The following editorial from Issue 15 of Socialist Revolution, the US magazine of the International Marxist Tendency, was published on 8 May 2019. The stage is clearly set for another convulsive economic disruption. The coming crisis will bring to the surface all the accumulated doubts and frustrations of the so-called boom years.
Driven by tech giants Amazon, Apple, Google, and Microsoft, Wall Street is enjoying the longest bull market in the country’s history. The Dow Jones is at record levels, having risen over 20,000 points since hitting a low of 6,469.95 in March 2009. The S&P 500 has ballooned by 334 percent over the last 121 months. And the NASDAQ has rocketed from 1,650 in February 2009 to 8,118, an increase of nearly 500 percent. GDP growth is steady and U6 unemployment has fallen from over 17 percent in 2009 to just over 7 percent. What could possibly go wrong?
Fear of the future
Unfortunately for the capitalists—and for the billions of us who are forced to live under their rule—none of the internal contradictions of the system have been resolved in the decade since the Great Recession. Workers are still unable to purchase back the full value of the goods and services we produce, the fatal flaw of capitalism that will lead inevitably to yet another crisis of overproduction.
The richest 0.1 percent of Americans own as much total wealth as the bottom 90 percent and “earn” more than 198 times as much each year. Jeff Bezos, Bill Gates, and Warren Buffett collectively hold more wealth than the poorest 160 million Americans—the equivalent of the combined populations of California, Texas, Illinois, Michigan, Ohio, Pennsylvania, New York, Georgia, and Florida.
Meanwhile, a fifth of Americans have zero or negative net worth. 78 percent of Americans live paycheck to paycheck. Adjusted for inflation, average hourly earnings peaked 46 years ago. The $4.03-an-hour rate recorded in January 1973 had the same purchasing power as $23.68 today—and yet the federal minimum wage stands at $7.25 an hour. This is an untenable situation—and let’s not forget that these are the “good times.”
Even before the next crisis, the world’s richest individuals are deeply worried. This was detailed in a recent article in the Washington Post, titled “Capitalism in Crisis: US Billionaires Worry About the Survival of the System That Made Them Rich”:
For the first time in decades, capitalism’s future is a subject of debate among presidential hopefuls and a source of growing angst for America’s business elite. In places such as Silicon Valley, the slopes of Davos, Switzerland, and the halls of Harvard Business School, there is a sense that the kind of capitalism that once made America an economic envy is responsible for the growing inequality and anger that is tearing the country apart . . .
One of the most popular classes at Harvard Business School, home to the next generation of Fortune 500 executives, was a class on “reimagining capitalism.” Seven years ago, the elective started with 28 students. Now there were nearly 300 taking it. During that period the students had grown increasingly cynical about corporations and the government, said Rebecca Henderson, the Harvard economist who teaches the course. “What the trust surveys say is what I see,” she said. “They are really worried about the direction in which the US and the world is heading.”
Ray Dalio, the founder of Bridgewater Associates, the world’s largest hedge fund, is equally unsettled. Dalio, who is worth an estimated $17 billion, has issued a manifesto arguing that capitalism must “evolve or die.” “I’m a capitalist and even I think capitalism is broken.” As reported in the Financial Times, he recently told the audience of 60 Minutes: “capitalism is ‘at a juncture.’ Americans could reform it together, ‘or we will do it in conflict.’”
According to the New York Times, the chief worry expressed at the Milken Institute’s annual global conference was “a coming backlash against capitalism.” Ray Dalio was in attendance and told his fellow billionaires: “If you have a population where there’s a large wealth gap and you have an economic downturn, it’s almost reliably there is conflict.” JPMorgan Chase’s Jamie Dimon agreed with Dalio that capitalism needs to be reformed if it is to survive. And Alan Schwartz of Guggenheim Partners summed it up succinctly: “What’s really coming is class warfare.”
Marxists understand that the class war is always raging, “carried on an uninterrupted, now hidden, now open fight.” But in recent years it has been a one-sided affair as the gains won in the past by the workers in struggle were mercilessly clawed back by the capitalists. As Warren Buffett famously put it, “there’s been class warfare going on for the last 20 years, and my class has won.”
While Buffett may have been right about the last few decades, he reveals the wishful thinking and limited horizons of even the most successful capitalists. The capitalists haven’t won—not by a long shot. History ain’t over yet. More to the point, the capitalists can’t offer a way out of the impasse. They are captive to the logic of their system—profit or perish—and are rushing headlong into another crisis with their eyes wide shut.
The Great Recession, which lasted from the fourth quarter of 2007 to the second quarter of 2009, saw nonfarm business output collapse by $753 billion. Some 8.1 million jobs were lost. $8 trillion in household stock market wealth evaporated. As many as 10 million Americans lost their homes. The “too big to fail” banks were shattered and came, cap-in-hand, to the government for the biggest corporate handout in history.
At the time, the public was told the bailout amounted to $700 billion. However, according to the Special Inspector General for TARP, the government’s total commitment was actually $16.8 trillion. The secrecy was justified by then-Chairman of the Federal Reserve, Ben Bernanke, who argued that “revealing borrower details would create a stigma” for those companies that resorted to massive government loans. Just a single American banker was sent to jail for his role in the crisis, a lone scapegoat for a crime perpetuated against humanity by an entire system.
