The Current Industrial Cycle (Pt 1)

COVID-19 devastates the U.S.

It has now become clear that the COVID-19 pandemic has hit the U.S. harder than any other large nation — and most smaller ones. The U.S. ruling class and Trump administration have been particularly enraged by China’s ability to largely check the pandemic. China has had far fewer cases, hospitalizations, and deaths despite its far larger population. Though the U.S. has only about 4 percent of the population it has 25 percent of the world’s COVID-19 cases.

Both Trump and the U.S. ruling class as a whole, including Democratic presumptive nominee Joseph Biden, have stepped up their anti-China propaganda — often combined with old-fashioned red-baiting — on numerous fronts. (1) In Trump’s case, the anti-China attacks have an openly racist character. He regularly refers to COVID-19 as the “Chinese flu” or the even more racist “Kung flu.” This is typical Trump.

Less commented on is the record of Vietnam. Vietnam acted early and effectively in controlling the pandemic, first reported in its northern neighbor late last year. According to the website Exemplars of Global Health, “Although Vietnam reported its first case of COVID-19 on January 23, 2020, it reported only a little more than 300 cases and zero deaths over the following four months.”

Exemplars reports that Vietnam’s “early success has been attributed to several key factors, including a well-developed public health system, a strong central government, and a proactive containment strategy based on comprehensive testing, tracing, and quarantining.” Not mentioned is the fact that none of the factors that have enabled Vietnam to deal so successfully with the COVID pandemic would have been possible without Vietnam’s successful struggle half a century ago against the attempt by U.S. imperialism to destroy it in the name of “fighting communist aggression.” The Southeast Asian country is still struggling with the effects of the infamous “Agent Orange” defoliation program and other effects of the brutal “American war,” as it is called in Vietnam.

At first, I thought Vietnam might have largely been spared the ravishes of COVID-19 because it is a largely tropical country. The tropics and the temperate zone are often affected differently by disease-causing pathogens. Perhaps, I thought, tropical climates with their heat and high humidity are not favorable for the COVID-19 virus. I found much speculation about this possibility on the Internet.

However, the emergence of the U.S. state of Florida, and especially the Miami area, as a major COVID-19 hot spot at the very height of the humid and hot Florida summer shows that this is not the case. During the summer, virtually the entire state has a thoroughly tropical climate featuring both high night and daytime temperatures and humidity. Miami, Florida’s largest city, located in the southern part of the state, has a virtually tropical climate — with the exceptions of some brief winter cool spells — the year around. It, therefore, has become clear that it is the different forms of government, and not biology or the climate, that are responsible for the very different course of the pandemic in China and Vietnam compared to the U.S. This remains true even though Vietnam like China now has a largely capitalist economy.

According to The Conversation website, “One country that moved rapidly to deal with the emerging threat was Cuba.” The website attributes Cuba’s success in containing the pandemic “to free universal health care, the world’s highest ratio of doctors to population, and positive health indicators, such as high life expectancy and low infant mortality.” It also points out, “Many of its doctors have volunteered around the world, building up and supporting other countries’ health systems while gaining experience in emergencies.”

What a contrast with the U.S.!

Cuba’s success against the COVID-19 pandemic has been achieved, The Conversation points out, despite “tightened U.S. sanctions” that “have sharply cut earnings from tourism and other services, deterred foreign investment, hampered trade (including medical equipment imports) and obstructed access to international finance — including emergency funds.” These are problems that Vietnam doesn’t currently face though it did for many years after the “American war.” (2) As is the case with China and Vietnam, Cuba’s successes in its battle against COVID-19 would not have been possible without its waging over many years a successful battle against U.S. imperialism.

Latin America’s potentially richest and most powerful country, Brazil, presents the opposite picture. According to the July 17 online edition of CBS News, Brazil has just surpassed 2 million COVID-19 cases and 76 thousand dead. According to CBS, “Experts blame denial of the virus’ deadly potential on President Jair Bolsonaro and lack of national coordination combined with scattershot responses by city and state governments, with some reopening earlier than health experts recommended.”

One thing “the experts” did not blame but really should have is Bolsonaro being a complete stooge of U.S. imperialism. This is the mirror image of what we see in China, Cuba and Vietnam. It seems that for a country to fight the COVID-19 pandemic it must first fight another one, the pandemic of U.S. imperialism.

