Economic Update: How US Capitalism Uses Nationalism

[S11 E17] New

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From 1945 to 1990 we were told a great struggle pitted capitalism against socialism/communism (chiefly the USSR and China). Yet still today, US leaders demonize Russia and China despite the end of communism in the USSR and a huge growth of capitalist enterprises in China. The explanation lies in US capitalism's long history of using nationalism (i.e. foreign dangers) to justify tax-payer funded government actions to protect, subsidize, and support major capitalists' dominant position in the US economy.


Transcript has been edited for clarity.

Welcome, friends, to another edition of Economic Update, a weekly program devoted to the economic dimensions of our lives: jobs, debts, incomes — our own, our children’s. I'm your host, Richard Wolff.

Today's program is one that has been building up in my mind for quite a while. It has to do with this remarkable phenomenon. That here we are; the Cold War is over. It basically came to an end back in 1989, which, if you think about it, is a long time ago. The so-called 20th century struggle between capitalism and socialism was, we were told, at an end. Capitalism has won, we were told. Socialism has been defeated, we were told.

And yet for the last 30 years, right up until the present, it's as if nothing changed. The stories about the Soviet Union have become the stories about Russia. But much in the stories hasn't changed. When I pick up The New York Times or The Washington Post and read about what's going on in Russia, it's invariably bad. If I pick up and read about what's going on in China, it's invariably bad. I remember, having been a young man when the Soviet Union was discussed or communist China was discussed, that same language.

And yet here's the interesting thing. The Soviet Union rejected its communist party, which is now a minor political party in that country. They embraced capitalism 30 years ago, and they have not wavered from that in the time since. Capitalism in China, likewise, is highly developed, much stronger year after year, than it has been in the past. Both Russia and China are societies that mix private capitalist enterprises with state capitalist enterprises. But that doesn't make them unique in the world. Most of the countries in the world do that. Most of the countries in Europe, Asia, Africa, Latin America are mixtures, of varying proportions.

So what is, then, this special hostility to Russia, on the one hand, and to China, on the other? It's as if the whole business about communism versus socialism was a fake issue, wasn't the real problem. Because now that that issue is clearly not relevant the way it was, nothing has changed. The hostilities are the same. Where once before both Republicans and Democrats demonized the Soviet Union and China, now they divide the work. The Democrats demonize Russia, and the Republicans demonize China. Or maybe Republicans and Democrats agree on China, but the Democrats are more hostile to Ru . . . . Come on, what's going on here?

My program today is an attempt to answer that question. And here's my thesis that I'm going to develop. Throughout the 20th century, the issue never was primarily communism versus socialism. The issue was very different. The issue was the anxiety of the one percent in the United States, the folks that own, and operate, and run the economy of this country. Their ability to do that is periodically challenged by one or another problem. You know, world wars challenge it. The Great Depression of the 1930s challenged it. I'm going to go through a variety of challenges.

And when capitalism in the United States found itself challenged, it wanted massive government help, expensive government help, and it had to organize that. But it wouldn't do to organize it by saying, we who run this economy are now going to use your tax money — you, the mass of people — to help us stay on top of the system. That's what we're going to . . . . You couldn't say that. You had to instead talk about a great crusade that would justify using all of that money. What do I mean by “using money”? Well, let me be very clear.

For the whole 20th century, but particularly after World War Ⅱ, we maintained in the United States, as we do to this day, an immense military-industrial complex — the very thing that President Eisenhower spoke to us about at the end of his presidency, and warned us about, quite rightly. It's extremely expensive. This year alone, we'll be spending almost a trillion dollars on the defense activities and budgets of the United States. It's staggering. That is an enormous source of profit to an enormous proportion of America's biggest corporations. The government is paying them huge amounts of money. ”Cost-plus contracts” they're called — very profitable. Every state in the union depends on the businesses that sell to the government military. And that has to be justified. And a great struggle between capitalism and socialism is a way to do that.

Then there's a second way that the government has been brought in. The United States, across the 20th century, became a global capitalist power. More and more, as the century went on, we — businesses in America — depended on foreign sources of raw materials; on foreign markets where you could sell the goods; on foreign supply chains where goods were made, and then processed, and moved to another place, eventually to be sold here. The profitability of American industry became more and more dependent on the world. And the government was called in to make sure that world played the role that would profit American businesses.