Along with the stock market, almost everything is bigger today than it was in 2008. GDP has grown by 21 percent and the national debt by 207 percent. And while the population has grown by 8 percent, labour productivity has grown by just 1.1 percent per year. How can such modest growth in GDP, population, and per-worker output be squared with the tripling, quadrupling, and even quintupling of the stock market indices? In economics as in nature, what goes up must come down—and the bigger they are, the harder they fall. The stage is clearly set for another convulsive economic disruption, which may come sooner rather than later.
Trump’s tax cuts and the Federal Reserve’s historically low interests rates are an attempt to “stimulate” the economy and stave off the next slump. But by using these measures to artificially prolong the boom they have tapped out their options for when things really get ugly. With the national debt more than double what it was a decade ago, there is precious little room for either bailouts or even tepid Keynesian stimulus spending when the next crisis hits. Austerity more vicious than anything we have seen over the last few decades will be on the order of the day. And as always, the workers, and particularly women, blacks, Latinos, and the poorest of the poor will be hit the hardest.
However, the political and social context will be significantly different this time around. Last time, the avalanche came during the chaotic transition between the “lame duck” Bush and Obama’s promise of “hope and change.” Obama was seen to have inherited the mess, and many gave him a pass. The blame fell on Alan Greenspan, Bush, and the “irrational exuberance” of the times. Today, the most unpopular president in recent memory stands at the helm. In fact, the only measure where is has over 50 percent approval is on his handling of the economy (55 percent), for which Trump has gleefully claimed full credit. And though he will be quick to scapegoat others, even his hardest core supporters will have their faith shaken by the coming storm, especially if he is in office when the economic lightning strikes.
Too big to fail?
In the 1970s, Bernie Sanders supported nationalising the country’s major industries. Since then, he’s drifted ever further to the right, ever closer to the Democrats, and ever nearer the halls of power. Today he is in favor of breaking up the megabanks and raising taxes on the rich. This sounds radical on the surface, but in practice, neither of these measures can end finance capital’s domination of our lives. If broken up, the banks will merely reaggregate over time, just as every trust busted in the past eventually reemerged bigger and stronger than before. And if taxed more heavily, the rich will always find ways to conceal their assets or pass the burden onto the workers through price rises or other measures.
For Marxists, “too big to fail” means “too big to be left in private hands.” The only solution is to nationalise the key levers of the economy, starting with the banks and the rest of the Fortune 500. This handful of corporations rakes in $13 trillion in revenues and accounts for roughly two-thirds of total US GDP. Its collective profits have grown ten times over since the 2008 crash and now stand at $1 trillion, with a market value of $21.6 trillion. These are colossal entities. The assets of JPMorgan Chase alone could be used to wipe out the credit card and student debt of every single American.
Billions of people around the world depend on the products and services produced by the workers of these companies. By bringing companies like Wal-mart, Exxon-Mobil, Berkshire Hathaway, Apple, UnitedHealth, Amazon, AT&T, and General Motors under public ownership, huge swathes of the economy would be safe from the vagaries of speculation, corruption, and mismanagement. By consolidating the biggest banks into a single, publicly owned and administered entity, we could protect workers’ savings and guarantee affordable loans to all. By integrating all nationalised companies into a rational plan of production under democratic workers’ control and management, everyone could enjoy a high quality of life.
To those who say such infringements on private property would be “un-American,” let’s not forget that the American Revolution expropriated the property of the biggest landowners and supporters of the English Crown, while Abraham Lincoln expropriated billions of dollars in human property—all without compensation to the former owners.
A new level of crisis and of struggle
Much water has passed under the capitalist bridge since GW Bush was in office, and much experience has been accumulated by the workers and youth. The Arab Spring, Wisconsin, Occupy, and the 2016 election have all left their mark. Millions of Millennials and Generation Zers are wide open to socialist ideas, and even the older generations have had their confidence in the system tested. Incredibly, 31 percent of Americans believe another civil war is likely in the next period, an indication of the sharp polarisation that continues to push the limits of American capitalism as the impasse drags into another decade.
The coming crisis will bring to the surface all the accumulated doubts and frustrations of the so-called boom years. The realisation that “this is as good as it gets” and that “things will only get worse from now on” will lead to a profound questioning of capitalism and its right to continue. The working class has already started to move, with teachers and nurses leading the way in the biggest wave of strikes since 1986. The generalised interest in socialism will become increasingly concrete; not something merely to aspire to, or to “hope” this or that politician will deliver—but to fight for.
Inevitably, there will be a mass reformist phase as people test every option within the system before deciding to push beyond its limits. But the billionaires’ system has many harsh lessons in store for the majority and offers no meaningful or lasting solutions within its limits. This is what keeps them awake at night. Under these conditions, people learn and change quickly. Along with sharper polarisation to the right, millions will move rapidly to the left. This may be the music of the future—but it is a not too distant future—and one we must actively prepare for.