The ability of not only China, Cuba and Vietnam to contain the virus combined with the better performance — though not as good as those three countries — of South Korea, Japan and Europe raises an interesting question. If the U.S. government is so incompetent that it cannot save the lives of more than 140 thousand and rising of its citizens and residents — many of whose lives would have been saved by a minimally competent capitalist government — why is it that the U.S. government dominates the world militarily, politically and financially? For example, if the U.S. cannot safeguard the lives of its citizens and other residents as well as other capitalist governments have done, why should it be entrusted with running the world monetary system? And why is it precisely the U.S. that regularly lectures other countries on their failings in the areas of human rights and democracy?

The diverging pattern of the pandemic in Europe and the United States

In both Europe and America, the pandemic showed signs of leveling off as the Northern Hemisphere spring replaced the cold, wet weather of winter. Seasonal flu and colds show a similar pattern. But while new cases, hospitalizations, and deaths have continued to decline in Europe as spring gave way to summer, the U.S. shows a different pattern. U.S. COVID-19 cases after falling slightly in the spring climbed sharply as summer set in. As a result, as these lines are being written in mid-July, new cases and hospitalizations in the U.S. are now far above the spring peak and rising.

Fortunately, deaths for a while continued to decline in the U.S. This is due partially to the fact that doctors are learning to treat the disease better. But it also reflects the fact that people don’t die as soon as they develop COVID-19 symptoms. In fatal cases, deaths usually occur a week or more after the initial symptoms appear. But now, as the experts had warned, U.S. COVID-19 deaths are rising once again.

Trump tries to repeal ‘Obamacare’ during the pandemic

Amid the COVID-19 pandemic, the Trump administration announced that it is bringing to the Supreme Court a lawsuit against the constitutionality of the Affordable Care Act, known popularly as “Obamacare.” This suit was first brought by state Republican governors. It aims to have the courts declare Obamacare — including its major if still inadequate expansion of the Medicaid program for the poor and its subsidies for people who can’t afford private insurance — unconstitutional. If the suit is successful, the result will be to kick millions more people off health insurance just as millions are losing their “employer-provided” health care insurance due to massive layoffs associated with the economic collapse that has accompanied the pandemic.

In 2017, as the Republicans moved to repeal Obamacare, they faced a wave of massive opposition. Republican congresspeople were confronted by angry demonstrators when they returned to report to the districts they “represented.” As a result, the Republican bill to repeal Obamacare failed by a slim margin in the U.S. Senate after it barely squeaked through on a second attempt in the Republican House. Then, in 2018, the Republicans lost their House majority to the Democrats in an election that was largely fought on the health care issue.

But the Republicans and the capitalists behind the Republicans have not given up in their attempts to deprive millions of their health insurance. When the Republicans passed their regressive tax cut legislation in December 2017, the bill included a provision that reduced to zero the amount of insurance a person must carry if they are to avoid a punishing fine under the Affordable Care Act. This represented an attempt by the GOP to bankrupt the Obamacare program. Then a group of states under Republican governors sued in the courts to declare the entire Obamacare legislation unconstitutional.

In December 2018, Texas federal Judge Reed O’Connor, appointed by George W. Bush, decided in favor of the Republican lawsuit. O’Connor’s decision allowed the lawsuit against Obamacare to move forward in the higher courts. The reason the judge gave in his decision was that the Republican Congress clearly intended to repeal Obamacare when it passed the tax cut bill that reduced the amount of insurance that a person must carry to zero. The judge ignored the fact that the Republicans had just lost their House majority precisely on the health care issue. So much for the principles of (bourgeois) democracy.

Normally, a sitting administration defends a law in the courts if there is a suit to declare the law unconstitutional. Under the U.S. Constitution, it is the executive branch of the government that enforces the laws whether the people in charge of that branch agree at any given moment with a particular law or not. However, the Trump administration in the case of the Affordable Care Act refused to do so. Now it has actively joined the suit.

Trump’s reelection strategy emerges

Trump from the very beginning minimized the pandemic’s impact on the U.S. At first, he claimed that the “Chinese flu” would bypass the U.S. entirely. When it became clear in March that the U.S. was being hit hard, Trump claimed that it would go away when warm weather returned “in April.” (3) Since then, Trump has repeatedly announced that the pandemic is virtually over. He supported the business-sponsored, far-right demand, backed by armed fascist demonstrations in April, for the immediate lifting of stay-at-home orders and the lifting of all restrictions on business. Until recently, Trump has refused to wear a mask in public.

