The West, Eurasia, and the Global South: The Development of Underdevelopment

August 01, 2021

By Francis Lee for the Saker Blog

‘The dependency thesis, like all good (and great) theories can be summed up in a single phrase: Modern ‘’underdevelopment’’ is not ‘’historical backwardness’’ the result of late and insufficient development; it is the product of capitalist development, which is polarizing by nature’. (Andre Gunder Frank -1996.)

The leader of the UK Conservative Party, Mrs Thatcher, first came to power in the UK in 1979 with a brief to end the post-war consensus which had prevailed from the Labour party victory in 1945. Although Labour lost the ensuing elections from 1951-1963, the Conservative Party nonetheless adopted many of Labour’s social-democratic policies, particularly the economic policies, which characterised the post-war years. The same process was to take place when Ronald Reagan established a similar ascendency in the United States. The Thatcher-Reagan duo was born and was to terminate the post-war settlement in both the UK and the US.

Theories were put forward by economic luminaries on both sides of the Atlantic, but particularly by Milton Friedman at the University of Chicago. The notion that there existed a magic panacea that would banish all the problems associated with the failing British and American economic policies of 1945-1979, formed the basis of the Thatcher-Reagan economic radicalism, which was to be followed by the Blair-Clinton consolidation of the 1990s. The so-called ‘supply-side’ revolution consisted of removing all the controls which undergirded capitalism, and which had been painstakingly put in place during the course of the 20^th century, and simply letting the system find its own level. Privatisation, deregulation, and liberalisation were the components in this policy paradigm.

Of course none of this is news; it had been the staple of the West’s chattering classes in the late 20^th century. But its effects were more than restricted to the North Atlantic bloc and was to have a global impact changing the political and economic policies and structures of the whole world.

NEO-LIBERALISM & GLOBALIZATION

­In international terms ‘free’-trade as it was known was at the heart of the system – a system, which was later to become known as globalization, packaged and sold as an irresistible force of nature. Globalization was considered to be neo-liberalism writ large. But on the contrary, a more nuanced interpretation was to be put forward by one of the more astute commentators on the issue.

‘’The standard and most popular narrative is of globalization as the twin of neo-liberalism, expressing the market-fundamentalist view that state-intervention is bad for the economy. It is argued that the state interferes too much with the self-regulating power of the markets, thereby undermining prosperity. This perspective would explain why Alan Greenspan regarded it as fortunate that globalization was rendering the government as being redundant. We call this the anti-state narrative. An alternative narrative is actually considerably more germane: an anti-politics, specifically an anti-mass politics narrative. Greenspan’s statement incorporated the conventional presumption that the West has reached the frontiers of traditional politics: politics has lost its efficacy in the face of global forces. As a result, especially economic policy, is now pretty irrelevant if not actually detrimental, because everything is driven by – determined by – the impersonal force of globalisation. (1) So it is argued.

It was of course taken as axiomatic that free-trade – a vital component in the new economic paradigm – was always and everywhere the best policy. This conventional wisdom was to become known as the ‘Washington Consensus’ and was given a legitimating cachet by political, business, and academic elites around the world. However many of the elements – if not all – of the Washington Consensus where hardly new, many date back to the 18th and 19th centuries and perhaps beyond. It could be said that the newly emergent mainstream orthodoxy represented a caricature of an outdated and somewhat dubious political economy.

The free-trade canon is, of course, spoken of in almost reverential terms. It is as jealously guarded by the economics priesthood in Wall Street and the City of London and of course academia. In short, the theory is based upon a type of formal logic expounded by the early pioneers of political economy, viz., Adam Smith and David Ricardo; and in particular in Ricardo’s magnum opus, The Principles of Political Economy and Taxation first published in 1817. Briefly he argued that nations should specialise in what they do best and in that way world output would be maximised. The hypothetical example he used was England and Portugal and the production of wine and cloth, where he calculated that England should produce cloth and Portugal should produce wine. It was asserted, although no evidence was ever presented, that all would gain from this international division of labour.

However, even a cursory glance at economic history, and particularly the transition from agrarian to industrial societies, demonstrates the weaknesses, and indeed serves to falsify the whole Ricardian model – taken as a model of development. The brute historical fact is that every nation which has successfully embarked upon this transition, including most importantly the US and Germany, has done so adopting catch-up policies which were the exact opposite of those advocated by the free-trade school. (2)

In the world of actually existing capitalism free-trade is the exception rather than the rule. Contemporary free-trade is mainly a matter of intra-firm trading, that is to say, global companies trading with their own subsidiaries and affiliates mainly for tax avoidance purposes, transfer pricing for example. Next come the regional trading blocs – the EU, NAFTA, (which was superseded by the United States–Mexico–Canada Agreement USMCA) and Mercosur (in Latin America). With regard to Mercosur there is no common currency as is the case in most of the EU. Thirdly there is barter trade where goods and services are exchanged for other goods and services rather than money. Finally only about 20% of world trade can at most be considered free trade, and even here there are exceptions involving bilateral specifications and agreements.

INTERVENTIONISM

Modernisation and industrialisation, wherever it took place, involved tariffs, non-tariff barriers (3) infant industry protection, export subsidies, import quotas, grants for Research and Development (R&D), patents, currency manipulation, mass education and so forth – a smorgasboard of interventionist policies whereby the economy was directed from above by the state. For example, during its period of industrialisation, the United States erected tariff walls to keep out foreign (mainly British) goods with the intention of nurturing nascent US industries. US tariffs (in percentages of value) ranged from 35% to almost 50% during the period 1820-1931, and the US itself only became in any sense a free trading nation after WW2, that is once its financial and industrial hegemony had been established.

