Economic Update: What "Capitalism's Decline" Means

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This week's show is dedicated to a discussion of the signs of US capitalism's decline. Wolff explores the passage of US capitalism from its birth, through its state-supported growth and expansion, to its global peaking from 1945 to 2000. He presents the causes of its ongoing decline this 21st century, and then offers a conclusion on the right, center and left political responses to decline.

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 and our children’s. I'm your host, Richard Wolff. 

Today's program is about the decline of US capitalism. And I mean that seriously, in a way that I haven't before, even though I've mentioned the idea. What do I mean by “the decline of US capitalism”? Well, I mean that there are signs that could be read — and I believe should be read — as symptoms of that decline. That we were finished just now choosing between Donald Trump and Joe Biden as if those were the best this system could do at a moment of crisis — which would be a stretch, I think most of you would agree. That we have failed to deal with a public health emergency on a scale that would embarrass any country. But for one of the richest countries in the world to have made such a mess at its own peril and at the cost now of almost a quarter of a million people dying — that's a sign. That the footprint of the United States in the world economy is really less than it was 10 years ago, and even less than what it was 20 years ago — that's a sign of something. And I think more and more Americans recognize it. That that American dream we thought was our heritage is now out of reach of the vast majority of people. That the standard of living is threatened at every turn. That we have a million fewer people producing public services in this country than we did in February of this year. At a time when we need public services more than ever, we have less than what . . . .  There are too many signs. And I think they point to something that we can and should call the decline of American capitalism. 

Well, some of you may wonder how could we talk about decline? Isn't the United States extremely powerful these days? Yes, it is extremely powerful. But that's not really relevant. Let me remind you: Feudalism came into the world around 500, 600 ad, at least into the European part of the world, and it lasted a thousand years. And at the end of feudalism, just before it died, was its time of greatest power. Those absolute monarchies — you know, Louis the 14th, or Louis the 16th, or the Austro-Hungarian Empire, or the British Empire — those were at the end. Those were the coming to fruition of a feudalism just before it died. So seeing a powerful America on one hand doesn't really refute anything about a notion of decline.

What about warfare? We haven't won the war in Afghanistan, not even close. And we haven't won the war in Iraq either. And that means something. Those are two of the poorest countries on the face of the earth, and they've been able — those that were the enemies of the United States — to stay, in large part, controlling their territories. That means something. And we know, economically, that we now have a real competitor in the People's Republic of China, that has been gaining on the United States for 30 years.

I could go on, but I think the case for decline might be better made if I talk to you about something that's true of all economic systems, in any country where they have arisen, and developed over time, and then died. That's the pattern, folks, of every economic system in every country. It's born out of something else, it emerges and develops and changes over time, and then it passes away. And there is no reason — and there never was — why capitalism in the United States should display any different pattern from all the others.

So let's review. And let's begin by talking about US capitalism's beginnings. Well, here in the United States, we didn't always have capitalism. You all know that. We had tribal societies here, what we call the Native Americans, who lived in kinds of arrangements that didn't include hiring and firing people, no wage label, no capitalists, no profit — none of it. Native Americans lived in completely different ways. 

So how did capitalism come here? How was it born? Well, basically, it was brought here by Europeans, who imposed it, who planted it here. And when it began, it was poor, and backward, and small, and weak. It was part of the colonial time, when a big, powerful country, Britain, established colonies here. And within those colonies, both before and after our independence, small capitalists emerged, capitalism emerged. You know out of what? Mostly out of self-employed people who didn't hire anyone, who were little peasants, and little crafts folks, in New England and the other parts of the Eastern Coast,where it all began.

And that's where capitalism was born. And like most newborns, it was weak and wobbly, and it needed a lot of help. And a lot of that help was provided, as always, by the government — the British government when we were a colony, the American government when we were independent.

And first and foremost, it was the government that snatched the land away from those other people who organized themselves in a pre-capitalist, non-capitalist, way. Those people were either pushed away or destroyed. The land was taken. And a different economic system from what they had was implanted. That's how capitalism grew. 

And, ironically, because it killed so many of the Native Americans, the capitalism that was born in the United States immediately had a terrible problem: labor shortage. You can't have capitalism, with an employer and an employee, if you don't have an employee. And the Native Americans weren't about to be employees, for a whole host of reasons. They didn't want it, and the colonists arriving didn't trust them and often killed them. 

So how'd you solve the problem? You brought wave after wave of immigrants to this country to be the employees. You had to have that; otherwise they wouldn't have lived a capitalist system here. And you had to solve the problem of how could you make this capitalism work — not just needing labor, but you needed a market. What would you produce? And to whom would you sell it? And, yeah, you could sell a little bit to each other, but you couldn't get a successful, let alone a rich, capitalism going like that.