Trump’s drive to “reopen the economy for business” as rapidly as possible and his attempts to brush the pandemic under the rug have sent his polls numbers plunging. This has happened not least because his support is concentrated among older white voters who have held on to the traditional — for U.S. whites — racist views they absorbed in their youth. These are views that most, though of course not all, younger white people, reject. (4)

However, it so happens that older people, including older white people, are more at risk from the COVID pandemic than younger healthier people with stronger immune systems. As a result — leaving aside the capitalists and small-scale exploiters who have an economic interest in Trump’s reactionary economic program — all but the most fanatically racist “Trumpers” among these older whites are now turning against the president.

Representing the demands of the “business community” but against the advice of most medical professionals, and with Trump acting as cheerleader, the U.S. has “reopened for business” faster than any other country. And the results are now coming in for all to see. Some state and local governments have backtracked on their “re-openings,” but the capitalists are determined to keep them going despite the surging pandemic. The capitalists fear a new plunge in economic activity — and what really matters to them, a new plunge in profits. They also fear a massive credit crisis such as was barely staved off last March or April by the Federal Reserve System. Alternatively, there could be a massive crisis of the U.S. dollar and disastrous return of stagflation in response to the Fed’s attempts to stave off the credit crisis by, in effect, printing money, which itself could end with an even bigger credit crisis — a little later.

In addition to the effects of the COVID pandemic, Trump has also suffered a massive blow since the May 25 police murder of African-American George Floyd. Floyd’s murder led to a wave of demonstrations across the U.S. — and around the world — that have greatly strengthened the Black Lives Matter movement and the broader movement against police violence. In response, Trump has made the cornerstone of his reelection campaign the racist “law and order” successfully used by Richard Nixon and George Wallace in the 1968 elections held after the wave of rebellions that swept African-American urban areas following the assassination of Martin Luther King. However, much has changed since 1968. Polls show that a majority of whites reject Trump’s appeals to racism and are supportive of the Black Lives Matter movement. People of color and above all African-Americans, not surprisingly, reject Trump’s racism by much larger margins.

Instead of moving “toward the center” like other U.S. presidents would be expected to do, Trump has stepped up his racism and red-baiting attacks. He has threatened people who knock down statues of Confederate “heroes” with long prison sentences. Further, Trump has warned that if statues of Robert E. Lee, Jefferson Davis, Stonewall Jackson, and so on are taken down, this will logically lead to the removal of statues of revered U.S. “founding fathers” such as George Washington and Thomas Jefferson who owned many slaves.

The U.S. president has even indicated his opposition to the NASCAR racing car association’s banning of the so-called Confederate flag. Trump has even opposed the Pentagon’s announced policy of removing the names of Confederate “heroes” from U.S. military bases. Trump sneered to Fox News correspondent Chris Wallace, “We’re going to name it [Fort Bragg] after the Reverend Al Sharpton?” Reverend Al Sharpton is a well-known African-American leader. You can’t get much more racist than that. Trump is therefore not only wrapping himself in the stars and stripes, he is also wrapping himself in the stars and bars, the very symbol of slavery itself. (5)

Trump hopes the rapid reopening of the economy that he has been demanding will just as quickly revive his poll numbers. He hopes that as people emerge from “stay-at-home orders” and virtually every business that has not gone bankrupt in the meantime reopens, spending will soar. Since the economy fell to extremely low levels during the brief “lockdowns” of March and April, it would not be surprising — indeed it would be expected — that U.S. GDP will expand at record rates in the third quarter from the extremely depressed levels of the second quarter.

Trump plans to take these coming GDP numbers out of their context and use them to claim that the U.S. economy is performing better than ever and doing so because of his “pro-business” policies. He hopes, despite what the polls are showing now, that the expected third-quarter economic “recovery” will ensure that his racist base will turn out in massive numbers to vote for him. To ensure this, far from playing down his racism Trump is stepping it up. Trump is counting on a massive turnout of white racist voters combined with “voter suppression” (6) to ensure his reelection, if not in the popular vote then at least in the Electoral College. The Electoral College is an undemocratic institution that under present-day conditions, as the 2016 election showed, strongly favors the Republicans over the Democrats.