In Europe laissez-faire policies were also eschewed. In Germany in particular tariffs were lower than those in the US, but the involvement of the German state in the development of the economy was decidedly hands on. Again there was the by now standard policy of infant industry protection, and this was supplemented by an array of grants from the central government including scholarships to promising innovators, subsidies to competent entrepreneurs, and the organisation of exhibitions of new machinery and industrial processes. In addition ‘’during this period Germany pioneered modern policy, which was important in maintaining social peace – and thus promoting and encouraging social investment – in a newly unified country.’’ (4)

This path from under-development to modern industrial development, a feature of historical and dynamic economic growth and expansion which has taken place in the US, Europe, and East Asia is not a ‘natural’ progression, it was a matter of state policy. It has been the same everywhere that it has been applied. That being said the Ricardian legacy still prevails. But this legacy takes on the form of a free-floating ideology with little connexion to either practical policy prescriptions or the real world.

Turning to the real world it can be seen, by all of those who have eyes to see, that, ‘’ … history shows that symmetric free-trade between nations of approximately the same level of development, benefits both parties.’’ However, ‘’ … asymmetric trade will lead to the poor nation specialising in being poor, whilst the rich nation will specialise in being rich. To benefit from free-trade, the poor nation must rid itself of its international specialisation of being poor. For 500 years this has not happened anywhere without any market intervention.’’ (5)

GLOBAL ECONOMIC ASYMMETRY

This asymmetry in the global system is both cause and consequence of globalization. It should be borne in mind that the Least Developed Countries (LDCs) are the providers of cheap raw material inputs to the industrial countries of North America, Western Europe and East Asia. In technological terms the LDC’s find themselves locked into low value-added, dead-end production where no discernible technology transfer takes place. Thus under-development is a structural characteristic of globalization, not some unfortunate accident. Put another way,

‘’ … If rich nations (the North) as the result of historical tendencies (i.e., colonialism – FL) are relatively well-endowed with vital resources of capital, entrepreneurial ability, and skilled labour, their continued specialisation in products and processes that use these resources intensively can create the necessary conditions for their further growth. By contrast LDCs (the global South) endowed with abundant supplies of cheap unskilled labour, by intentionally specialising in products which use cheap, unskilled labour … often find themselves locked into a stagnant situation which perpetuates their comparative advantage in unskilled unproductive activities. This in turn inhibits the domestic growth of needed capital, and technical skills. Static efficiency becomes dynamic inefficiency, and a cumulative process is set in motion in which trade exacerbates already unequal trading relationships, distributes benefits largely to the people who are already well off, and perpetuates the physical and human resource under-development that characterises most poor nations. (6)

Examples of these unequal economic relationships are not difficult to find. US global trade policy was openly based upon a ‘Me Tarzan, you Jane’ set up. America’s trade ‘partners’ were somewhat less endowed with both political and economic capital compared with their senior trading associate – this fact provides a number of typical case studies in this connexion.

Agriculture was always a particular example of the double standard inherent in the trade liberalization agenda. The United States always insisted that other countries reduce their barriers to American products and eliminate subsidies for those products which competed against theirs. However, the US kept up barriers for the goods produced by the developing countries whilst it continued to underwrite massive subsidies for their own producers.

Agricultural subsidies encouraged American farmers to produce more output, forcing down global prices for the crops that poor developing countries produce and depend upon. For example, subsidies for one crop alone, cotton, went to 25,000 mostly very well-off US farmers, exceeded in value the cotton that was produced, lowering the global price of cotton enormously. American farmers, who account for a third of global output, despite the fact that US production costs twice the international price of 42 cents per pound, gained at the expense of the 10 million African farmers in Mali, West Africa, who depended on cotton for their meagre living. Several African countries lost between 1 and 2 percent of their entire income, an amount greater than what these particular countries received in foreign aid from the US. The state of Mali received US$37 million in aid but lost US$43 million from depressed cotton prices.

In other grubby little deals the US tried to keep out Mexican tomatoes, and Mexican trucks, Chinese honey, and Ukrainian women’s coats. Whenever an American industry is threatened, the US authorities swing into action, using so-called fair-trade laws, which had been largely blessed by the Uruguay Round.

Such Treaties were little more than a con game between two grossly unequal partners where one of the partners holds all the cards. Nor does it end there. Transnational Companies can and do avoid much local taxation by shifting profits to subsidiaries in low-tax venues by artificially inflating the price which they pay for their intermediate products purchased from these same subsidiaries so as to lower their stated profits. This phenomenon is usually called ‘transfer pricing’ and is a common practice of Transnational Companies (TNCs), one over which host governments can exert little control as long as corporate tax rates differ from one country to the next.

It should also be borne in mind that although the IMF and World Bank enjoin LDCs to adopt market liberalisation policies they apparently see – or conveniently ignore – the past and current mercantilist practices of developed nations. Agriculture, as has been noted, is massively subsidised in both NAFTA and the EU. But it really is a question of don’t do what I do – do as I say.

The hypocrisy at the heart of the problem represents the elephant in the room. We know that countries which attempt to open their markets when they are not ready to do so usually pay a heavy price (Russia during the Yeltsin period and the shock therapy for example). The countries which protect their growing industries until they are ready to trade on world markets – e.g. South Korea –have been the successes, even in capitalist terms. The wave of development during the 19^th century and the development of East Asia in the 20^th bears witness to this.

NOT IN THE DEVELOPMENT BUSINESS

But the object of the free-trade rhetoric and finger-wagging posture of the developed world is precisely to maintain the status quo. We should be aware that … ‘’Transnational Corporations are not in the development business; their objective is to maximise their return on capital. TNCs seek out the best profit opportunities and are largely unconcerned with issues such as poverty, inequality, employment conditions, and environmental problems.’’ (7)

Given the regulatory capture of the political structures in the developed world by powerful business interests, it seems that this situation is likely to endure for the foreseeable future. Development will only come about when the LDCs take their fate into their own hands and emulate the national building strategies of East Asia.

‘’…markets have a strong tendency to reinforce the status quo. The free market dictates that countries should stick to what they are good at. Stated bluntly, this means that poor countries are supposed to continue with the current practices in low-productivity, low-value added, and low research-intensive activities. But engagement in these activities is exactly what makes them poor in the first place. If they want to leave poverty behind, they have to defy the market and do the more difficult things that bring them higher income and development – there are no two ways about it.’’ (8)

APPENDIX

THE RUSSIAN ROAD.

