Economic Prospects

Three factors shape the current global economic conjuncture.

The first is the sluggish but long rise in the capitalist global industrial cycle following the world economic crisis of 2007-09. This rise continued until February 2020.

The second factor is the worldwide COVID-19 pandemic that shut down large parts of the global economy and world trade in 2020. This sent unemployment rates into double digits. The West’s capitalist governments increasingly treat COVID-19 as endemic rather than a pandemic. Shutdowns are over and even mask-wearing is becoming a thing of the past. But the virus continues. On-and-off shutdowns continue in the world’s leading manufacturing nation: China.

The third factor is the global economic and financial war launched by the U.S. world empire against Russia. This war was formally launched in response to the Russo-Ukrainian war, ongoing since the U.S.-supported right-wing Euromaidan coup in 2014. It entered a new stage with Moscow’s launching of a special military operation on Feb. 24, 2022. The war had already taken about 15,000 people’s lives before the military operation began. Fighting was limited in recent years, but in the weeks leading up to Feb. 24 Kiev stepped up shelling the Donbass. All indications are Washington encouraged its puppet Euromaidan government to launch an offensive to crush the ethnically Russian People’s Republics of Lugansk and Donetsk.

In response, Vladimir Putin’s government recognized the Lugansk and Donetsk Republics, then launched a special military operation that can also be described as a limited invasion pursuing limited goals. The Kremlin combined its operation with a diplomatic initiative by opening negotiations with Kiev to end the war.

The Kremlin demands Kiev withdraw its troops from all the territories claimed by the People’s Republics of Lugansk and Donetsk; give up its claims to these regions; acknowledge Crimea as part of Russia; stop the persecution of Russian language speakers in Ukraine; and the “de-Nazification” of Ukraine. In addition, Moscow also demands Ukraine enshrine its non-NATO status in its constitution, promise not to acquire nuclear weapons, and refuse nuclear or other weapons of mass destruction on its territory.

However, Washington has blocked any meaningful negotiations between Kiev and Russia. Instead, Washington encouraged Ukraine not to make any concessions to Russia while escalating weapons supplied from the U.S. and its satellite NATO countries to the Kiev regime. Washington hopes a continuation of the war will lead Russia to crack and Putin’s Russian-nationalist government replaced by a government willing to do Washington’s bidding. Washington would expect a post-Putin government to sell off its oil-gas-and-mineral-bearing land to U.S. and Western European corporations for a song. This is what the Ukrainian Euromaidan government has been doing. (1) For Russians, the limited war in Ukraine is part of a broader struggle for the very survival of the Russian nation against what Russians call the collective West — the U.S.-NATO world empire.

How the COVID aftermath boom breeds inflation

A reader asked about the relationship between the inflation bred by the COVID aftermath boom and what I call currency-depreciation inflation. Is the inflation bred by the COVID aftermath boom the same thing as currency depreciation inflation? The simple answer is no, or rather, not yet. To understand the dynamics of the current economic situation and its future evolution, one must understand the relationship between aftermath boom-bred inflation following the lockdowns and inflation occurring when a currency loses a great amount of its value against gold over a short time.

When capitalist governments ordered the shutdown of much of the economy in March 2020 in a failed bid to stamp out the pandemic, business inventories — Marx’s commodity capital — shrank drastically. Commodity capital is unsold commodities that have absorbed surplus value. That surplus value becomes profit only when and if they’re sold at profitable prices.

During the shutdowns, capitalist governments borrowed and spent a vast amount of money to support spending to the extent possible under lockdown conditions. The other aim of government spending was to prevent a collapse of the credit system. To finance this the U.S. Federal Reserve System greatly expanded the quantity of U.S. dollars which enabled other central banks to expand the quantity of their own currencies.

The combination of a shrinking supply of commodities plus an explosion in the quantity of central bank-created money, plus commercial bank-created money, is inflationary. This inflation takes effect as the economy reopens, forcing individual profit-seeking capitalist firms, both industrial and merchant, to scramble to rebuild their commodity capital. The individual capitalist, who lags behind competitors in rebuilding inventories, risks losing markets to competitors, perhaps permanently.

Whenever a large number of capitalists simultaneously build up inventories — what Keynesians call the multiplier involving increased demand for commodities for personal consumption — an accelerator of increased business investment is triggered. The result: an expansion of the demand for commodities including the labor-power commodity. Once started, the multiplier and accelerator effects intensify the boom until the demand for loan money exceeds the supply to the extent that credit begins to seize up. As the multiplier and accelerator take full effect, what appears as an inventory shortage conceals overproduction. When this overproduction has developed to a certain point, the multiplier and accelerator effects reverse, and recession develops.

In recent weeks, the Federal Reserve System signaled its plan to increase, or rather allow, a considerable rise in interest rates over the coming months. (2) The Fed says this is to stop inflation. And despite the wishful thinking of progressive economists to the contrary, this is correct as long as the economy operates on a capitalist basis. The Fed hoped inflation would fade away as the economy continued to reopen and the commodity quantities for sale on the market increased. But thanks to the operations of the multiplier and accelerator effects, that has not happened.

If the Fed continues creating dollars at a fast enough pace to prevent rising interest rates, won’t the boom continue? Capitalism’s history shows aftermath booms, like the more common cyclical booms, end only when the economy runs up against a growing money shortage and credit dries up. The underlying reason is the quantity of non-money commodities — measured in terms of the money commodity’s use value or in terms of labor values — expands at faster rates than the money commodity’s quantity — also measured in terms of the money commodity’s use value or labor value. Marx called this a general relative overproduction of commodities. In more common terms, the production of commodities exceeds the ability of the market to sell them at a profit.

The common-sense answer (3) to whether or not the Fed and other central banks can avoid a recession by continuing to expand the quantity of currency is: yes it can. Progressives argue that modern money is no longer based on gold because there is no longer a legal link between currencies and gold. Therefore, it is believed that modern money is non-commodity money, following different economic laws than the gold or silver-based money of the past. They say crises of overproduction are no longer inevitable if central banks are generous enough with the money they can create out of thin air. These progressives then demand that the Fed continue creating enough money to prevent rising interest rates.

Progressives (4) want the government to stop inflation somehow other than allowing a rise in interest rates that would lead to recession. According to this “common sense” view, inflation is caused by greedy capitalists raising prices to increase profits. Many progressives demand the government just forbid price increases. In reality, individual capitalists are driven by competition and always greedy for more profits. Even if a capitalist isn’t particularly greedy, they have no alternative but to aim at the highest profit possible if they want to survive. Raging against corporate greed as the cause of inflation sounds radical, but it betrays a naïve view of how capitalism works. If inflation is caused by corporate greed, then why were inflation rates low before the pandemic? Were capitalists any less greedy before the pandemic? Of course not!