We should also keep in mind that Trump’s own businesses outside of real estate are concentrated in the hotel and gaming sectors that have been hard hit by the shutdowns and sharp drops in travel caused by the pandemic. The businessman-president, therefore, has a personal economic as well as a political reason to move to quickly “reopen the economy,” even if it means hundreds of thousands more U.S. deaths. If Trump learned anything from his businessman father, Fred Trump, it is that capitalism is above all based on looking out for number one.

It’s not only Trump, it’s also the Democrats

If it was only Trump that was the cause of the U.S. government’s disastrous response to the pandemic, there would be a reason to hope that things will improve considerably after January 20, 2021, when Trump, at least according to present indications, will be leaving office. But in fact, Trump is only the cyanide-laced icing on a very poisonous cake.

Why has the response of the U.S. government to the pandemic been so uniquely poor?

In reality, it is not only, and indeed not mainly, Trump’s response to the pandemic that is behind the U.S. government’s exceptionally poor performance. The lack of a system of universal health care has been an important factor, and here the Republicans are not the only ones to blame. The Democrats have also opposed universal health care as a basic human right rather than a commodity. This year the Democrats had an opportunity to rectify this situation by nominating Senator Bernie Sanders for the presidency. Instead, the Democrats insisted on nominating the anti-health care as a human right Joseph Biden at the very moment when the COVID-19 pandemic was beginning to hit the U.S. with devastating force.

In addition to the joint Democratic-Republican opposition to health care as a human right, the archaic and undemocratic nature of the U.S. political system has played an important role. For example, there is the confusing division of powers between the states and the federal government. Before the War of the Slave Owners’ Rebellion — called the Civil War — the question was still open whether the U.S. would be a loose confederation of independent white-settler nations or a single white-settler nation with a centralized federal government.

In those days, whether a U.S. state had the right to secede from the union was still an open question; the U.S. Constitution itself was silent on the issue. The Southern states insisted on “states’ rights” because they feared that a more centralized political system would sooner or later fall into the hands of the Northern capitalists, who based themselves on wage labor. When this occurred, the slaveholders believed that the continued existence of African chattel slavery would be brought into question.

During the later 19th and early 20th centuries, the U.S. became increasingly centralized when it came to questions about military, police, banking and currency. After the War of the Slave Owners’ Rebellion, there was no longer any question that when it came to repressive functions of the state — the functions that make the state the state — the ultimate power lay in Washington, D.C., and not the state capitals.

However, when it comes to “welfare” questions ranging from unemployment insurance to medical insurance, the U.S. retains its decentralized character. Unemployment insurance and the federal Medicaid insurance program for the poor are managed through the states. The separate states then compete with each other on which state has the most “pro-business” climate when it comes to the lack of labor rights and the skimpiest welfare systems and other safety nets. When Obamacare expanded the Medicaid system for the poor, it included a provision that allowed the states to opt out of it. Many states, generally under Republican leadership, did exactly that.

Here we come to another peculiarity of the U.S. political system. That is the uniquely reactionary politics of the U.S. South. The roots of this reaction are found in slavery and then the 1876 compromise whereby the Democrats recognized the victory of the Republicans in the presidential election of that year but the Republicans in return agreed to withdraw federal troops from the U.S. South, which effectively brought Reconstruction to a halt. Reconstruction thus ended well before the South was thoroughly transformed along (bourgeois) democratic lines and the South’s hideous heritage of modern slavery finally overcome.

The end of Reconstruction  also saved the misnamed U.S. Democratic Party, whose main base was in the South, from well-deserved extinction. It was in the interest of the capitalists class — not a resurgent class of Southern slave owners — who saw wage workers correctly as their main class enemy. The capitalists, largely based in the North, were, therefore, determined to do everything they could to preserve the South as a bastion of reaction. In the 1870s and beyond that meant saving and perpetuating the Democratic Party to prevent the emergence of a new political party of wage earners.

Right to work for less laws

How U.S. capitalists used the uniquely reactionary politics of the South is illustrated by the spread of “right to work” laws that ban the union shop. In 1947 when the anti-union Taft-Hartley Law was passed over President Truman’s veto by a coalition of Republicans and Jim Crow Democrats, it included a provision that the states had the right to pass legislation that bans the union shop. “Right to work” laws have nothing to do with ensuring the right of workers to a job, and the U.S. trade-union movement calls them “right to work for less” laws. Under the union shop, every worker who has passed probation must pay dues to the union.