And they hit upon a solution. The British — of course, because they ran the show — they needed something. Why? Because the biggest industry in England at the beginning of the United States was cotton textiles. That's what made the British Empire the powerhouse that it was. But cotton doesn't grow in England. It's too cold, it's too rocky, it's too wet. They had to find a place to grow the cotton, to buy the cotton, to bring it to England to make the textiles that made the British Empire.

And that's where the United States came in. In the South, you can grow cotton and sell it to England. That gives you something to sell to make money, good money, because the British would buy it because it was within their empire. You lacked nothing except one thing: labor again.

So how did you solve the problem? The government got to work and created a safe way to bring masses of people, by taking over military strength, snatching African Americans — Africans then, African Americans now — and bringing them over by force. And making them work in the cotton fields by force, and threat, and intimidation, and oppression, and all the rest of it. With a system of government to enforce it, to enforce slavery, to bring back the runaway slave, to require . . .— you get the picture? Capitalism develops at every step with reliance on the power of the government.

But it works. It produces a wealthy United States capitalism. And as it grows, it doesn't want to be under the control of the English, because they tax you, and they snatch away parts of it, and they monopolize what you're selling, and give you a crappy price. So you break away, in an independence war. Now you can be more your own master. That's a military battle, fought by the government, to fight against the British, to give you the space to grow. Yeah, the government helps you develop capitalism. And then it grows. 

And the British are angry. You know what they accuse Americans of? Stealing British technology, stealing intellectual development from Britain — which of course they did. They had learned in England; they came from England. You know, it reminds me of the charges against the People's Republic of China coming from the United States, which literally reproduced what the British said about the United States a little while earlier. It makes no difference. That kind of information passes, and you can't stop it. The British couldn't stop the Americans from copying and developing from those copies, and we can't stop the Chinese, any better than we stopped the Japanese before them, etc. 

And capitalism grew in America. And as it grew, it outgrew its own parent, as children often do. We became bigger and richer than the British. But there was another country doing it at the same time: Germany. And toward the end of the 19th century, you had American capitalism ascending, British capitalism threatened, German capitalism ascending. And it exploded in two world wars — World Wars Ⅰ and Ⅱ — that were, whatever else they were, a fight between the Americans, the British, and the Germans. And the Americans allied with the British, to destroy the Germans. They had to do it twice to settle the matter. And by 1945, the end of World War Ⅱ, the United States had emerged dominant, having destroyed both its parent, the British economy, by out-maneuvering it, and the Germans by physical destruction. 

And the United States capitalism — born, evolved over time, maneuvered — becomes the dominant capitalism of the world. After 1945 — already a little bit after World war Ⅰ, but really settling it after World War Ⅱ — we are the dominant capital. We've really reached our peak. And the peak lasts for a while, as peaks often do, from roughly 1945 to roughly now. That's half a century. Not bad. Kind of like the peak of the feudal absolute monarchies in France, England, and so on.

And now, I would argue, it's coming to an end. Decline is setting in. And that's not a cause for alarm, and it's not a cause for weeping, and it's not a cause for thinking of disaster. All of those are possible, but if we're aware of the process and can think about it, we have a better chance of managing it. And in the second half of today's program, I'm going to talk about what that decline involves and how we might manage it.

We've come to the end of the first part of today's show. Before we go on, I want to remind you that we've recently published my third book with Democracy at Work. It's called The Sickness Is the System: When Capitalism Fails to Save Us From Pandemics or Itself. It's a compilation of essays that aims to explain why the real sickness is our system, more than it is covid. You can get your copy at democracyatwork.info/books. I want to also thank our Patreon community for their ongoing and invaluable support. It helps make this show possible. And if you haven't already done so, please take a look at us at patreon.com/economicupdate. Sign up today for all of the services available there. Please stay with us; we'll be right back.

Welcome back, friends, to the second half of today's Economic Update. We're talking about the decline of US capitalism. And, you know, once you understand that that's a framework for analysis, you then of course begin to see all of the earlier signs. So I want to take us back to that period after World Wars Ⅰ, and particularly after World War Ⅱ, when the United States emerged as the top and most successful capitalist economy. From being born, in that situation we talked about; to growth; to development; and then to dominance over the last almost century, certainly more than half a century. It is understandable that already early signs might have been missed, but they've now accumulated, and they can't be missed anymore. And I want to talk a little bit about them, so you get a sense of a process that we're caught up in and why we're experiencing the symptoms of a decline that needs to be understood as that.

Well, after World War Ⅱ we were king of the hill. We had destroyed — or the war had destroyed — all conceivable competitors. Britain, Germany, Japan, Russia — they were all decimated by the war. We emerged almost unscathed. Excepting Pearl Harbor, no bombs fell in this country and did the damage that they did in all those other countries. But, you know, defeated countries, broken countries, destroyed economies — they all rebuild. And by the 1970s the defeated countries, particularly Germany and Japan, had indeed rebuilt and become capitalist powerhouses. 