Another progressive argument is that the Fed raises interest rates to increase unemployment to slow wage increases. This argument needs a careful look. It has a grain of truth. It’s also a trap for the working class. It’s true that measured in dollars or any other currency unit, wages on average have risen faster than they have for many years. However, real wages — the purchasing power of the money that workers are paid for each hour of work — have been declining. Wages have been chasing the rising cost of living and are still falling behind, despite the highly encouraging wave of union organizing and strikes.

Are wage increases causing inflation?

Journalist Christopher Rugaber repeats the claim that rising wages drive price increases. He attributes this view to Federal Reserve chief Jerome Powell, a very authoritative figure. Rugaber writes, “Powell described the job market as ‘extremely, historically’ tight and ‘unsustainably hot.’ Available jobs are near record highs. Wages are rising at their fastest pace in decades. The unemployment rate is flirting with a half-century low, and layoffs are sparse. … With the highest inflation in four decades hurting households and businesses, the Fed chair regards the job market’s strength as a key driver of spiking prices.” (“Why Fed worries about the strongest US job market in decades,” Christopher Rugaber, AP News, April 22, 2022)

The problem, Rugaber and Powell would have you believe, is that unemployment is too low! They believe unemployment must be increased to increase competition among the sellers of labor power and reduce competition among the buyers of labor power. A rise in unemployment slows wage increases, thus halting inflation. Somehow Rugaber forgot to mention that real wages are falling, not rising.

Progressive economists acknowledge the fall in real wages. After 40 years of stagnation in real wages despite rising productivity — why would it now be necessary to slow wage increases even more — really cutting wages? Is this the answer to inflation?

Rugaber tries to assure us a rise in Fed-engineered unemployment won’t be severe … well, maybe. He writes, “As Powell and the Fed see it, the surge in job postings forces employers to boost wages to attract and keep workers. Those higher labor costs are then passed to customers in the form of higher prices, thereby helping fuel inflation.” Again I refer readers to Marx’s pamphlet Value, Price and Profit, which refuted this argument over 150 years ago.

If a rise in unemployment is as mild as Rugaber and Powell imply, then it will be mostly young people entering the labor force for the first time who will suffer. That would mean that young people won’t get that first job necessary to get good jobs in future years. A small price to pay to slow inflation, according to Powell, Rugaber, and AP News.

Rugaber explains how the Fed might achieve this outcome. With so many open jobs, the Fed figures most employers will cut back on job postings rather than lay off people. Fewer openings reduce the need to raise pay and ease inflationary pressures. The logic of these arguments – here is the trap – is if workers voluntarily limit wage demands, inflation would go away. The Fed won’t need to raise interest rates. This increases the chances for a soft landing which only affects young people entering the labor market, not workers who already have jobs.

Labor unionists might reasonably ask: Why are workers asked to moderate wage demands when it’s the bosses who raise prices? Why not demand that bosses refrain from raising prices? If the bosses refuse, have the government move in and impose price controls. If the government moves to stop inflation by imposing price controls, won’t inflation cease? Then the Fed won’t have to fight inflation by allowing recession-breeding interest rate hikes. Sounds reasonable, doesn’t it?

The problem is that the law of value governing the capitalist economy forces each capitalist to raise profits according to market conditions. Capitalist production is not about meeting human needs. It’s about making the highest profit possible. If the government attempts to interfere with profit-making, capitalists have ways to get around it. They can withhold commodities on the market, or sell them on illegal or gray markets. Or they can reduce the quality of commodities sold, as occurred during Nixon’s price and wage controls in the early 1970s.

To fight the effects of inflation, we must understand how the capitalist economy operates or risk repeating the mistakes of our predecessors back in the early 1970s. Then most workers supported Nixon’s wage-price controls, which turned out to be mostly wage controls. These controls utterly failed to halt inflation but lowered real wages.

As I explain throughout this blog, prices in a capitalist economy are a quantity of the use value of the money commodity measured in the unit of measurement appropriate to the use value of the money commodity. In practice, this means prices are quantities of gold bullion measured in some unit of weight, what Anwar Shaikh calls golden prices.

Capitalists scramble to rebuild inventories during aftermath booms — such as those that followed World War I, World War II, and now the COVID economic shutdowns of 2020 — even more than during cyclical booms. Assuming the quantity of gold each dollar, or other currency units, represents remains stable if the central bank expands the quantity of currency it creates, the aftermath boom continues, but so does the inflation associated with it. This means that, eventually, golden prices exceed the value of commodities. (5) The law of value discovered by classical political economy and perfected by Marx does not allow prices measured in terms of gold bullion to rise without limit.

Assuming the quantity of gold a dollar represents remains unchanged, the cost price of mining and refining gold will increase. This progressively wipes out the profits of the gold mining and refining industries producing the money material. Capital then flows out of gold mining and refining into more profitable branches of production. Gold production declines. The rate of growth of the global gold hoard progressively slows as the rate of growth of the quantity of non-money commodities, measured in terms of their golden prices, continues climbing. This is the essence of relative overproduction that ends in a crash — recession.

If the Federal Reserve System follows policies allowing the COVID aftermath boom to continue, at some point, capitalists will perceive gold as being in short supply. They’ll move to protect the value of their money capital by converting their currency into gold bullion as they did during the 1970s. Then (in the 1970s), profits calculated in gold terms — profit must be positive in gold terms — turned negative.

The result: a fall in the quantity of gold a given unit of currency represents. Each unit of currency represents less and less real money or gold, and commodity prices, in terms of currency units, rise. I call this currency-depreciation-driven inflation. Currency-depreciation inflation occurs not because demand exceeds supply but because currency units such as dollars represent less and less real money. Currency-depreciation inflation is, therefore different from the inflation caused by a shortage of commodities relative to monetary effective demand as we see during an aftermath boom.

More than during cyclical booms, during aftermath booms, production rises quickly. While at the beginning of aftermath booms, commodities are in short supply relative to demand, during aftermath booms the quantity of commodities increases at a faster rate than the growth in the quantity of money, allows effective monetary demand to expand. As golden prices rise above the value of commodities, gold production declines. If central banks attempt to keep the boom going by creating more currency, currency-depreciation inflation sets in. Profits calculated in terms of gold — golden profits — become golden losses.