The legacy of the Yeltsin years had left Russia badly exposed to a triumphalist Western US/EU/NATO bloc. The NATO expansion up to Russia’s western frontiers posed a serious threat to Russia’s security. Internationally Russia was relatively isolated. The socialist political and economic alliances (Warsaw Pact and Comecon) were disbanded, and their previous commercial and economic networks were dismantled. The Russian Federation was excluded from membership of the European Union and was not (yet) a member of the World Trade Organization (WTO). This was the background for the widespread popular support for the assertive policy of President Putin.

But the geopolitical situation was to say the least – challenging. For his part Putin objected to NATO’s deployment of missiles in Poland and Romania pointed directly at Russia. In 1999 the Visegrad countries, Czech Republic, Poland and Hungary, joined NATO and in 2004 they were joined by Bulgaria, Estonia, Latvia, Lithuania, Romania, Slovakia and Slovenia. All these states joined in 2009. Albania and Croatia joined in the same year. Economically, politically and militarily, the ‘’West’’ had arrived at Russia’s borders.

In addition to its external enemies Russia had an abundance of internal foes. This latter group was a product of the Yeltsin model and prior to this a tottering bureaucratic system which barely worked and ultimately collapsed. It was possible to distinguish two main groups which, for better or worse, undermined the Soviet system, which were identified as 1. The Administrative Class, and 2. The Acquiring Class, to which should be added the black-market entrepreneurs who were keen to emulate their western business icons in addition to the American mafia. Powerful reactionary and criminal elements in Russia were keen to bring about deep-rooted changes at the expense of the Russian people.

‘’Ostensibly the reforms in Russia were overseen by a group of senior state officials headed by one Yegor Gaidar and advised, supported and encouraged by senior figures from the US administration, as well as by various American ‘experts.’ But according to an American scholar, Janine Wedel, the Russian reforms were worked out in painstaking detail by a handful of specialists from Harvard University, with close ties to the American government, and were implemented in Russia through the politically dominant ‘Chubais Clan’. (Wedel – 2001). Chubais was officially reported as having engaged foreign consultants including officers of the CIA, to fill leading roles in the State Property Committee. Jonathan Hay, citizen of the USA and Officer in the CIA, was appointed director of the Foreign Technical Aid and Expertise Section and Deputy to the chairperson of the committee (Anatoliy Chubais) within the Expert Commission. The Expert Commission was empowered to review draft decrees of the president of Russia to review for the decisions by the government and instructions by the Chairman and Deputy Chairman of the State Property Committee of the Russian Federation of the details of privatisation in various sectors of the economy … The memoirs of Strove Talbott, Assistant to the US President William Jefferson Clinton on Russian affairs, left no doubt that the US administration viewed (the then) Russian President, Boris Yeltsin, as a reliable conduit for its interests in Russia.

The US neo-liberal economists Jeffrey Sachs and Andrei Shleifer, and Jonathan Hay, had an unprecedented degree of influence over Russia’s economic policy which was unparalleled for a sovereign state. Together with Gaidar and Chabais they formulated decisions that were inserted directly into Presidential decrees … Analysis shows that the implementation of Russian reforms organically combined an aspiration by Soviet bureaucrats to transform themselves from State functionaries into private property owners, and a desire on the part of the ruling elites in the West to impose their own system of values on their historical rival. It was thus inappropriate to speak of Russia and its neighbours in the CIS as having been independent in their conduct of radical economic reforms, and this very lack of independence was crucial for determining the strategy applied in these transformations.’’ (9)

Be that as it may, the damage to Russia carried out and orchestrated by both internal and external enemies was to push back Russian development at least two decades, if not more. Russia has been described by various informed opinion as being a ‘semi-peripheral economy’ and there is some truth in this, its main exports being raw materials and military and defence hardware. But this was a choice forced upon Russia by the US-western alliance. At the turn of the 19/20 century Russia needed to defend itself from western aggression. There were two absolute priorities. Agricultural security and military security. This was the sine qua non for Russia’s continued survival and development. The mixed economy – a characteristic of the western economic models, was for the moment, out of reach. But then the west started to run into its own problems, so things began to balance, particularly with the emergence of the Russian-Chinese alliance. However, the Yeltsin period which had produced a crop of cronies, co-conspirators, criminal and mafia elements, are still hidden in the shadows, often in very high places. The struggle goes on. La Lotta Continua.

NOTES

(1) Phillip Mullan – Beyond Confrontation – p.36

(2) These economic policies as advocated by Alexander Hamilton in the US. In the month of January of 1791, the Secretary of Treasury to the then President George Washington’s administration, Mr. Alexander Hamilton, proposed a seemingly innocuous excise tax on spirits distilled within the United States of America. The move was part of Hamilton’s initiative to encourage industrialization and higher degree of national sufficiency. In his December 1791 report to manufacturers, Hamilton called for protective tariffs to spur domestic production. Also, Hamilton called for the reduction of duties on goods that were carried by American ships.

This was also the case of Freidrich List in Germany in his short work – The National System of Political Economy.

(3) A non-tariff barrier (NTB) is a policy implemented by a government that acts as a cost or impediment to trade. It is not tariffs on products but rather different rules and regulations that are often the biggest practical barrier to trade between countries. Examples of non-tariff barriers include rules on labelling and safety standards on products. Other types of non-tariff barriers to trade can also be the result of policies that differentiate between national and international companies and firms. For example, domestic subsidies by governments to a carmaker may help keep that manufacturer in their country. However, that acts as essentially an indirect non-tariff barrier to other car companies looking to compete. Governments are also often likely to give preferential treatment to companies in their own country when it comes to government procurement contracts. Governments also buy products from their own industries in preference to foreign companies, these are called procurement policies another NTB. This can be seen as an impediment to free and fair international trade.

(4) Ha-Joon Chang – Kicking Away the Ladder – p.32/33.

(5) How Rich Countries Got Rich and Why Poor Countries Stay Poor. – Erik Reinert. It could be argued that political intervention would be the prerequisite for an industrial policy.

(6) Development Economics – Todaro and Smith – 2009

(7) Todaro and Smith – Development Economics – Ibid.