At first, “right to work” laws were limited to the Jim Crow Democratic Party-ruled South, where Southern reaction continued to refuse to recognize the most basic labor rights, not just for African-American workers but for white workers as well. In the states outside the South, however, the unions, thanks to the powerful industrial union upsurge of the 1930s, were strong enough to block “right to work” legislation.

Over the years as the unions have grown weaker, right to work for less laws have spread to Northern states. Recently, Michigan, home of the United Automobile Workers Union, the flagship union of the Congress of Industrial Organizations — CIO, passed a right to work for less law. The failure of the CIO during it “glory days” of the 1930s and 1940s to confront and defeat Southern reaction — itself the result of the CIO alliance with Roosevelt’s Democratic Party, which included the Jim Crow Democrats — has caused “right to work” laws to spread like a malignant tumor from the South to the rest of the U.S. Today, 27 U.S. states, a majority, have right to work for less laws.

The coming deflationary shock

Progressives have pointed out correctly that the very economic recovery that Trump is counting on so much to win is endangered by the imminent end of the expansion of unemployment insurance and moratorium on evictions. On July 31, unless there is an extension, the newly unemployed will face a $600-a-week cut in their unemployment pay just as they are being hit by an end to a temporary freeze on evictions. When the halt to evictions ends, people will either have to come up with their current and back rent or face homelessness.

Many people, especially the unemployed, will simply not have the money to pay their accrued rent. This will render landlords unable to meet their mortgage payments to the banks. The banks will respond by tightening credit, which is already happening. Therefore, by the U.S. mid-summer, the economy will — unless the expanded unemployment benefits and eviction moratorium are extended — face a major deflationary shock.

Another deflationary shock expected to hit in the second half of 2020 is a wave of layoffs by the state governments. Unlike the federal government, state governments face severe legal restrictions on their ability to borrow. Unless they receive major aid from the federal government, state governments will have little choice but to start laying off many of their employees. The laid-off state workers will have to curtail their spending, which will mean a further reduction of sales.

Wage labor

Bernie Sanders and other Democratic senators supported the “CARES” act, which was mostly a giveaway of trillions of dollars to the capitalists, using the desperately needed expanded unemployment pay as an excuse. However, some right-wing Republican senators like Mitch McConnell and Lindsay Graham have complained that many workers have been getting more income on unemployment than they were when they were working. These esteemed senators are concerned — this seems right out of Marx’s “Capital” — that this is destroying the incentive of workers to work. What the Republican senators are implicitly asking is, would anybody agree to work for somebody else — and produce surplus value for them — when they can have a higher income by not working? This, the GOP senators worry, strikes at the very foundation of the system of wage slavery, which replaces the whip of chattel slavery with the whip of hunger.

One solution to this “problem” would be to raise wages so that even the worst-paid workers would earn the amount they have been getting on the temporarily expanded unemployment pay under the CARES act. However, this solution would mean a drop in the rate of surplus value and therefore the rate of profit. So from the Republican — and the capitalists’ — point of view, the solution of raising wages is worse than the problem it would address. The Democratic defenders of the extra $600 in unemployment pay agree with their Republican colleagues on the main point, since they too support the system of wage slavery. But they point out that the $600 provision will end on July 31 — or not long thereafter if it is extended — and is therefore not a threat to the system of wage slavery.

In reality, many people who have applied for the expanded unemployment payments — or any unemployment payments for that matter — have had great difficulty collecting them. To do so you often have to stand in long lines for hours to apply for benefits that by law you are entitled to. Even if you join the unemployment lines early in the morning, you often will not reach the unemployment office before the working day ends at five o’clock and the office closes. In that case, you have to return the next day and hope you have better luck. If you try to apply on-line, the forms are often so convoluted that it is virtually impossible to figure out what information you are supposed to type into them.

If you call the unemployment office on the telephone to clarify the situation, you need good luck as well. Back in the day, if you called a government office you would speak to an actual person and you might actually get some help. Now if you call a government office, you get to speak to a computer and not a very “intelligent” one at that. All the computer tells you to do is to push a button on your phone, only one of which is the option to speak to a live person “when one is available.” You then get to listen to music — not very good music — which is interrupted every few minutes by a message informing you that you will indeed be able to speak to a live person “when one is available.” Eventually, if you are lucky after many minutes — or hours if you are not and assuming your cell phone battery charge doesn’t run out in the meantime — you finally get to speak to a live person who may or may not offer you meaningful help.