Once serious currency-depreciation inflation takes hold, whether the initial inflation was caused by an aftermath boom or had some other cause, the economy enters an unstable state called stagflation. Unstable because golden profits are negative. This situation cannot be maintained for long. During stagflation, there is little economic growth as the cost of living rapidly wipes out the purchasing power the governments and central banks attempt to create, while interest rates rise rapidly. Assuming capitalism continues, stagflation can only end in deep recession and massive unemployment. The only way to avoid this is a socialist revolution. (6)

We last saw these economic laws play out during the 1960s, 1970s and early 1980s. In the 1960s a combination of a normal cyclical boom was then amplified by a regressive tax cut in 1964, followed by a surge in government war spending associated with the Vietnam war. (7) This was all financed by the Fed’s expansionary monetary policies leading to inflation. This was not currency-depreciation inflation. Rather it was caused by the demand for commodities growing faster than the supply.

This inflation was not yet the stagflation of the 1970s. The Vietnam war inflation of the late 1960s saw prices rise by 2% to 4% a year, which was mild compared to the current inflation. These price increases, in terms of dollars as well as gold — the dollar price of gold was still fixed at $35 an ounce — on top of earlier inflation episodes starting with World War II, the post-war aftermath boom of 1946-48, the Korean war inflation in 1950-51, raised the cost price of mining and refining gold enough to halt the rise in global gold production that began with the super-crisis of 1929-33. U.S. policymakers of the time, under the influence of Keynesian economics, believed if they detached the dollar from gold, the dollar itself would become the measure of the value of commodities and profits. The hope was capitalist prosperity would continue indefinitely, and the business cycle would be licked.

The policymakers’ mistakes of the 1960s and 1970s could not change the objective economic laws governing capitalism. These laws dictate that if the multiplier and accelerator cause the market golden prices of inflation to rise above the value of commodities, inflation leads to currency-depreciation inflation. At that point, if stagflation followed by hyperinflation and complete currency and economic collapse is to be avoided, the central bank must allow interest rates to rise until the boom ends in recession.

The mistake the policymakers made was their belief that by breaking the legal link between gold and the dollar they would establish the dollar as non-commodity money. (8) But as any student of Marx should realize, non-commodity money can neither be the measure of value nor profit. The attempt to establish the U.S. dollar as non-commodity money in place of gold was doomed from the start. Once inflation turns into currency-depreciation inflation, the longer inflation goes on, the more capitalists’ confidence in the currency is shaken. The more confidence in the currency is shaken, the more the central bank must allow interest rates to rise before confidence is restored and the currency-depreciation inflation can be halted.

This is why the wave of currency-depreciation inflation occurring during the 1970s was stopped in the early 1980s only when the Federal Reserve System head Paul Volcker allowed interest rates to rise into the double digits. Before Volcker, the Fed caused the growth rate of the number of dollars to increase in an attempt to hold down interest rates.

When the Volcker Fed allowed double-digit interest rates, dollar depreciation was halted, and inflation faded. But the high-interest rates caused a deep recession, sending even the official unemployment rate, a great underestimation of real unemployment, to rise into the double digits as well. Even worse, from the viewpoint of the U.S. working class, the resulting recession was only the beginning of a process of permanent deindustrialization of much of the U.S. economy. (9) A similar rise in interest rates would have an even more devastating effect today due to the level of corporate debt being much higher than it was in the early 1980s.

How should labor unions react?

Though severe recession with sharply rising unemployment is threatening, it is not yet here. Thanks to the COVID aftermath boom, the demand for the commodity labor-power is stronger than it’s been for many decades. Workers have taken advantage of this, and they should. We must ignore the advice of professional economists to limit wage demands in hopes it will stop inflation without a recession. This didn’t work in the 1970s (or in 1865), and it won’t work today. Nor should we put hope in government price controls to stop inflation. Even if controls are imposed, they will not defend the purchasing power of our paychecks. If we do not take advantage of the favorable conditions prevailing in today’s labor market, the bosses will crush us and our unions when the labor market turns, as it will, in their direction. This is the lesson of the 1970s. No capitalist fails to take advantage of a favorable turn in the market for commodities they sell. Neither should we, sellers of the commodity labor power, do so.

The third factor affecting the evolution of the current world economic situation is the global economic and financial war launched against Russia by the U.S.-NATO world empire. This war has both economic (commodity) and financial (monetary) aspects. The economic aspect involves orders by Washington to the West European, especially German, satellites to stop purchasing Russian oil, natural gas, fertilizer, grain, metals and other primary commodities from Russia. And the Russo-Ukrainian war threatens to disrupt the Ukrainian production of grain and natural gas.

West Europeans say they can’t just stop buying Russian natural gas. But Washington wants to force them to shift to buying expensive liquefied natural gas from U.S. companies. [See “Global Economic and Financial War Erupts”] This puts German and other European capitalists at a competitive disadvantage by increasing their individual cost prices. German capitalists, in particular are unhappy about Washington’s demands.

The April 13 edition of The New York Times quoted the CEO of German chemicals giant BASF, Martin Brudermüller: “Cheap Russian energy has been the basis of our industry’s competitiveness.” The Times continues: “It has, in fact, been the basis of the German economy. Now that German businesses are facing the possibility of being asked to do without it, resistance is quietly mounting. Government ministers say they are being asked discreetly by business leaders when things will ‘go back to normal’ — that is when they can return to business as usual.”

The Times report says: “Chancellor Olaf Scholz surprised the world, and his own country, when he responded to Russia’s invasion of Ukraine with a 100 billion euro ($108 billion) plan to arm Germany, send weapons and end his nation’s deep dependence on Russian energy.” So far, so good. The Times adds: “That won applause … at home and abroad.”

But then, The Times complains: “Six weeks later, the applause has ceased. Even as images of atrocities emerge from Ukraine … Scholz has ruled out an immediate oil and gas embargo, saying it would be too costly.” Since then on May 2, German Foreign Minister Annalena Baerbock said that Berlin was ready to support an EU-wide embargo on Russian oil imports.

The German capitalist class is aware that the current economic war against Russia is also an economic war against Germany. However, resisting U.S. demands will require German imperialism to find a way of cutting the NATO (10) chains that have kept it subordinate to U.S. imperialism since the U.S. invaded and occupied (western) Germany in 1945. That seems unlikely.