And that was expensive. Thousands of military bases around the world. An enormous foreign-policy apparatus. And that was justified also in the name of a great crusade against socialism and communism. Yeah, that was a wonderful rationale. And it has a name, an old name. It's called nationalism. You can get people to do all kinds of things if you either say that you must protect the nation against danger or you must celebrate the nation as God's gift to the world. And the United States, we did both.

But it was a charade. It had an ulterior motive. And we know it now because the socialism and the communism are gone, but the exact same game keeps getting played. If the Russians and the Soviets can't be the enemy, terrorism will be. If terrorism doesn't look like it can be the plausible enemy to justify the defense budget, to justify all the activities around the world, okay we'll pick the Chinese. It really doesn't matter; it's the same game. I want to take this argument and show you historically why it is a consistent pattern in and of the United States. And then I want to show you where that leaves us right now. So let's begin.

The power and the position of American capitalism has been challenged repeatedly. It was challenged by the rise of populism at the end of the 19th century. It was challenged again after World War Ⅰ. It was challenged by the Great Depression of 1929. And it was challenged after 1945, when the end of World War Ⅱ left a very powerful Soviet Union as the other part of what defeated fascism in Germany, in Italy, and in Japan.

And the American business community felt threatened after each of those periods because their position was shaken. And in each case, as I will show you, nationalism was used. Immigrants, or foreigners, in one way or another, were pinpointed as the great danger that had to be protected against. The rest of the world had to be controlled, shaped, blocked from hurting us. A war between the United States and the “other,” the foreigner, was brought into play.

Let me give you a few examples. At the end of the 19th century, with a rise of populism in this country, the rise of our labor movement — the Knights of Labor, the AFL — you had a real upswing of mass, popular hostility. Often by the rural parts of America — the farmers, who were really being destroyed by the railroads and the rise of industry. There was the first of these big waves. A ferocious anti-immigrant ideology was developed. Business led the way in all of this. These immigrants are threatening the American way of life. These immigrants, these — over and over.

People who had come earlier were taught to hate those who came later. They were to be seen as threats. The English came first, so they saw the Irish as a threat. The Irish came next; they treated the Italians and the Jews as a threat. Then you can continue on and on. The danger of the other. A big wave of nationalism. The United States entered the Spanish-American War, took over Puerto Rico, the Philippines, to control the world, to stop the immigration. The whole mentality of fighting the other, the foreigner.

After World War Ⅰ, when there was a scary revolution in Russia, this got a little bit different. Once again there was danger to the capitalist domination of the world. Those Russians weren't about to play, those Soviets, the way the United States wanted the world to play. They were a discordant element. And so once again we had a big anti-immigrant wave, only now later immigrants.

The most important case of the 1920s was of Sacco and Vanzetti, Italian immigrants who were attacked for being somehow subversive, anarchists, communists, socialists — all of that European, immigrant, foreign, foreign — the nationalism as a way to justify repression. The 1920s was a period of ferocious repression, particularly in Boston, which came to be the symbol of that period of time.

And so my point, which I'll pick up in the second half of today's show, is carrying that history forward. We have a long history. When the people who run this society feel frightened, and they want the government to smash whoever scares them, and to pay for whatever they need to have their dominance maintained, they mobilize nationalism. They find some foreign enemy. Who it is changes, and really doesn't matter. It wasn't about capitalism versus socialism. It was the re-run in the 20th century of an older 19th century pattern of using nationalism to shore-up capitalism every time the capitalists felt endangered or vulnerable.

We've come to the end of the first part of today's show. Before we get to the second half, I want to remind you, our new book, entitled The Sickness Is the System: When Capitalism Fails to Save Us From Pandemics or Itself, is available at democracyatwork.info/books. I also want to thank our Patreon community for their ongoing invaluable support. If you haven't already, please go to patreon.com/economicupdate, where you can learn more about our activities and get involved. Please stay with us; we'll be right back to continue this discussion of nationalism and capitalism.

Welcome back, friends, to the second half of today's Economic Update. We're talking about how an embattled, a vulnerable, a frightened capitalist class in the United States has reacted to moments of danger and fear that their situation is compromised by deploying nationalism, by coming up with some foreign or foreign-connected danger that has to be protected against, that has to be fought, that has to be engaged, to get people to spend the money that the capitalists need the government to spend to keep themselves dominant. But of course they don't say so; they don't admit that. Instead, we're all sent off on a big crusade on the argument that our nation depends on it.