(8) Ha-Joon Chang – Bad Samaritans – p.210

(9) Ruslan Dzarasov – Russia, Ukraine and Contemporary Imperialism – Semi-Peripheral Russia and the Ukraine Crisis – pp.82-97

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The Great Interregnum

February 01, 2021

by Francis Lee for The Saker Blog

The road to the future, to a new expansion as is always close to the heart of capital, led outwards, to the still pleasantly unregulated world of a borderless global economy in which markets would no longer be locked into nation-states, but nation-states locked into markets. (1)

The golden age of post-war capitalism which lasted from the Bretton Woods arrangements of 1944 ended definitively with the great 1971 counter-revolution; a process which began with the removal of the US$ from the gold standard. Since the rest of the world’s currencies were fixed to the dollar these currencies were automatically detached from gold. What emerged, whether by accident or, more likely by design, has defined the contours of the 21^st century and this has borne witness to the emergence of a New World Order (NWO) of a neo-liberal, globalization settlement and conjointly the collapse of actually existing socialism. This realignment was by no means accidental and represented fundamental policy changes rather than unconnected random events.

THE RISE OF NEOLIBERALISM AND THE NWO

This NWO has been established on the basis of deep structural changes in the nature of actually existing capitalism and qualitatively different to the welfare, inclusive capitalism of the immediate post-war period. However the counter-revolution caught the left unprepared and who have seemingly been unable to grasp this fact. Moreover the collapse of actually existing socialism ended the historical period of political ascendency of the left – a process which dated back to the Russian revolution of 1917 – and transmuted into the great neo-liberal counter-revolution which began in 1971.

This eclipse of socialism – or anything resembling socialism – has been the feature of the late 20^th and early 21^st centuries. Both social-democratic and even communist parties have been politically marginalised by their theoretical inability to discern the deficiencies in their political agendas. The counter-revolutionary wave of the late 20^th century began in stages to sweep all before it. The decline of a moribund social-democracy and even eurocommunism with their entrenched and seemingly immovable policies of an earlier period – Progress through Parliamentary Reform – were found to be wanting, out of date and out of time, running out of steam with their economies plagued by stagflation and declining growth. By the late 60s early 70s Le Trente Glorieuses were no more and this gave rise to the surge of counter-revolution initially led by the Reagan-Thatcher axis. This move into the future was – if anybody noticed – a backward movement. Winners included the then Head of Siemens, Heinrich Von Pierer, to triumphantly proclaim: ‘’The wind of competition has become a storm, and the real hurricanes still lies ahead of us.’’(2)

THE EFFECTIVE DEMISE OF THE LEFT

To think that the Left which had once occupied and dominated Western Europe and consisted of mass parties of social-democrats and communists, and moreover, even in 1945 there were armed communist partisans operating in Albania, Greece, Yugoslavia, Italy, and France, including a large Parliamentary representation.

But the Left capitulated and adapted to the new order and for better or worse – actually worse – and was to imbibe the fashionable doctrines of neo-liberalism.

I vividly remember being a student delegate at Labour Party Annual Conference in the seaside town of Blackpool in 1976. Conference was always a rather tedious and dispiriting affair but this time it was historic. James Callaghan the then Prime Minister gave the following address. The key passage was as follows:

‘’We used to think that you could spend your way out of a recession and increase employ­ment by cutting taxes and boosting Government spending. I tell you in all candour that that option no longer exists, and that in so far as it ever did exist, it only worked on each occasion since the war by injecting a bigger dose of infla­tion into the economy, followed by a higher level of unemployment as the next step. Higher inflation followed by higher unemployment. We have just escaped from the highest rate of inflation this country has known; we have not yet escaped from the consequences: high unemployment.’’ Apparently, Keynes was now passe and Von Hayek was flavour of the month.

What Callaghan was in fact articulating was the demise of social-democracy in the UK, and for that matter everywhere else; it was over, finished, and now a complete political racket infested with careerists and parvenus on the make. So Orwell was right even before then to describe the Labour Party as being ‘pale pink humbug’(The Road to Wigan Pier 1937). The neo-liberals had won, and it was an Atlantic-wide victory. Be advised that a party which calls itself a party of the Left, but which adheres to the neo-liberal orthodoxy is simply a fraud. Ex-centre-left parties have simply moved over to the centre-right en bloc. This project was definitively operationalised with considerable success by Blair (New Labour) and Clinton (political centrism) in the 90s.

TAKE A KNEE TO THEM NOW

This political about-face where the ashes of the left and the emergence of the neoliberal right was presided over by a new goddess known as TINA—There Is No Alternative. The long list of her high priests and priestesses extends from Margaret Thatcher via Tony Blair down to Angela Merkel and Bill Clinton. Anyone who wished to serve TINA, to the accompaniment of the solemn chorus of the united economists of the world, had to recognize the escape of capital from its national cages as both inevitable and beneficial, and would have to commit themselves to help clear all obstacles from its path. Heathen practices such as controls on the movement of capital, state aid and others were to be tracked down and eradicated; no one must be allowed to escape from ‘global competition’ and sink back into the cushioned comfort of national protections of whatever kind. Free-trade agreements were to open up markets and protect them from state interference, global governance was to replace national governments, protection from commodification was to be replaced by enabling commodification, and the welfare state was to give way to the competition state of a new era of capitalist rationalization. By the end of the 1980s at the latest, neoliberalism had become the de rigeuer for both the centre left and the centre right—with haemorrhaging membership and a declining electoral participation, disproportionately so at the lower end of the social scale. Additionally, a beginning in the 1980s this was accompanied by a meltdown of trade-union organization, together with a dramatic decline in strike activity worldwide—altogether, in other words, a demobilization along the broadest possible front of the entire post-war machinery of democratic participation and redistribution The old political controversies were now regarded as being obsolete by the PTB.(3)

THE ROAD TO NEMESIS

But history is full of surprises. In their hubris the new ruling elites were to become victims of their own propaganda, a customary and predictable human failing. Cracks were beginning to show in the neo-liberal paradigm during the holding period of 2008-2020 and the model was, whether they liked it or not, beginning to show deep structural fault-lines. The new economic system was becoming increasingly obsolete and unstable, the elephant in the room is now beginning to make its presence felt. This has been the result in the build-up of problems which were occasioned by the 2008 blow-out.