In China — where a successful Communist Revolution in 1949 had the Soviet Union to look at — they made a decision not to go in certain directions that hadn't worked for the Soviets, to avoid their mistakes. And one of the big decisions the Chinese made was to become the powerhouse producer for the world economy — something the Russians didn't decide to do and probably couldn't have done, given the politics. But the Chinese could, and the Chinese did. And they became the powerhouse relative to the United States that Russia never managed.

You also had globalization, the great success of American capitalists leaving this country, finding cheaper workers and faster-growing markets outside the United States. And that, in turn, meant that the capitalists lost interest in the United States. Why give money to a university in Kansas, where you're not going to be hiring very many engineers, when you can give scholarships in India, or China, or elsewhere — ending up with engineers trained pretty much the same way but affordable, for a fraction of the salary you'd have to pay an American? It begins the undermining.

And, of course, if businesses are focused elsewhere, then they pay taxes there, not here. And that means local governments and state governments don't get the kind of revenue from their capitalists that might have allowed them to continue to be supportive in the way they had once been. You begin to see it: Public education fades. Why? Again, why spend money to build public education here, to produce expensive workers, when capitalists can fund public education over there, for much cheaper educated workforces? And you begin to see the erosion of the public sphere. 

And that's one of the reasons why we have had even more symptoms of decline as this process accumulates. No matter how much you blame Mr. Trump, it isn't all him that made us fail to be prepared for a virus, to be able to contain a virus. Likewise, we know that capitalism has a business cycle downturn every four to seven years. We knew, therefore, that we were due for one, since the last one was in 2008-9. What did we do to prepare for it? Nothing. What did we do to contain it? Nothing. And then our worst nightmare: an economic crash together with a public health disaster. And both of them could have been, and should have been, prepared for and managed, but they weren't. It's not because Americans aren't smart. It's not because Americans have forgotten their history. But their empire, their resources, their means of coping, are being undermined. So too the failed wars in Afghanistan and Iraq. The impotence in the face of Venezuela and Bolivia, that we would have in the past brushed aside and replaced with governments more favorable. Can't do it anymore.

It's a problem. It's a serious decline. The share of world trade that is accounted for by the United States shrinks all the time. The US dollar, which was once the global currency, is increasingly contested. The Chinese are moving in, the Russians and the Chinese together. The Middle Eastern oil producers want to escape from having to make all their deals in dollars. The role of the dollar internationally, so closely allied with that of the United States, is in trouble. Oh, it's not gone yet. We're not talking about collapse. But we are talking about decline. 

And now the mass of the American people are beginning to feel it and sense it too. The notion that the United States was a place where every generation lives better than the one before — that notion is dead. Many, many Americans feel bitter, and angry. A major part of Donald Trump's support was coming from the people who feel betrayed. They experience the decline I'm talking about as a betrayal. Somebody has got to be to blame. Could it be immigrants? Could it be liberals? Could it be black and brown people? The scapegoat opportunity is always there, and there's always a sleazoid politician who’ll climb aboard the scapegoat train and ride it as far as he can. Trump is only the latest. 

But there's a lesson there to learn. There is something real going on, making people upset, and angry, and bitter, and sometimes cruel and nasty. What is this? And, you know, we have parallels. One parallel I'm going to give you is Germany. Too much happened to the German working class in too short a time, and it went crazy. Let me remind you, Germany was the ascending power at the end of the 19th century, like the United States. The powerful, rich, capitalist newcomer, displacing the old, previously dominant British capitalist empire. And the Germans were successful, like the Americans. And began to really believe in themselves, like the Americans. And to imagine that they had a bright future, like the Americans. And then the United States and Britain allied and destroyed the German hope. In 1914 the Germans went to war thinking they'd win. In 1918 they had been defeated; they were destroyed.

But that was only step one. In 1922 and ‘23 Germany experienced an inflation of the sort that the Germans had never seen before. In a matter of a few months, the exchange rate between German marks (that was their currency at the time) and the US dollar went from six marks to a dollar to 10 billion German marks to the dollar. That's right. People were paid twice a day, ran home and gave their wives or husbands the pay in a bag of bills. And they ran to the store to spend them, because if they didn't spend them within an hour, they'd be worthless later that afternoon. That's how fast prices were rising. That's an inflation. Americans haven't seen it — yet. 

And then, as if two whacks — a defeat in World War Ⅰ and a catastrophic inflation — weren’t enough. And, by the way, what really did the Germans in was that inflation. Germans are very frugal to this day. They save a lot of money. They don't use credit cards. They don't go into debt like Americans; they never did. They save money. They've been saving for decades. But they were saving in marks. And in a few months in 1922-23, those marks became worthless. And all the savings accumulated by all the German families were worthless. 