You know, you can go back to the earliest part of the United States: that famous Tea Party. What was it actually about? The businessmen in Massachusetts were angry about a tax on tea, which was a business they were profiting from. They wanted to get rid of that tax. But instead, a to-do was made. We must be independent; we can't be dictated to by the evil (get ready) foreign king over there in England, George Ⅲ, etc., etc. It's a very old pattern.

After World War Ⅱ, when there had been the Great Depression that turned people critical of capitalism, when we had been allied with the Soviet Union in World War Ⅱ, when socialists and communists were active all over the United States because they were seen as reliable patriots in the fight against fascism — which indeed they were — it frightened American business when the war was over. They didn't like to see socialists and communists in such prominent positions. They didn't like the taxes they had been required to pay for the depression, New Deal, and for the war. And so they had to fight back. They had to undo the New Deal. They didn't want to pay those high taxes. They didn't want to spend all that money to help average people with what had been done in the 1930s: you know, Social Security, unemployment compensation, a 15-million-federal-jobs program. The kinds of things we need now.

They didn't want to pay for those anymore. But again, getting the government not to tax them but instead to spend money to make the world safe for their profitability, and to keep the big military budget going, which they did after World War Ⅱ — that had to be justified by something. You got it — nationalism again. And here's how it was handled. We are in danger from the Soviet Union. Those communists, those socialists, they're in . . . . And worse — they have their people here inside the United States. The famous fifth column — we have to expunge their agents here at home, you see. Just like keeping out immigrants, keeping those foreign agents from this country.

And so you could repress everything in this country that had built-up the New Deal: the communists, the socialists, the union activists. They're the ones who made the New Deal happen. You could squash them at home, and you could push back against the Soviet Union. But to make money for business, you could not give that as the explanation, even though it was. You had to come up with a great crusade. And the crusade (here we go) was capitalism versus socialism. It became the dominant motif, the mantra of the second half of the 20th century. But it was a very old game, played yet again. Very important.

Now let's turn to the present and see where we are and where it's taking us. We have had three crashes of capitalism in the 21st century, each one worse than the one before: the dot-com crisis in the spring of 2000, the subprime-mortgage crisis in the autumn of 2008, and the ongoing COVID-19 crisis that started in March of last year. Each one worse, each one more devastating, each one blamed on something else. But the capitalists at the top, they know they're in trouble. They know it because of the difficulties they face. They know it because of the criticism coming up left and right. Suddenly a socialist can run for president and do well. Suddenly socialists can run for Congress and win. Suddenly the critique of capitalism is everywhere, even on evening comedic programs on our TV.

They know their situation is once again dangerous. And once again it will be nationalism that they turn to, because they've done that from the beginning of this country's history. And the most graphic examples are right in front of us. What caused the defeat of Hillary Clinton? The Russians. Not her, not her policies, not her program, not the condition of the United States. No, no, no — the Russians did it. And for Mr. Trump as president, who is the great threat? The Chinese. And the Democrats and Republicans compete over who the foreign enemy is. And as if that weren't enough, Mr. Trump goes further. It's the immigrants again. He rediscovers a hundred years ago, 19th century anti-foreigner as a way . . . . We're in danger! Remember his words? Invasions are coming from Central and Latin America. We have to protect against . . . . The imagery, the words, the language — it's a theater. To get what?

The one thing the Trump administration did was to give businesses and rich people an enormous tax cut. The rest of it was cover for that. The stock market has been booming; the rest of the economy is a disaster. And the government has been funding, by printing money, the boom in the stock market. This is no rocket science, what's going on here. But there is a difference. It was reasonable, if narrow-minded, to protect capitalism in the 19th century, and particularly the 20th century, in the ways they got the US government to do. And for you and me to pay, as taxpayers, for the wars, for the government bases around the world, for the repressive apparatus, for the tax cuts — for all of it.

But capitalism has moved on, and that changes everything. The profit-making capitalists have left the United States in huge numbers and to a remarkable extent. They moved to China, and India, and Brazil. They are producing all over the world. Capitalism has become global. And in that process the United States, for the capitalists, is less important than it ever was.

And so now the nationalism has a problem it didn't have before. If you mobilize the American people against China, you are threatening the biggest investments American companies have made in the last 25 years, which are in China. Forty to fifty percent of what comes from China comes from subsidiaries of American corporations or businesses in China that are partly or totally owned by American business. Those global supply chains that President Biden's talking about? Those were created by private businesses because they're profitable. And if American companies can't do it, we will be out-competed by capitalists from other countries who can. And they know it. Everybody knows it.