At the present time, however, the cracks which had papered over the post 2008 bodge and the distribution of national income was increasingly tilted away from the 99% to the 1%. Such a polarization of wealth and income cannot possibly endure without economic and political chaos. The process is in its early stages and represents the most severe trial of the new order since the 1971 establishment. In effect democracy is being sacrificed by the requirements of capitalism. This Great Reset is the Hayekian wonderland of a 21^st century slave state.

‘’If capitalism of the consolidation state can no longer produce even the illusion of equitable growth, the time will come when the paths of capitalism and democracy must part. The likeliest outcome would be the completion of a Hayekian social dictatorship in which the capitalist market economy was protected from democratic correction. Its legitimacy would depend upon whether those who once were its citizens would have learned to equate market justice with social justice and to think of themselves as members of a unified marktvolk. Its stability would further require instruments for the ideological marginalization, political disorganization, and physical restraint of anyone unwilling to accept this lesson. Those who refused to bow to market justice, in a situation where political institutions economically, would then be left with what used to be described in the 1970s as extra-parliamentary protest: emotional, irrational, fragmented, and irresponsible. And this is what we would precisely expect if the democratic channels for the articulation of interests and the formation of preferences are blocked, only because the same outcomes can never emerge or because what emerges no longer makes any difference to the markets … The alternative to capitalism without democracy is democracy without capitalism. (4)

So now we are living in a period of what Antonio Gramsci described as the interregnum. “The crisis consists precisely in the fact that the old is dying and the new cannot be born; in this interregnum a great variety of morbid symptoms appear.”(5) Its outcome can only be guessed at.

La Lotte Continua.

NOTES

(1) Wolfgang Streeck – New Left Review – 104

(2) Der Spiegel 1996

(3)Wolfgang Streeck – New Left Review 104

(4) Grace Blakeley – Stolen: How to Save the World from Financialization -pp.172/73.

(5) Prison Notebooks – Antonio Gramsci.

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President Assad Slaughtered Neoliberalism’s Four Sacred Cows

 By Andrew Korybko

Source

Syrian President Assad just slaughtered neoliberalism’s four sacred cows of gay marriage, radical secularism, marijuana legalization, and gender theory in a short video of his latest speech that recently went viral on social media where he condemned these examples of “total moral degeneracy” that he very passionately believes “target our humanity”.

The “Great Social/Civilizational Reset”

The increasingly sharp contrast between the West’s extreme neoliberal social values and most of the rest of the world’s embrace of conservative traditionalism was brought to the fore of global attention after October’s terrorist beheading of a French schoolteacher for sharing satirical cartoons of the Prophet Muhammad. The author published an analysis at the time asking “Is A ‘Great Social/Civilizational Reset Upon Us?”, which predicted that each value system’s proponents will become more vocal in the future but that this doesn’t necessarily imply that the fearmongered “Clash of Civilizations” scenario is inevitable. Rather, what’s likely to unfold is that each side more proudly reasserts their identity as time goes on, defending that which they hold dearest against what they regard as the threat represented by the other system. This is precisely what recently happened after a short video of Syrian President Assad’s latest speech went viral on social media where he slaughtered the four sacred cows of neoliberalism.

Syrian Girl Made The Syrian Leader Go Viral

Mimi Al Laham, also known as Syrian Girl on Twitter, translated the most important part into English. Her work was then shared by Infowars as part of their article titled “Bashar Al-Assad: Neoliberalism is Based on ‘Total Moral Degeneracy’”, which in turn brought it to the attention of countless people across the world. President Assad is known for his solid support of secularism in the face of fundamentalist religious threats to his country’s society, yet casual observers would have been mistaken if they assumed that this means that he’s sympathetic to neoliberalism. The reality couldn’t be more different since the Syrian leader showed that it’s possible to be a secular anti-liberal unlike what many people might have naively thought. Some of his own supporters abroad might even be a bit surprised by what he said since they probably didn’t expect him to group gay marriage, radical secularism, marijuana legalization, and gender theory together as examples of “total moral degeneracy” which he very passionately believes “target our humanity.”

Slaughtering The Four Sacred Cows

For the reader’s convenience, the author is sharing Syrian Girl’s translation of President Assad’s speech below:

“Neoliberalism is based on promoting a total moral degeneracy and separating individuals from any principles or values and affiliations and beliefs in order to reach this moral degeneracy. Neoliberalism promoted gay marriage. They started in the 1970s and now gay marriage is legal. And now they have children but it’s different from adopting because how can they have children?

Neoliberalism promoted that a child does not choose his own religion and this is against the child’s freedom of expression. A child is born without any religion and later choose his own religion when he’s grown up. This is against human nature. Ever since human made their own idols and Gods, a child would instinctively belong to his family’s religion. They contradict humanity itself.

It has recently promoted that marijuana is not harmful and now it’s sold in shops legally. They started claiming that drugs are not harmful, and later they will find something more harmful. Now in some places you can buy marijuana-flavored bread. This is neoliberalism. It (neoliberalism) now claims that a child is born and does not have a gender, that the child chooses later to be a male or a female. Very strange indeed!

So what do we understand from this? Neoliberalism targets our humanity, and by doing so, it collides with religions because religions serve humanity while neoliberalism separates individuals from their values.”

From the above, there’s no doubt that President Assad slaughtered all four of neoliberalism’s sacred cows.

Reviewing President Assad’s Principled Views

Gay marriage, as he noted, has been pushed by neoliberals onto society for nearly the past half-century, after which it finally succeeded to such a wild extent that sex change surgeries can now even lead to so-called “male pregnancies”. According to President Assad, the radical neoliberal ideology of forcibly secularizing children “contradicts humanity itself”. Legalizing drugs, and especially Western society’s normalization of marijuana, is harmful in his eyes, and he also regards gender theory as “very strange indeed”. Taken together, it can unambiguously be said that President Assad sees little difference between “impregnating” sex-changed males, forcing children to accept secularism despite their parents’ wishes, eating a marijuana “brownie”, and convincing children that gender is a choice. These are all similar expressions of neoliberalism’s “moral degeneracy” and “targeting of humanity”, hence why they’re equally condemned. All four of these are like a cancer eating Western society from within, something that he wants to avoid having happen in Syria.