Since both Russia and Ukraine are major wheat producers, a drop in grain supplies — caused by the embargoes, war, and possible harvest failures from fertilizer shortages — is threatening. This will raise food prices with future raises probable, if the 2022 grain harvest is reduced due to a fertilizer shortage. We could then have a combination of agricultural and energy underproduction, combined with overproduction in other branches of industry. This could lead to an extraordinarily nasty global economic crisis over the next few years.

Another problem is a shortage of pig iron, also known as crude iron. Pig iron is the intermediate product between iron ore, oxidized iron, and steel. By the time of Leonid Brezhnev, the USSR had emerged as the world’s largest steel producer. (11) Today what is left of the U.S. steel industry depends on the remains of the once-mighty Soviet steel industry in the form of pig iron produced in Russia and the Ukraine. Much of Ukrainian iron production is now offline due to the war. Russian iron production is embargoed, thus U.S. steel manufacturers are suffering from a shortage of pig iron. Capitalists will try to build inventories of these suddenly scarce commodities, driving prices higher, just as the Fed allows interest rates to rise to end the general overproduction associated with the COVID aftermath boom.

Higher food prices mean people will have less money to buy other commodities and the poor in the Global South may face starvation. Pig iron shortages drive up steel prices. This raises the price of automobiles and other steel-containing products. People are already feeling the effect at the pump and in the grocery store. The situation threatens to get worse. The Biden administration has attempted to lower oil and gasoline prices by selling oil from its strategic reserve and ordering its European satellites to do the same. This can only go on so long without wiping out the reserve, as Biden is releasing 180 million barrels of oil in six months, about a third of the total reserve, which will take years to restore.

The financial war

In addition to the economic war, there is the financial war. The most important move in the financial war has been freezing the Russian central bank’s dollar and euro reserves held in the Western banking system. The Russian government managed over the last few years to shift about 20% of its reserves into gold bullion held in Russia. Though Washington moved to ban the use of these gold reserves, the measure has little chance of success. As the Roman Emperor Vespasian who ruled ancient Rome between 69 CE and 79 CE is reputed to have remarked: Pecunia non olet (money does not stink), that is, money is not tainted by its origins.

Japan and China have the largest dollar and euro reserves. Japan has been occupied and controlled by the United States since 1945 so it has no choice in the matter. But China is a different story. With the U.S. threatening war over Taiwan and elsewhere, the Chinese government and the Peoples Bank of China (the Chinese central bank) must be asking, won’t the United States and its European satellites freeze and maybe even steal China’s reserves estimated to total $3,222.4 billion as of November 2021? China’s leaders must be thinking they should convert much of their foreign exchange reserves into gold bullion while there is still time. (12) Other countries that fear they too are headed toward conflict with Washington have good reason to do likewise. Indeed some already have.

To the extent foreign central banks shift their reserves out of dollars into gold, private capitalists expecting the dollar to lose value against gold will do likewise, magnifying the effect. To prevent a fall in the dollar that could kick off currency-depreciation that would likely prove fatal to the dollar system, the Fed has an additional reason to allow interest rates to rise along with the chance of recession. A recession with its mass unemployment would force the United States to reduce imports and increase exports which would once again increase the (gold ) value of the dollar.

If the shift away from the dollar into gold becomes permanent, the long-term ability of the U.S. to run trade deficits will be permanently reduced. If this happens, the dollar comes under pressure to lower trade deficits forcing the Fed to allow interest rates to rise sooner than if the dollar retains its status as the world’s chief reserve currency. This means smaller U.S. trade deficits or even trade surpluses as the internal market contracts relative to the national markets of other countries. As the United States exports more wealth abroad while imports of wealth drop, the standard of living declines.

Even if the Russo-Ukraine war is settled and Washington unfreezes the Bank of Russia’s dollar and euro reserves, the damage has already been done. China and other nations will ask: What will prevent the U.S. from freezing our reserves in a future crisis? This is why the Biden administration and its successor will be under powerful pressure to bring the war against Russia to a victorious — for the U.S.-NATO empire — conclusion. If the United States wins the economic and commercial war, the dollar system and U.S.-NATO will be strengthened for years to come. But if the U.S.-NATO loses, the dollar system and the U.S.-NATO empire could unravel.

The economic and financial war is in its early stages. The Russian ruble initially fell sharply against the dollar, to the delight of Washington. Then to its chagrin, the ruble rallied. The fact that Russia was able to convert almost a quarter of its reserves into gold over the last few years plus the current high price of oil and natural gas has strengthened Russia’s ability to resist U.S.-NATO aggression for now. But when the current boom gives way to a global recession, oil, natural gas and other primary commodities prices will be expected to fall. Then the ruble will come under massive pressure.

When this happens it will become harder for the Putin regime to keep control. If Putin does fall, Russia could go to the right — meaning a transformation into a U.S.-NATO colony like Ukraine under Euromaidan. Or Russia could fall to the left. If to the right, the Peoples Republic of China would be next because U.S. control of Russia’s vast natural resources would deny them to Chinese industry. But if Putin falls to the left, it could lead to the rebirth of the Russian proletarian revolution, and some form of the USSR. The stakes couldn’t be higher. (13)

There is more to write about but I am running out of space and time for this month. One thing is certain. Understanding the laws that govern world trade, not neoclassical fantasies, is crucial to understanding the current global political crisis which threatens to escalate to a world shooting war. It also has the potential to ignite dormant Russian and world proletarian revolutions. If we are to understand what is happening we have to understand the economic laws governing world trade. This takes us to Anwar Shaikh’s critique of the neoclassical theory of world trade.

World trade

Anwar Shaikh was born in 1945 in what was then northwestern British India. British India was soon to win its independence, not as one nation, but as two. One of these was Pakistan where Shaikh was born. The other was India. Bangladesh, originally part of Pakistan, won its independence in 1971. All three suffer from what is called underdevelopment. As a university student, Shaikh shifted from engineering to economics to explore what was causing the underdevelopment of Pakistan and other nations of the Global South where the overwhelming majority of humanity lives. Underdevelopment is closely linked to international trade.

The theory of international trade that Shaikh learned from neoclassical economist Gary Becker and his other professors did not satisfy Shaikh. What Shaikh learned from these teachers about international trade is called comparative advantage theory.

This theory was first advanced by David Ricardo. Unlike his theory of labor value, comparative advantage theory migrated from Ricardian classical bourgeois political economy to neoclassical economics. What does the theory have to say about international trade? I have dealt with this subject before but I will review the question here because it is central to Shaikh’s work.