They lost the war, they lost their future, they lost their savings. And in 1929, a few years later, the Great Depression hit and they lost their jobs. It was too much. In 10 years everything was destroyed. And you know what happened to them? They decided that their savior would be this short little man with a funny dark mustache who claimed that the great people of the world were blue-eyed and blonde, even though he was neither. And they followed Adolf Hitler into a total and complete disaster. But they were desperate, and they were really suffering. And it isn't so hard to understand. Economic decline, especially when you're not prepared for it, is a social trauma. 

And we're living through it now. That's why there was a Trump. Here's the way it can go. When the decline sets in, and you have to begin to face what that means, one reaction is denial. We are living in a country that is mostly about denial. Trump denies in one way, but Biden denies in another. One is going to “make America great again” — which is half an admission, if you think about it. We have to go back, because we're sliding. Biden says oh no, no, “build back better.” Well, there's the admission again, buried into words. Yeah, something's wrong.

Well, we lurched to the right, like the Germans did. We haven't paid the price the Germans did — yet. And this latest election suggests maybe the majority of Americans are basically beginning to understand and are deciding not to go to the far right. They're going to try running down the middle. You know, Biden, the Democrats, neoliberalism, globalization, back to normal — a hundred ways of saying it. 

But now here's a hopeful way to end this story, if the lurching to the right, which we just had four years of, didn't solve the problem. And let me underscore, it didn't solve the problem. Our economy is in worse shape than when Mr. Trump started. Our global position is poorer than when Mr. Trump started. Our public health is a disaster. Our economic future looks grim. Yeah, he didn't solve the problem of decline. And I'm here to tell you that there's nothing in Mr. Biden's program that offers any solution either. No question which is the better way to go, but if you're looking for a solution, if you're aware that we have a decline, then you will not find a solution in Mr. Biden either. It's as much of a prediction as I will make.

But the good news? The silver lining in a cloudy spectrum of options? What we haven't tried in the United States is to go to the left, to be progressive, to do things that we have done that have worked in the past. The last time the United States faced decline, it was the collapse after 1929, when the roaring ‘20s gave us the depressed ‘30s. And in that moment the American people rose up. And they went left, creating Social Security, unemployment compensation, a federal jobs program, a minimum wage. And that got us out of the depression pretty well — not alone, but pretty well — and it was a better way to go.

And that's my message to you. You can handle a decline — we were a rich country — but you have to be ready to admit it in order to solve it. It's a little bit like AA. You have to admit you have a problem as your first step in solving it. We are a declining economic power. And that either gets faced and managed in a humane way, or it drives us crazy into political and moral dead ends.

Thank you for your attention. I look forward to speaking with you again next week.


Transcript by Marilou Baughman
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Showing 3 comments

  • Pasqual DiGesu
    commented 2020-12-31 07:55:48 -0500
    @ Benjamin, This is why we need a government entity that dictates not for powerful industry or lucrative tax providing business or decadent growth, but controlled industry which is necessary as opposed to unnecessary. Its not just about economics but of government. Our landfills are now outside our borders causing disastrous effects on local inhabitants. Produce only small ecological vehicles for all to use, computers and electronics made to last 50 years before recycling, mandate public transportation during the week for work travel (when there is no virus). How many unnecessary widgets are presently pumping factory smoke stacks? Let employment be redistributed in a new playing field of necessaries. Where is the leadership?
  • Benjamin Schroeder
    commented 2020-12-29 10:04:40 -0500
    Professor Wolff, 12/28/2020
    I think you missed out on an especially important part of the Economic consequences of “The Sickness is the System”. We (the government, the manufacturers, and others) pollute the world for our/their profits. Our world is becoming or turning into a waste dump on land, in the sea’s/oceans and mountains of waste material in rural areas.
    Not to mention the auto’s junk yards, Volkswagen lots with cars that did not meet emission standards, the tires dumps, the used industrial machinery, the used train locomotives, old steam locomotives, old trolly’s, the aircraft bone yard in Arizona, and I can go on and on.
    Piles and piles of it (Waste, Garbage, Trash, Junk, etc.) ! It is all around us. The world is becoming full of it! This is a result of our economic system (The Sickness). We are producing more and more without paying for the waste, garbage, trash, junk, etc.
    How has this (Waste, Garbage, Trash, Junk, etc.) gotten rid of? Mountains of this is in landfills, as mountains are built in the country outside cities, old rock mining quarries, dumped into our oceans, private waste sites operated by power companies, or given to other countries, etc.
    Is this what is we will give to our children and grandchildren?
  • Pasqual DiGesu
    commented 2020-12-09 21:37:37 -0500
    Excellent class lecture

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