The Syrian Model Stands To Inspire The World

President Assad’s very principled defense of traditional values despite his vehement support for secularism challenges the assumption that the only ones who support the former are religious fundamentalists. As proven by none other than himself and his millions of supporters across the world, it’s entirely possible to simultaneously support secularism and traditional values while being strongly against both neoliberalism and religious fundamentalism. It’s not an either-or choice like those who want to provoke a so-called “Clash of Civilizations” dishonestly try to make everyone think. The world is so complex that not every society neatly falls into one or the other category as Syria shows. For this reason, the Syrian model might eventually be replicated by other countries that are striving to strike a balance between those two social extremes. In hindsight, the nearly decade-long Hybrid War of Terror that was launched against his country in 2011 might have even been partially predicated on erasing Syria’s unique social system from the face of the earth in order to prevent that.

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A Hard Look at Rent and Rent Seeking with Michael Hudson & Pepe Escobar

Source

December 23, 2020

Michael Hudson and Pepe Escobar discuss rent and rent-seeking, i.e., unproductive economic activity, in the US and China mainly but including the Russian, Iranian and Brazilian economies.

In the first 15 minutes, an overview from Michael Hudson explains what happened in the US economy once jobs and manufacturing were offshored to mainly China.  He proposes that even if China did not exist, the US economy has been changed to the extent that it is almost impossible to change back to a productive economy without material changes in the economic model.

Pepe keeps the conversation flowing quickly with incisive questions.  The two esteemed gentlemen take a look at the Chinese view on a possible Biden administration and how the military hawks in Washington could be countered.   Outlining the ‘conflict of systems’ between the US and China, Michael Hudson explains the thinking of the Pentagon and paying ‘protection money’ historically to fund oligarchies.  It is a ‘war between systems’, Hudson explains with the thinking being:  “If only China did not export to us, we could reindustrialize.”

“It’s over”: says Hudson, because “we’ve painted ourselves into such a debt corner.  So much money flows to the top 5% that there is no money for investment, no money for growth.”

Hudson explains the concept of capitalism, how it was conceived to work against neo-liberalism, and how it has changed to systemic support for rentier economics.

A wealth of detail follows, around fictitious debt and wealth creation.   Michael discusses the ‘brainwashing’ of Russia vis a vis economic policy and central bank to end up in a position where Russia was paying 100% interest for years under American advisors and privatized rentiers, “a bunch of gangsters.”   Very interesting is the discussion on how the perpetrators, the leading university of the US in the destruction and looting of Russia, could not be brought to a court.

“You don’t need an army to destroy a country any longer.  All you need to do is to teach it American economics.”  Michael Hudson

A question from Pepe regarding the economies of North East Asia, South East Asia, the Asia Crisis and currently further integration with Russia, resulted in this very cogent quote from Michael Hudson.

“The current mode of warfare is to conquer the brains of a country, to shape how people think.  If you can twist their view into unreality economics, to make them think you are there to help them and not to take money out of them, then you’ve got them hooked.  You need to lend them money, and then crash it.”  Michael Hudson.

The conversation ends with an extensive question from Pepe regarding the biggest myth regarding Belt and Road, the supposed ‘debt trap’.  The difference in systems, non-rentier, and rentier, debt, and neo-liberalism again is illustrated in a crystal clear fashion.

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Corporations, States, and the neo-liberal symbiosis

December 16, 2020

By Francis Lee for the Saker Blog

The men and women who run global corporations are the first in history with the organization, technology, money, and ideology who are attempting to structure the world as an integrated economic unit. (1)

THE RISE OF CORPORATE POWER.

Scroll down another six decades (or thereabouts) and this statement has hardened into an objective fact – and moreover has turned out worse than the above authors had ever imagined. In effect what has taken place, and is still taking place, is the massive shift of power, out of the hands of nation states and democratic governments and into the hands of Transnational Corporations (TNCs) banks, Investment banks, Commercial banks, and Central banks. It is now the coalition that effectively governs the lives of the vast majority of the people on earth; yet these new world realities are seldom reflected in the strategies of citizen movements for democratic change. All too often, strategies are aimed primarily at changing government policies, whilst the real power being exercised by TNCs behind the scenes is rarely challenged, let alone dismantled. When the operations of TNCs do become a prime target for citizen action campaigns, there is a tendency to employ a rather piecemeal and foot-dragging approach to such popular struggles to what is a deeply systemic problem – a problem for the lower orders that is.

Regardless of their nominal home bases these globe-trotting corporate Leviathans have become essentially ‘stateless’ (I use this term advisedly) juggling multiple national identities and loyalties in order to achieve their global competitive interests. Regardless of where they operate in the world these conglomerates can use their overseas subsidiaries, joint ventures, licensing agreements, and assume foreign identities and tax evasion on a huge scale – as for example in the practise of ‘transfer pricing’ – whenever it suits their purposes. In so doing, they develop chameleon-like abilities to change their identities to resemble insiders wherever they are operating. As one nameless CEO put it, When we go to Brussels, we are member states of the EU, when we go to Washington, we become an American Company. Whenever the need arises these gentlemen will wrap themselves up in the national flag of choice (or flags of convenience as in the shipping industry) to get support for tax breaks, research subsidies, or governmental representation in negotiations affecting corporate profit and marketing plans. Through this process stateless corporations are effectively transforming what were independent nation states to suit their interests.