Comparative advantage

Let’s assume you were the manager of a factory with a thousand workers. You must employ all 1,000 workers in a way to maximize the productivity of their labor and the total output of the factory. There are different tasks to perform requiring different skills, physical strengths, and manual dexterity. The individual workers differ in terms of the skills they possess. A few workers can perform all tasks at an above-average level. A few workers are below average in every task.

Most workers are above average in at least one task and below average in others. If you employ only workers of average skill or above, you will leave workers who are below average in all tasks unemployed. But you’re not allowed to do that.

To maximize productivity and output while employing all workers you must assign every worker to a job they perform better than they can perform any other job. This is true even if the job they perform best at is still below the productivity of the average worker. The individual workers who are below average in all tasks, but closer to average in one task, are said to have a comparative advantage in the task they are least bad at. Let’s assume our factory is the entire world economy, and our individual workers are capitalist nations engaged in international trade. The manager of our factory is the world market.

Under capitalism, Shaikh explains, nations don’t trade with one another. It is individual profit-seeking firms that trade with one another. We know that on the national market the capitalist with the lowest cost price can undersell their rivals. Assume all industrial capitalists pay the same wage to their workers. Then the capitalists who can produce commodities with the least quantity of labor — both dead or constant capital, and living or variable capital — will enjoy the lowest cost price. If on the other hand the capitalists produce commodities with the same quantity of labor both living and dead but pay different wages, it will be the capitalist who pays the lowest wages that will win the battle of competition.

On average we know that the capitalists have to pay for all the labor represented by the dead labor, that is, constant capital. We also know from Marx’s surplus value theory that capitalists pay for only a part of the labor performed by the workers. On average all dead labor is fully paid; only a fraction of living labor is paid.

The capitalists winning in competition use the least amount of paid labor, not necessarily those using the least amount of total labor to produce a commodity of a given use value and a given quality. While it’s a reasonable approximation to assume all capitalists are forced by competition in the national labor market to pay more or less the same wages for a given type of labor power, this is not true internationally. Capitalists in the Global South can often compete successfully with those in the Global North by paying their workers lower wages. The lower productivity of labor in the Global South does not reflect a lower level of skill, but that a lower degree of mechanization or automation is applied.

The problem with comparative advantage

Regarding the national market, the law of absolute advantage rules competition. But in the international market, according to Ricardo and his neoclassical successors, comparative advantage rules. Why one economic law for the national market and another for the international market? The law of comparative advantage is attractive to neoclassical economics because it can be used to demonstrate that both developed nations of the Global North and the underdeveloped nations of the Global South have an equal interest in free international trade. Neoclassical economists use the theory of comparative advantage to advise governments of both the Global North and Global South to follow free trade policies. From this viewpoint, a government’s economic policy in both domestic and international spheres should strive to get as close as possible to the ideal of perfect competition.

Free trade means no tariffs, no export subsidies, and no restrictions on the purchase or selling of foreign currencies and gold or any other restrictions on the flow of money out of or into the country. This is seen as the extension of the economic policies they urge domestically. Governments should keep their hands off domestic trade as well. This free trade on the international level, according to neoclassical economists, is also necessary domestically to achieve maximum consumer satisfaction as minimal or ideally no business regulation, no trade unions, no minimum wage, and no child labor laws.

Full employment of capital versus full employment of labor

Where neoclassical economics has “advanced” beyond Ricardo — besides getting rid of his theory of labor value — is in its mathematical concept of perfect competition and full employment. Ricardo himself assumed all the capital within each capitalist nation and throughout the world is fully utilized. He assumed that only by fully utilizing the capital available to them could the capitalists maximize their profits. But unlike his successors, Ricardo never claimed the working class would be fully employed.

Ricardo was a supporter of Malthus’s theory of population. He assumed that if wages rose above the value of labor, family formation would rise, accelerating the population growth rate to the point where it would exceed the capital growth rate. The result would be that the number of workers would exceed the demand for labor even though capital itself was fully employed, and a growing section of the working class would be unemployed.

Eventually, the growing number of unemployed workers drives the price of labor — wages — below the value of labor. When this happens, family formation slows and the population growth rate drops below the capital growth rate. As a result, the growth rate of the number of potential workers drops below the capital’s rate of growth. The growing shortage of labor causes wages to rise above the value of labor. The cycle then repeats. Through these cycles, the value of the commodity labor in a given country regulates the level of wages in the long run like value regulates the price of all other commodities. Ricardo did not believe full employment of labor could be achieved. In contrast, neoclassical economists insist that by assuming perfect competition, not only capital but labor as well will be fully employed. When they refer to full employment, they mean full employment of (constant) capital and labor.


The conclusions of Ricardo and his successors on the desirability of free trade are the opposite of the conclusions drawn by the early mercantilist economists, who dominated political economy before Adam Smith. Mercantilists advocated protective tariffs, subsidies for industries engage in foreign trade, and restrictions on the movement of money out of the nation, which today are called capital controls. The aim of these early economists was to achieve the greatest possible growth in the quantity of gold and silver — money — in the country. Mercantilists believed this maximized the wealth of the nation.

They believed the consequent expansion of the domestic money supply would stimulate business by increasing demand for commodities within the nation. The quickening of the state of business, the mercantilists held, would increase profits upon alienation — commodities being sold above their value — of the capitalists. The consequent maximization of the capitalist’s profits would in turn stimulate the national production of wealth.

Mercantilism acknowledges the relations among trading capitalist nations are one of antagonism. Not all capitalist nations can run balance-of-trade and payments surpluses at the same time. World trade causes some nations to be enriched while other nations are impoverished. The aim of political economy was to develop economic policies for the government of their own nation that would see to it their own country would be enriched by world trade.

Today, in May 2022, the world is gripped by a global economic and financial war. Believers in comparative advantage say global economic and financial wars are the result of evil governments and individuals, as well as false policies. From the viewpoint of the mercantilists of old, the current global and financial war is the expected result of operations of the laws of economics as they understood them.

There is a danger the current global economic and financial war will turn into a global military war. This would seem perfectly normal to the old mercantilists. Economic and financial wars were the rule in their days — the 16th through the 18th centuries — and they not infrequently led to military wars. To paraphrase Carl von Clausewitz, war was the continuation of commerce by other means.

The mercantilist era climaxed in the Seven Years’ War (1756-1763) fought across the globe by Britain and France. This was in reality the first world war. One crucial difference between the days of mercantilism and today is that productive forces in the old days were at a vastly lower level of development than they are today. The means of destruction were similarly less developed. The danger that a worldwide military war would lead to the destruction of our civilization, which haunts us so much today, did not exist in the days of the mercantilist economists.

