Security. Another 67 million are enrolled in Medicare. Disrupting/privatizing either or both would certainly promise a rebellion. Shawn Fain and the United Auto Workers are leading a resurgence of the labor movement. Although the unauthorized immigrant population is about 11 million, they live in 6.3 million households with 22 million people, almost 5% of U.S. households. Were Trump to attempt deportation, the resistance would be massive and probably violent. Most Americans want a separation of Church and State, and most prefer the rule of law. Trump can certainly start a revolution but it is not at all clear he can finish it.
During a similar crisis, Rosa Luxembourg argued that it was socialism or barbarism. As it turned out, the world chose barbarism, the Great Depression, World War II and 100 million dead from the war. Today, the rate of profit/growth is still falling and barbarians are at the gates. The future seems up in the air. Who knows where the choice will go but many lives are at stake, maybe billions.
[1] While orthodox economists today reject the labor theory of value, the history of growth rates is consistent with Marx..
[2] It is customary during long upswings to declare the business cycle dead, and this is the idea of some economists today. Smith, New York Times, April 11, 2024.
[3] Kondratiev ND, Stolper WF (1935) The Long Waves in Economic Life. The Review of Economic Statistics XVII(6): 105-115. Kondratiev is an interesting figure who originally supported Lenin’s New Economic Policy, fell out of favor with Stalin, arrested in 1930 but continued writing in prison, then executed in 1938 on Stalin’s orders.
[4] While the data on slow growth was strong, Mandel’s interpretation varied from the standard, which saw the recession as a result of the oil shock.
[5] Estimates for 1900 are controversial. www.oecd-ilibrary.org. (n.d.). 2. The long view on economic growth: New estimates of GDP | How Was Life? Volume II : New Perspectives on Well-being and Global Inequality since 1820 | OECD iLibrary. [online] Available at: https://www.oecd-ilibrary.org/sites/5fa1c6e1-en/index.html?itemId=/content/component/5fa1c6e1-en.
[6] Ssa.gov. (2019). Social Security History. [online] Available at: https://www.ssa.gov/history/reports/ces/cesbookc3.html.
[7] Living New Deal (n.d.). What Was the New Deal? [online] Living New Deal. Available at: https://livingnewdeal.org/history-of-the-new-deal/what-was-the-new-deal/.
[8] Crestmont Research
[9] . Transnational Institute. (2023). 50 years after the coup d’état in Uruguay | Transnational Institute. [online] Available at: https://www.tni.org/en/article/50-years-after-the-coup-detat-in-uruguay.
[10] Chen, Linda, “Labor unions and regime transition in Argentina.” (1988). Doctoral Dissertations 1896 –
February 2014. 1760.
https://doi.org/10.7275/gv2s-p444 https://scholarworks.umass.edu/dissertations_1/1760
[11] The best account of this is Naomi Klein, The Shock Doctrine, Metropolitan Books, 2007.
[12] Mishel, L., Rhinehart, L. and Windham, L. (2020). Explaining the erosion of private-sector unions: How corporate practices and legal changes have undercut the ability of workers to organize and bargain. [online] Economic Policy Institute. Available at: https://www.epi.org/unequalpower/publications/private-sector-unions-corporate-legal-erosion/.
[13] The so-called “southern strategy” actually began long before Regan. One can go back to Strom Thurmond’s walking out of the 1948 Democratic National Convention, then Richard Nixon and Kevin Phillips successful implementation of the strategy, which Reagan later took advantage of.
[14] Economic Policy Institute (2022). The Productivity–Pay Gap. [online] Economic Policy Institute. Available at: https://www.epi.org/productivity-pay-gap/.
[15] Tax, I. (2019). Historical Highest Marginal Income Tax Rates. [online] Tax Policy Center. Available at: https://www.taxpolicycenter.org/statistics/historical-highest-marginal-income-tax-rates.
[16] Institute on Taxation and Economic Policy, https://itep.org/corporate-tax-avoidance-in-the-first-year-of-the-trump-tax-law/
[17] The billionaires are not completely new in American history, they are a reincarnation of the Robber Barons of the late 19th century.
[18] New though not unprecedented, there was a parallel in the 19th century with he railroad and steel magnates who accumulated unprecedent wealth and power before the progressive era and the New Deal challenged their status.
[19] The actual number is in flux all the time, and of course is subject to the vagaries of evaluating and estimating fortunes.
[20] How Many Billionaires Are There, Anyway. (n.d.). new york times magazine.
[21] lord, bob (n.d.). America only had a handful of billionaires 40 years ago. We’re now creating ‘centibillionaires’–and unless we tax them, trillionaires. fortune.
[22] https://mail.google.com/mail/u/0/#inbox/WhctKKZWgdVvggglzGkwZrXxzhlPvSrHFrjSQtVnNdskfzNMfhLDpGxBBBTZrFqNdfrtBWv
[23] Mcgerr, M.E. (2010). A Fierce Discontent : the Rise and Fall of the Progressive Movement in A. Riverside: Free Press.
[24] The luxury boats’. (n.d.). business insider. July 2023.
[25] www.luxhabitat.ae. (n.d.). Top 10 most expensive yachts in the world (2021) | LUXHABITAT. [online] Available at: https://www.luxhabitat.ae/the-journal/top-10-most-expensive-yachts-in-the-world/#:~:text=1.
[26] “George Clooney: I Love Joe Biden. But We Need a New Nominee..” NYT, July 10, 2024.
[27] https://www.forbes.com/billionaires-2022/
[28] (No date) U.S. boasts 38% of the world’s population of centi-millionaires | Barron’s. Available at: https://www.barrons.com/articles/u-s-boasts-38-of-the-worlds-centi-millionaires-01674679280 (Accessed: 14 May 2024).
[29] The Guardian, December 5, 2023.
[30] https://www.marxists.org/archive/trotsky/works/1944/1944-fas.htm#p1
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