These factors, by the way, reveal why U.S. unemployment claims were the lowest in “50 years” in the period leading up the COVID-19-triggered economic collapse. The capitalist media kept pointing to the low unemployment claims numbers to support its assurances that jobs were extraordinary plentiful and layoffs were at all-time lows. However, the very weak figures of GDP growth and industrial production, by the standards of all previous upswings in the industrial cycle, combined with the anemic growth in employment, showed that what the capitalist media was claiming about “record” low unemployment, at least as it would be defined by any worker, could not possibly be true.

The real reason why unemployment claims were at 50-year lows was that state governments had made it extraordinarily difficult for newly unemployed workers to obtain benefits from the unemployment insurance funds they had paid into. This is exactly what the bosses want.

But all this doesn’t change the reality that things are far worse today than they were before COVID-19, or even during the depths of the Great Recession a decade ago. Even under the expanded unemployment benefits, you are not eligible for the benefits if you quit rather than being laid off by your boss or if you receive an invitation to return to work from your boss. Suppose your boss demands that you return to work even as new COVID-19 cases are rising. You then have a choice of either risking contracting COVID-19 at work and spreading it to your family and loved ones with possibly fatal consequences — not to mention the prospect of medical bankruptcy — or you have to find a way of surviving without any unemployment benefits. This is just the way the capitalists and their political servants in the Republican and Democratic parties like it.

The danger of stagflation and a ‘Greater Depression’

But “deflationary” threats to the economy, serious as they are, are not all that is threatening capitalist prosperity over the coming decade. This brings us to bourgeois economist Nouriel Roubini’s fear of renewed stagflation such as occurred in the 1970s that he thinks will be followed by a “Greater Depression.” By Greater Depression, Roubini means a Depression worse than the Depression of the 1930s that he thinks will arrive during the middle of the current decade. Keeping in mind that possibility, how close are we to renewed stagflation?

As we have seen in earlier posts (see here and here), the central bank can “get away” with creating extra currency not backed by gold without the currency immediately depreciating during a period of recession/crisis or post-crisis stagnation. When the economy is in such a situation, the velocity of circulation is lower than the average. There is still a high demand for currency or central bank money (7), which under “fiat systems” is equivalent to legal-tender currency.

Under the conditions of cyclical stagnation, capitalists seek to increase the portion of their total capital that consists of money — whether hoarded currency or more commonly bank deposits. For the U.S. and world capitalist economy to shift from the current stagnation/depression to stagflation, the velocity of circulation will need to accelerate rapidly. This means that the demand for paper money — central bank money — as a means of payment and hoarding will have to drop sharply.

Under conditions of the current COVID-19 depression, this process would likely produce what would appear initially to be a strong recovery accompanied by rising currency prices, especially as excess productive capacity falls to more normal levels. Indeed, Trump has been counting on such an upturn developing by November, which he hopes will make his reelection possible. However, such an inflationary recovery would develop into stagflation once the velocity of circulation reaches a point beyond which it cannot increase any further, if only because a given piece of money cannot be in more than one pocket at any given time. At that point, inflation would sharply accelerate and there would be little or no further growth.

Trump has been predicting a “V-shaped” recovery as regularly as he has predicted that the COVID pandemic is about to go away. However, from Fed chief Jerome Powell’s point of view, his job is to prop up the capitalists’ “confidence” in the dollar as the U.S. and world currency while avoiding a contraction or an abrupt decline in the rate of growth of Federal Reserve-created dollars that makes the dollar so “scarce” on the world market that interest rates soar and the economy falls back into recession.

In recent weeks, the dollar price of gold has surpassed $1,800 an ounce showing that the threat of a 1970s-style stagflation is real. In response, the Federal Reserve System has destroyed a portion of the massive quantity of dollars it has created since this past March. The Fed aims to prop up the capitalists’ confidence in the U.S. recovery, both in the U.S. and throughout the world, as the hoped-for reopening recovery gets underway without destroying so many dollars that the recovery fails completely.

Therefore, there are two quite different threats to the hoped-for reopening recovery. One is that the resurgent (in the U.S.) COVID pandemic will force renewed shutdowns — or even in their absence keep people away from the shopping malls — causing “monetarily effective demand” to contract once again even if the Federal Reserve System renews its moves to create more dollars. In this scenario, the potential demand represented by the rise in the quantity of U.S. dollars will instead be absorbed by the declining rate of turnover of the dollar, which would also prevent inflation in the short run.