Today’s neoclassical economists live in an age when military warfare could lead to the destruction of civilization. Even before the development of nuclear weapons, the neoclassical school was eager to prove the interests of individuals, classes, and nations engaged in perfect competition were identical. Neoclassical economists contend that economic conflicts among nations that lead to commercial wars are the result of incorrect neo-mercantilist policies pursued by various governments. If all nations’ leaders understood neoclassical economics and adopt free trade policies, there would no commercial wars. In neoclassical economics, protectionist, mercantilist or neo-mercantilist are dirty words.

Developmental economics

There is a branch of modern economics called developmental economics. This is of great concern to Anwar Shaikh. Should an underdeveloped country follow a protectionist, or neo-mercantilist, policy of import substitution, protective tariffs, subsidized promising industries and maintaining capital controls to keep money within the country? Or should it follow neoliberal free trade policies?

Neo-mercantilist advocates for policies for developing countries, including Shaikh, hold that if they follow free trade, nations of the Global South will either remain underdeveloped or be able to develop only by paying their workers very low wages.

All nations have an absolute advantage in some branches of production

In reality, all nations enjoy an absolute advantage in some sectors of production. For example, a tropical climate allows a nation to grow bananas, sugar cane, coconuts, cotton, and mangoes. Or a nation might be rich in oil or natural gas deposits, deposits of copper, gold, silver and other precious metals, nickel, iron, or rare earths. Underdeveloped nations under conditions of free trade, assuming the law of absolute as opposed to comparative advantage prevails on the world market, will be locked into agricultural or extractive industries.

Adam Smith, though he advocated free trade rather than mercantilist policy, assumed the law of absolute advantage applied to both national and international competition. The capitalist, assuming equal wages, producing with the least amount of labor, prevails in competition. Assuming absolute advantage, free trade works well for nations with highly developed capitalist economies. When Smith wrote “The Wealth of Nations,” Britain was pioneering the use of steam power. The law of absolute advantage guaranteed Britain’s domination of manufacturing. By Smith’s time mercantilist policies no longer made sense for Britain.

But was the rest of the world supposed to specialize in agricultural and extractive industries forever? Wouldn’t other countries be tempted to follow mercantilist policies until they were able to stand up to Britain in world competition and even exceed it? If they did, wouldn’t such policies pose a threat to Britain’s industrial monopoly?

Ricardo believed that Britain should sacrifice its agriculture to advance its industry. If it purchased the cheapest food on the world market, it could lower money wages through the cheapening, in Marxist terminology, of the value of labor power, Ricardo’s lowering of the value of labor. Assuming real wages and the working day remained unchanged, the rate of surplus value and the profit rate would increase, accelerating the development of Britain’s industrial capitalism. British industrial capitalists agreed with Ricardo’s view, though not the agricultural capitalists or landowners.

Ricardo and his free-trade supporters were willing to sacrifice the interests of landowners and capitalist farmers in the name of maximizing industrial production. But this left Britain vulnerable to blockade. The country needed to develop its naval power. As long as Britannia ruled the seas there would be no blockade. In 1846, free-trade policies won a victory with the repeal of the corn laws protecting British agriculture.

But Ricardian theory went beyond advocating for free trade for industrial Britain. It claimed all nations should adopt free-trade policies regardless of their level of economic development. The claim that free trade policies made sense for Britain did not need the theory of comparative advantage. It was also true from the viewpoint of absolute advantage. If the absolute advantage in international trade is correct, free trade favors already industrialized countries over developed countries. For example, the 19th century’s leading U.S. economist, Henry Carey (1793-1879), was a strong protectionist.

If we follow Ricardo’s logic, Britain made a mistake following mercantilist policies in the past. But in the mid-19th century, British economic liberals armed with Ricardo’s work corrected earlier mistakes. If absolute advantage theory is correct, Britain faced the prospect of other countries following its own strategy and its industrial monopoly could be broken. This is what happened. The comparative advantage was very convenient for those determined to defend the monopoly. The same is true today of imperialist core countries seeking to defend their own industrial monopolies from the Global South’s industrialization.

Ricardian comparative advantage versus mercantilism

The mercantilists, predominating in Britain before monopoly, claimed the state should maximize the quantity of money — gold and silver. Since the government couldn’t increase gold and silver-bearing land, the only way to do so was to increase the inflow of money from abroad.

The way to do this was to follow policies for the highest positive trade balance. The weapons: protective tariffs to help emerging industries dominate the home market as they expanded the world market. Mercantilism encouraged passing laws making it difficult to take money out of the country. These laws are now called capital controls. Mercantilism says commercial wars should be vigorously fought and won. Since the world was increasingly dividing into nation-states, the job of political economists was to help their own nation state win the battle for world market dominance. If this leads to shooting wars over access to markets, so be it.

World trade theories based on Ricardian comparative advantage see world trade differently. It believes in the quantity theory of money. Since a nation’s capital fully employs an increase in money quantity caused by a positive trade balance, this leads to higher nominal prices and wages. In money terms, a nation’s wealth increases but not in real or use-value terms. Moreover, higher domestic prices, including the price of labor, make the nation less competitive in foreign trade, and the positive trade balance can’t last.

If there is a negative trade balance and money flows out of the nation, prices including that of labor, fall. Money wealth falls, but capital remains fully employed, so the nation’s real wealth is unaffected. The quantity of money affects the country’s nominal wealth, not its real wealth. Money is neutral. Moreover, a negative trade balance doesn’t persist because the fall in prices caused by the contraction of the money supply increases the nation’s competitiveness in the world market. This makes the negative trade balance disappear. Ricardo believed this to be the mechanism that enforced comparative advantage, not absolute advantage, in international trade.

Comparative advantage and the modern quantity theory of money

Ricardo assumed fixed currency exchange rates against gold and other currencies. The price of gold in terms of a given currency is the exchange rate of a national currency against world money — gold. Today, supporters of the quantity theory of money no longer claim fluctuations in money do not affect the real economy. The modern money quantity theory admits that short-term fluctuations in money supply have strong effects on production and employment levels. Modern economists blame the 1930s Great Depression on the contraction of the world money supply from 1929 to 1933.

Supporters of modern money quantity theory hold that fluctuations in the money supply affect output in the short run. However these insist that in the long run, fluctuations affect only nominal wealth not real wealth. Therefore if modern neoclassical theory holds, when the money supply growth rate is stabilized, both capital and labor remain fully employed, barring an economic shock like the 2020 COVID lock-downs.