CORPORATIONS AND STATES – PARTNERS IN CRIME

Having said this, however, I would add a qualifying disclaimer:

Namely, that nation states do not necessarily choose to prostrate themselves before their lords and masters of Finance and Industry, this was never – mirabile dictu – meant to be a one-way arrangement or an alternative to the liberal market economy. I have argued elsewhere that states and corporations are both conjoint and symmetrical. Both need each other. The state unquestionably remains the most significant force in shaping the national and world economies, despite the rhetoric of the state-denialist lobby. The state has played a fundamental role in the economic development of all countries, from the 19^th century onwards, and my hunch is that it will continue to do so for the foreseeable future.

However, given the universality of the state-economy dualism it should be understood that a system of variegated capitalism is a feature of the contemporary state-economy partnership. In general terms this fragmentation breaks down into basic models of actually existing capitalism.

1. The liberal-market capitalism (LMC). This is generally understood to be associated with the Anglo-American economies. Rampant individualism has become the dominant characteristic, short-termist and based upon a weak industrial and a strong financial sector. Shareholder value has assumed a quasi-religious status. The banking system is oligopolistic and averse to industrial investment and fixated on the property sector. Financialization is the dominant economic form.

2. Social-market capitalism. (SMC) A premium is placed on collaboration between different actors in the economy with a broader definition of ‘stakeholders’ beyond that of solely the owners of capital. The concept of ‘social partnership’ is more prominent than the Anglo-American model, but somewhat weaker more recently. Capital markets – unlike the LMC – tend to be bank-centred and the banking industry tends to be more diffuse as instanced in the existence of the German Sparkassen. This model is characteristic of the German, Scandinavian, western European bloc.

3. Developmental Capitalism. This is a highly activist state-driven system (although not necessarily through public ownership of productive assets). The state sets substantial policies contained within an explicit industrial strategy. Capital markets tend also to be bank-centred and there is a strong emphasis on tight business networks – e.g., the Chaebol and Keiretsu. The model is exemplified by Japan, (south) Korea, Taiwan, Singapore, and more recently by China.

4. Russian Capitalism. This is difficult to categorize since it is given an unbelievably bad press – for geopolitical reasons – in the western media and academia.

It is also under the cosh of western sanctions which makes development even more difficult. Moreover much of what is going on is conducted in the Russian language which makes reporting and analysis even more difficult. Both political and economic structures were liberalized after 1991 but the Russian state still exerts strong control over the economy. The jury is still out on Russia’s system and development.

Given a choice of which system works best it would seem to be the highly state-activist developmental model.

‘’We can safely predict that the Anglo-American model will become less influential … whilst … virtually all of the Asian models of capitalism involve a more active role for government. And the rise of these models is taking place as the US approach is discredited by abuse, shrivelling opportunities and a shrinking middle-class. Among listed alternatives, the US model is now the outlier.’’ (2)

Alexander Hamilton 1755-1804

These views on industrialisation and state-building could legitimately be described as a protectionist and strategic policy, this to the extent that his theories made a positive impression, and these were not lost on US President and ex-commander-in-chief of the Army of the Potomac, Ulysses S Grant. (1822-1885).

According to Grant:

‘’For centuries England has relied on protection, has carried it to extremes and has obtained satisfactory results from it. There is no doubt that it is to this system that it owes its present strength. After two centuries, England has found it convenient to adopt free trade because it thinks that protection can no longer offer it anything. Very well then, gentlemen, my knowledge of our country leads me to believe that within 200 years, when America has gotten out of protection all that it can offer, it too will adopt free trade.’’

Interestingly enough the United States did not become a great trading power and not recognisably be a free-trade nation until after WW2.

Similarly In Germany, Friedrich List (1789-1846) who also had scant regard for any ‘free-market’ nonsense along with the Ricardian corollary of comparative advantage, was instrumental in promoting a guided political economy; a system of political supervision from above as a policy for economic development. He argued that,

‘’…the first stage (of such a long-term policy) is one of adopting free-trade with more advanced nations as a means of raising themselves from a state of barbarism, and of making advances in agriculture; in the second stage, promoting the growth of manufactures, fisheries, navigation and foreign trade by means of commercial restrictions; and in the last stage, on after reaching the highest degree of wealth and power by gradually reverting to the principle of free-trade and of unrestricted competition in home and foreign markets.’’ (3)

As with Hamilton’s economic theories and their influence on Grant, so with List’s theories, on the leading figure in Germany at the time, the ‘Iron Chancellor’ and leading statesman of the day – Otto Von Bismarck (1771-1845).

These strategic, nation-building, and planned approaches were to give rise to the considerable success of the ‘mixed economies’ during the Bretton Woods era – 1944-1971 – and particularly so in the west. But this historical phase ended abruptly with the rise of the Thatcher-Reagan axis circa 1980, to the tune of TINA – there is no alternative, although such policies continued to be the chosen road to development in East Asia. If the TNC-State paradigm operates globally they do so only because the state allows and facilitates this. But the relationship between the two varies from one state’s political economy to another.

The present actually existing state-market archetype – which in its essence is neo-liberal – is such that business enterprises now seem fit to expect/demand more from their governments in order to secure markets for their products (these enterprises certainly have some chutzpah in this respect!)Trade follows the flag. This special pleading notwithstanding, the fashionable nostrums extolling the economic virtues of neo-liberalism – nostrums of an entirely theoretical nature, based upon a type of reasoning associated with the medieval schoolmen, or rolled out as if it were Immanuel Kant’s Categorical Imperative. In this respect also such economic theory, as postulated by the marginalist school (see below) takes place before any engagement with the material world, the theory precedes practice when it should be the other way around. I believe that it was Goethe who once said “All theory is grey, my friend. But forever green is the tree of life.”

ECONOMIC DEVELOPMENTAL DESIDERATA

However, in spite of the neo-classical economics theological school founded in 1870 (4) the fact of the matter is that the private sector requires at least 4 principles of support and services from governments.

1. Infrastructure support. That is to say state funding of high-risk and basic research. This involves funding of universities and of vocational training systems. Subsidizing of mechanisms for the dissemination of scientific and technological transfers.