And so suddenly the effort to use nationalism to shore up a shaky, frightened capitalism doesn't work. And the enemy of it is the American companies themselves, who don't want to lose the investments they put around the world. And they don't want to lose the competition that they will lose if they're denied access. So now turning against the foreigner isn't what it was before.

And there's another problem: You waited too long. It's the old story, that a policy that worked in the past isn't necessarily going to work in the future. You have to remember that, or else you make unspeakable mistakes — in your personal life, in your economic life, in your political life. What worked in the past — mobilizing nationalism — is now extremely dangerous. It has enemies at home, here in the United States — all those businesses who don't want that, who want the United States to support them in making money globally, because that's the way capitalism has to function now.

And part of why Mr. Trump isn't president (hard as it is for him and his followers to grasp) is that the business leadership of the United States had enough. They didn't want this. They wanted much less of this than Mr. Trump. He overplayed his hand. He didn't understand American history. He wanted to run a game that the conditions no longer make reasonable. Then there's another problem: You waited too long. The investments are now in China. And China is a powerhouse.

Let me underscore one of the dangers of making a nationalist effort to save the United States. Russia and China together — the two number-one enemies of the leadership of this country — together have a population four times larger than that of the United States, and a military capability that the United States has never confronted in its history and that we'll have to think long and hard about. They have the resources, probably better and more than we do. They certainly have the people. They have the infrastructure. This is not the kind of battle that has been engaged in the past. Do you really want to go down that road? The catastrophic possibilities you don't need me to talk to you about.

I want to go back and raise the basic question again. The struggle between capitalism and socialism was mostly theater, like so much of our politics. When Mr. Trump railed against the immigrants, it was theater, designed to cover what he had to do, which was to give corporations the huge tax cut they got in December of 2017. This country is not endangered by a few thousand immigrants from Latin America. We are a country of 325 million people. If we have 10 million undocumented immigrants (that's the maximum), the 10 million of those poor folk do not threaten an economy of 325. It's theater. Nationalist, anti-foreign theater. And so is the demonization of Mr. Putin or Xi Jinping. This is not a defense of those societies or what they do. I'm sure it's a mixed bag, like in most countries. But the crazed hostility here is about protecting American capitalism. The origin of our foreign policy is the domestic struggle of an increasingly endangered capitalism to survive.

Look at it for a moment from the capitalist point of view. We were terrible in dealing with this covid crisis, way worse than most countries. We have fires out of control in California. A week ago the Federal Reserve payment system collapsed. Texas can’t function in cold weather. We have 20 million people out of work. This is a system that is in deep trouble.

And when it is, turning to a nationalism, a crusade, blaming immigrants, Russians, China, whoever — they're cheating us, they're taking from us — that has to be understood for the political theater it is. And more important, what the underlying domestic question is. The American people have to face that they're being played with here, but that the playing is more dangerous than it has been in a long time.

This is Richard Wolff for Democracy at Work, and I look forward to speaking with you again next week.

Transcript by Marilou Baughman
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Showing 1 comment

  • pasqual digesu
    commented 2021-05-17 11:24:45 -0400
    As stated here, “From 1945 to 1990 we were told a great struggle pitted capitalism against socialism/communism (chiefly the USSR and China). Yet still today, US leaders demonize Russia and China despite the end of communism in the USSR and a huge growth of capitalist enterprises in China. The explanation lies in US capitalism’s long history of using nationalism (i.e. foreign dangers) to justify tax-payer funded government actions to protect, subsidize, and support major capitalists’ dominant position in the US economy”,
    And to add to this truth, China will now empower itself in the future to a greater extent than we have and can ever imagine by controlling capitalism rather than leave it in the hands of self serving and avaricious “entrepreneurs”.
    Lets not forget this same method of using nationalism in the middle east where Israel and Saudi Arabia are being funded, one with 6-9 billion annually using several methods of funding and the other by customer loyalty and protection of an energy market and lobby of incredible wealth and power. This is under a plan that requires both nations to channel or invest back large sums to our defense industry or selective pockets. A level of tax payers money laundering that the Cosa Nostra can only dream of. This racket is so important that we would allow and protect it even if those nations continue to practice a form of human persecution that goes beyond Fascism and can be unmistakably be more closely identified with Nazism (a similar system that we’ve practiced here before). All this despite the global view, opinion and protest. How many innocent lives within all these places and their future security are we gambling with? How many times can you kick a dog before it bites back? Our controlled media will be very selective as to when and what it will project.
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