Neoclassical economists like Milton Friedman favor a policy of flexible exchange rates. They see no need for any form of world money whether gold or international reserve currencies like the U.S. dollar. All that is necessary for world trade to proceed according to the laws of comparative advantage is for national currencies to remain freely convertible into other national currencies at free-market rates. Neither central banks nor national governments should concern themselves with exchange rates. If a nation has a trade deficit, the exchange rate of its currency against other currencies falls. This makes imports more expensive in domestic currency while their export prices fall in terms of foreign currency. This results in falling imports and rising exports. This continues until the trade deficit disappears.

If a country runs a trade surplus, its currency exchange rate against other currencies rises. Imports become cheaper in domestic currency while exports to foreign countries rise. Imports rise and exports fall. This continues until the trade surplus disappears. The beauty of this system, according to neoclassical economists, is that fluctuations around the long-term growth rate of the domestic money supply — inevitable with fixed exchange rates — can they claim be avoided with free-floating exchange rates. Since neoclassical economists believe that short-term fluctuations in the growth rate of the quantity of money are, according to neoclassical economists, the major source of fluctuations in real output, a clean float makes it possible to avoid fluctuations in the level of business. No more recessions with their cyclical mass unemployment!

If these policies are followed, it is claimed that international trade will be balanced, countries will not fall into debt to one another, and barring some outside shock like war, famine, or pandemic, international economic crises will be avoided. Milton Friedman’s followers, on the right wing of bourgeois economics, as well as economists on the extreme left wing of modern bourgeois economics – supporters of Modern Monetary Theory – support a free currency float.

The harmonization of interests of the trade nations implied by the Ricardian theory of comparative advantage and its perfected modern neoclassical form makes it appealing to neoclassical economics. The trinity of Says Law, the Quantity Theory of Money, and Comparative Advantage in international trade lying at the core of modern neoclassical economic theory is already found in Ricardo. Today this trinity forms the heart of economic liberalism or neoliberalism.

In countries of the Global South, nationalists reflecting the national bourgeoisie’s interests, as well as the left, advocate import substitution protective tariffs, government subsidies to key industries and capital controls. Virtually all professional economists in the world are taught neoclassical economics in universities. As we saw above, the law of comparative advantage is central to the neoclassical theory of international trade. According to neoclassical theory, the only way maximum consumer satisfaction can be achieved on both a national and a global scale is for perfect competition to prevail both within national markets and on the world market. All forms of protectionism and mercantilism, whether practiced by the Global North or the Global South, by preventing perfect competition and comparative advantage from freely operating, are harmful to the consumer wherever they live.

Why are mercantilist policies needed by the Global South if comparative advantage governs international trade? Left economists say comparative advantage doesn’t work because of the growth of monopoly in the Global North. If perfect competition prevails, mercantilist policies would be unnecessary and harmful. But the growth of monopoly means not perfect but imperfect competition prevails.

Anwar Shaikh rejects these arguments. He believes absolute advantage governs international trade like it governs trade within a nation. Moreover in “Capitalism” Shaikh shows empirical studies indicate no evidence comparative advantage prevails in international trade either in the short run or the long run.

Shaikh writes, “Standard theory says that terms of trade will move to automatically balance trade. … Empirical evidence on persistent trade imbalances clearly favors the classical theory.” [Meaning the theory that absolute, not comparative advantage, rules international trade —SW] (p.523)

If comparative advantage does not work in practice, it seems the problem lies with the claim that the law of comparative advantage rules international competition while absolute advantage governs domestic competition. Ricardo used the quantity theory of money to prove comparative advantage rules world trade. If he was wrong, his mistake lies in his faulty theory of money. To continue our examination of Shaikh’s treatment of world trade, we first need to examine Shaikh’s own theory of money. Then I will return to Shaikh’s important work on international trade.

Shaikh considers John Maynard Keynes, Adam Smith, David Ricardo, and Karl Marx to be the four greatest economists of all time. We should look at what Keynes wrote on mercantilism and international trade and examine Karl Marx’s views on free trade versus protectionism. This will be the subject of next month’s post.

(1) The Euromaidan government is often described as a nationalist government. In many ways, it is the exact opposite. The regime in Kiev is eager to sell Ukrainian farmland and other economic resources to U.S. and West European corporations and wealthy individuals. For example, in 2019 the Euromaidan regime “removed a ban on the sale of farmland for the first time in nearly two decades, a move supported by the country’s foreign backers that risks a political backlash,” the Financial Post reported at the time. This is not what a genuine nationalist government would do. The Azov brigade, part of the Euromaidan regime, is notorious for using Nazi symbols, including the swastika. Yet German Nazis considered Ukrainians, a Slavic people, fit only to perform low-wage labor for their German masters. Euromaidan is nationalist only in the sense it encourages hatred of other nations, especially Russians. The roots of the Ukrainian nationalist movement are not in any genuine national liberation movement but are in the bitter opposition of Ukrainian capitalists to the Russian Revolution in both its democratic and its socialist aspects. (back)

(2) Central banks can only set interest rates they themselves charge. As far as the U.S. Federal Reserve System is concerned this includes the rate at which it (re)-discounts commercial paper, unsecured short-term business loans, and the interest rates it pays on deposits commercial banks and the Treasury maintain with the 12 banks making up the system. The Federal Reserve System manipulates within certain limits but does not set other interest rates. It manipulates rates by expanding or contracting the number of dollars it creates. If it wants market interest rates to fall, it expands the number of dollars. When it wants market interest rates to rise, it reduces or slows the creation of dollars.

If the central bank attempts to set interest rates lower than the market wants, money flows out of the currency either into other stronger currencies or into gold. This unleashes a process of what I call currency-depreciation-driven inflation that drives interest rates higher. When the prices in currency terms rise, more currency is needed to circulate that currency. If the extra currency is not forthcoming interest rates rise.