2. Providing tax breaks. Incentives, necessary for investment in industrial R&D

3. Guarantees. That national enterprises from the given country have a sufficiently stable Home Base and privileged access to the home market via public contracts (defence, telecommunications, health, transport, education, social services). Industrial policy, particularly for those in the high technology strategic sector (defence, telecommunications, and data processing), also guarantee of a certain basic scientific and technical competence, as well as protecting designated sectors of the internal market on which local enterprises may depend.

4. Provision: that is the necessary support and assistance (regulatory and/or commercial, diplomatic, and political) to local enterprises in their activities and in their fight to better survive in international markets.

The above prescriptions would constitute the absolute sine qua non for economic growth and development. But it is no longer necessarily the case that these expectations will be met. Instead of the assessment (and presence) of past economic developmental strategies with measurable outcomes we have a religious, inflexible dogma of ‘market forces’ which is not to be gainsaid, gibberish in theory, but not even workable in practice. Herewith the record.

1. Capital/Labour relations.

Promise: Deregulation will allow for full employment.

Outcome: No clear impact.

2. Forms of Competition.

Promise: Deregulation will erode oligopolistic market power and will restore free competition

Outcome: Re-regulation, less producers, increased market concentration, from one oligopolistic form of competition to another.

3. Monetary Regime

Promise: Control of Monetary Base is possible.

Outcome: Monetary Innovation prevents this control and the rise of the shadow banking system.

4. State.

Promise: Minimal state will enhance growth and productivity

Outcome: Poor levels of productivity due to lack of educational infrastructures. Finance is put before industry.

5. International Regime

Promise: Smooth currency adjustments.

Outcome: Large movements up and down of exchange rates

And so on and so forth. The state – if it so chooses – remains the most formidable institution to channel and tame the power of the markets. In the absence of powerful countervailing regulation any economic analysis shows that persisting unemployment, recurring financial crises, rising inequality, underinvestment in productive activities such as education and research, a cumulative asymmetry of information and power and overinvestment in financial activities are the outcomes of a complete reliance on market forces. This we already know, but the suffocating global impact of Anglo-American liberal globalism – in both theory and practice, and in its sphere of influence – has served to erect a seemingly insurmountable barrier, both political and ideological, to any exit from the dead-end of TINA.

DECLINE AND FALL

Sad to say, however, that the public authorities on both sides of the Atlantic have defaulted on their obligations to their electorates and to a large extent have merged with the corporate and banking sector. The US and EU remain in thrall to neo-liberal doctrine, the only ‘growth’ policy considered worthy of the name consists of eliminating organizations or institutions of any kind that are regarded as obstructing markets and competition, be they cartels, chambers of commerce and industry, trades unions or tax guilds, or minimum wages or employment protection. This is all that is meant when todays creditors expect debtor states to implement the dreaded ‘structural reforms’. The collapse of the Keynesian economics establishment and its political manifestation in both social-democratic theory and practice was unable (and even unwilling) to prevent the counter-revolutionary onrush of the neoliberal forces who now command the political and economic agenda.

‘’The historical significance of the transition from a Keynesian to a Hayekian political economy, which has been taking place since the 1970s, becomes clearer if we recall the situation at the beginning of the neoliberal turn. Whereas today with open borders, formerly sovereign states with independent central banks must pursue a rule-bound economic policy in accordance with a prescriptions of efficiency theory, the Keynesian mixed economy of the post-war decades had at its disposal a wide range of instruments for discretionary government intervention, especially in the distribution of the national product and the life-chances of national citizens … The neoliberal counter-revolution has left nothing of this. It’s objective was to trim the states of post-war capitalism as much as possible reducing them to providing for the functioning and expansion of markets and making them institutionally incapable of corrective intervention in the self-regulating enforcement of market justice.’’(5)

Returning to the global perspective of the opening passage the problems of under-development in the periphery is now being felt in the imperial centre as the centre becomes more and more like the periphery. A state cannot be emerging or developed if it is not inward rather than outward looking to the goal of creating a domestic market and thus reasserting a national economic sovereignty. This complex objective requires over all aspects of economic life. In particular, it demands policies that protects food security and sovereignty, and equally sovereignty over ones natural resources and access to others outside one’s territory. These multiple and complementary objectives are contrasted with those objectives of the internal comprador class, who are content to adapt to growth models that meet the requirements of the dominant global system (liberal globalization) and the possibilities that these latter alternatives offer. (6)

At the present time, the historical requirement for the establishment of an entirely new social and economic order based upon sound principles and respecting the environment with a goal of the fulfilment of human rights has become imperative. It hardly needs stating that this is a monumental task and the possibilities between success and failure are evenly balanced. Nonetheless it remains the greatest challenge in today’s world – moreover it is a challenge which spans both the developed and developing world and for tackling the issue of the survival of the human species and the Earth itself. Whether mankind is up for this challenge remains to be seen, but the world is running out of time and positive action needs to start very soon indeed. We shall wait and we shall see.

La Lotta Continua.

NOTES

(1) Richard Barnet & Robert Mueller -Global Reach – 1974

(2) Rothkopf – Financial Times – 01/02/2012)

(3) Freidrich List. – National System of Political Economy. P.15

(4)The Marginalist ‘Revolution’ of 1870. The term ‘marginalist revolution’ is commonly utilised to indicate the abandonment of the classical liberalism – of Adam Smith, and John Stuart Mill – and posited a theoretical shift to a subjective theory of value and the analytical notion of marginal utility. The years between 1871 and 1874 saw publication of the major writings of the leaders of the Austrian marginalist school, Carl Menger (1840-1921); of the British school, William Stanley Jevons (1835-1882); and of the French (Lausanne) school, Leon Walras (1834-1910). For better or worse – pretty much the worse FL – this is the basis of the contemporary economics taught in schools and universities today. It is a toxic legacy.

(5) Wolfgang Streeck – Buying Time – pp.111/112

(6)Samir Amin – The Implosion of Capitalism – p.44

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Can Progressives Save Biden From Disastrous Economic Policies?

Photograph Source: stingrayschuller – CC BY 2.0

BY RICHARD D. WOLFF

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Richard Wolff is the author of Capitalism Hits the Fan and Capitalism’s Crisis Deepens. He is founder of Democracy at Work.

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