If the central bank attempts to fight an interest rate rise by creating more currency, the result is accelerated depreciation of the currency against both gold and undepreciated or less depreciated currency if it exists. The depreciation continues. This results first in runaway inflation, then hyperinflation, and ends in the collapse of the currency. Central banks have learned that economic booms require them to allow interest rates to rise to safeguard currency values. The central banks are unable to prevent interest rates from rising during booms. At a certain point, rising interest rates end in recession. (back)

(3) Marx pointed out that if common sense was sufficient to understand both natural and social phenomena there would be no need for science. (back)

(4) Progressives can be defined as well-meaning people who oppose the consequences of capitalism but are unwilling to draw the necessary political conclusions. These conclusions are that capitalism must be transformed into socialism (the first or lower phase of communist society) through the institution of Marx’s dictatorship of the proletariat. This dictatorship is nothing but the working class organized as the ruling class. Because progressives are well-meaning but unwilling to draw necessary conclusions, progressive economics is an enormous muddle. (back)

(5) If modern money was really non-commodity money there would be no way for the general price level to rise above or fall below the value of commodities. The concept of prices standing above or below a commodity’s value, which they must be able to if capitalism is to achieve the correct proportions of the different branches of production, requires that commodities exchange for a counter value. This can only be some quantity of another commodity with its own separate value, independent of the value of the commodity it measures in terms of its use value.

If a particular commodity sells at a price above its value, the quantity of money that it exchanges for has greater value than the commodity being sold. If the commodity sells at a price below its value, the commodity exchanges for a sum of money with less value than the value of the money commodity. If a commodity sells at its value, that quantity of money it exchanges for has the same value as the money commodity. Under capitalism or any system of commodity production, non-commodity money is a logical impossibility. (back)

(6) Before Paul Volcker became chairman of the Federal Reserve Board in July 1979 under Jimmy Carter, the Fed’s policies were to target short-term interest rates. Volcker stopped targeting interest rates and froze the rate of increase of the dollars it was creating. Volcker’s refusal to accelerate the rate of growth of the quantity of dollars the Fed was creating is known as a Volcker Shock.

Interest rates soared, the dollar price of gold plunged, and inflation faded. The price? Double digits in official unemployment figures, the collapse of much of U.S. basic industry, and the birth of the Rust Belt. The number of workers employed in manufacturing has never again come close to the levels of July 1979. In other words, when Paul Volcker got a new job, a lot of industrial workers lost theirs and never got them back. From the viewpoint of the capitalist ruling class, Volcker’s policies were no mistake. His policies succeeded in restoring a positive profit rate in terms of gold. From the viewpoint of U.S. Capitalism, they were absolutely necessary. The only alternative would have been a working-class socialist revolution. (back)

(7) Traditional financial doctrine holds that governments should raise taxes to fight wars. The U.S. government did the opposite by cutting taxes just as it was escalating the war. The inflation of the late 1960s is what should have been expected. (back)

(8) Academic Marxists claim today’s money is non-commodity money. They pretend the attempt to establish the U.S. dollar in place of gold as the ultimate measure of value succeeded when it failed. Their belief that today’s money is non-commodity is central to the view that in booms, recession-breeding interest rates can somehow be prevented by the central banks. This is tied to the view that a set of policies can be developed that end unemployment and the poverty it breeds without abolishing capitalism. (back)

(9) The fundamental causes of deindustrialization are the differences in the value of labor power and the rates of surplus value in the United States and the other imperialist countries and the countries of the Global South. However, the high interest rates that followed the Volcker Shock considerably accelerated the process. The failed attempt to demonetize gold is what made the Volcker Shock necessary for capitalism. (back)

(10) NATO was founded in 1949. In reality, NATO began to form in June 1944, when the United States and Britain invaded Europe. Almost 78 years later, U.S. troops are still in Europe and their numbers are increasing. As was said in 1949 by NATO’s first Secretary-General, British Gen. Hastings “Pug” Ismay, “The purpose of NATO is to keep the Russians out, the Americans in, and the Germans down.” With the German government capitulating to U.S. demands to cut off essential trade with Russia that is so important to Germany, NATO is still working as intended in keeping the Germans down. (back)

(11) The Azovstal steel plant where the last Ukrainian forces in the city of Mariupol are dug in was built during the first and second Soviet five-year plans between 1930-33. This plant was stolen from the Soviet working class as a result of the 1985-91 social and political counterrevolution. It’s been owned and operated by the Dutch company Metinvest Holding LLC, a subsidiary of Metinvest B.V. Nothing more sharply illustrates the difference between the October Revolution on one hand and the political and social counterrevolution of 1985-91 on the other hand.

The working class in power built up a mighty industry, while the capitalist class that returned to power as a result of the counterrevolution is divided into war camps. They ruined the industry built by the multinational Soviet working class and they are continuing this devastation. This indicates not only the destructive nature of the political and social counterrevolution, but also the urgent need for new workers’ revolutions in Russia, Ukraine, and the other former Soviet Republics. (back)

(12) Even if Beijing becomes convinced of the need to move its huge foreign currency reserves into gold, it can’t do this all at once. One reason is the dumping of more than $3 trillion on the gold market would send the dollar price of gold up so rapidly that much of Beijing’s foreign trade reserves would be wiped out when measured in real money – gold bullion. In addition, such a move could send the global economy into a deep depression engulfing China as well. Another reason: If China did this, Washington would freeze China’s dollar and euro reserves as it’s done to Russia. (back)

(13) If Russia can drive the Ukrainian Euromaidan army out of the Donbass, the morale of the Russian people and working class will rise. The people of Donbass will feel they have won a victory. Their victory will be over the neo-Nazi battalions that have killed thousands since 2014. They will also feel that their victory is over the collective West, the U.S.-NATO empire standing behind the Euromaidan reactionaries.

But though Putin might help drive Ukrainian reactionaries out of the Donbass, this will leave Russian capitalists still in charge. The workers of the Donbass and parts of Russia might be inclined to extend their victory to these Russian capitalists. Here Putin will be of no help. But the workers will say, our great grandfathers and grandmothers dealt with the capitalists in their day, why can’t we do the same today?

The fourth Russian revolution – the revolution of 1905 is the first, the second is that of February 1917, and the third is the 1917 October Revolution.. In the event of a Russian victory in the Donbass, a fourth will draw closer But if the collective West and the Euromaidan stooges emerge victorious, the Russian people and workers would sink into despair. Reaction in Russia, and perhaps the world, would be strengthened for years to come.

If the Euromaidan government and U.S.-NATO emerge victorious, their political grip on Ukraine will be deepened. Reaction will reign there for years. The Ukrainian people will put their hopes into whatever crumbs are thrown at them by the U.S.-NATO empire. But if Euromaidan is defeated, the mood of patriotism and chauvinism around the current Ukrainian government will dissipate. Ukrainians will ask, what did we gain from the fratricidal war with the Russians that we fought on behalf of our Euromaidan leaders and their U.S.-NATO masters? If this is the outcome, the current Euromaidan government will have a tough time holding on to power in post-war Ukraine. The chances of a new revolution in Ukraine will rise. (back)