To the extent that the Federal Reserve System continues to destroy some of the dollars that it has created since March, the contraction of the monetary base will be a deflationary force tending to slow or even abort the reopening recovery. The recent surge in new U.S. COVID cases has now greatly increased the chances of either a renewed economic plunge or Depression-level unemployment lingering well into next year.

The longer-term threat is that the huge expansion of Federal Reserve-created dollars will trigger an inflationary surge that turns into stagflation, setting the stage for a new “Volcker shock” to save the U.S. dollar. The threat is that the effects of a new Volcker shock due to the relatively much higher level of debt due to years of post-stagflation “financialization” will be far worse than the effects of the 1979-80 Volcker shock or even the Depression-breeding super-crisis of 1929-33 itself. Hence, the threat of a Greater Depression towards the middle or end of the current decade.

To illustrate what stagflation is I want to review two normal phases of the industrial cycle: the phase of stagnation and the phase of boom. We will then examine how stagflation differs from normal cyclical stagnation that occurs to one degree or another in every industrial cycle.

Stagnation versus boom

During the stage of cyclical stagnation that follows the recession/crisis, much of the industrial plant lies fallow. The extent to which industrial plant lies fallow, that is unable to function as capital, is measured by the amount of excess capacity. The higher the level of excess capacity the more intense the stagnation.

During cyclical stagnation, capital investment is low because of high excess capacity. It makes little sense for the industrial capitalists to expand their capacity when they cannot sell anywhere near the mass of commodities they can produce with their existing capacity at profitable prices. Instead, the industrial capitalists reduce their capacity by permanently shutting down unprofitable factories, a process that begins with the crisis but continues into the stagnation.

During the stagnation, unemployment is higher than average with many workers being wholly or partially unemployed. The balance of forces on the labor market during the stagnation favors the capitalist buyers of labor power versus the sellers of labor power. The rate of surplus value is rising. This promises capitalists a much higher mass and rate of profit soon. This is reflected by the rise in stock market prices that occurs during the stagnation. However, as long as the stagnation phase lasts, profits are restrained by the slow turnover of variable capital due to still sluggish sales. This means that in a given period — for example, a year — a less than normal amount of surplus value is produced.

Capital investment

During the stagnation, money is abundant in the money market and the rate of interest is low. The balance of forces on the money market favors the borrowers as opposed to the lenders of loan money capital. Loan money is abundant — relative to the demand for it — for three reasons.

First, the sluggish level of the circulation and thus the production of commodities means that the quantity of money is large relative to the quantity of (non-money) commodities. Second, the low level of commodity prices works in the same direction because the quantity of commodities consisting of different use values and qualities is measured not in terms of their use values but rather in terms of the use value of the money commodity. Everything else remaining equal, the lower the level of prices the more plentiful money is. Finally, the low level of market prices relatives to values — or prices of production — stimulates the production of new money material.

Under stagnation conditions, the quantity of idle loan money capital increases not only absolutely but relative to non-money commodities and the economy as whole. This enables the central government to borrow great amounts of money without driving up interest rates and “crowding out” the private sector. Keynes is therefore very much in fashion. During cyclical stagnation, a portion of the potential loan money capital is unable to function as money capital just as idle means of production are unable to function as constant capital, and the labor power of unemployed workers is unable to function as variable capital.

Since the total quantity of money is abundant relative to that of commodities, there is far less need for credit than during other phases of the industrial cycle. Therefore, the “credit system” of the preceding boom gives way to the “monetary system” of the stagnation. The stagnation of money means by definition that the velocity of turnover of money is low. Therefore, the existing quantity of money can potentially support a much higher level of demand than is seen during the stagnation. The money is available but not being spent.

From the viewpoint of the economists, the problem appears to be a lack of capitalist investment. The industrial capitalists are hanging on to their money rather than transforming it into the elements of productive capital — means of production, raw and auxiliary materials, and above all labor power. These are the conditions that inspired the development of what we now call Keynesian economics during the 1930s.

Cyclical stagnation over time becomes less intense as excess capacity declines due to a combination of the physical destruction of some of the excessive productive forces by the industrial capitalists and reactivation of other productive forces as they become capable of functioning as capital once again. This leads to the transitional phase of “average prosperity,” which gives way to the boom.

The boom

The boom is marked by a high level of capacity utilization. The industrial capitalists find that they can profitably utilize most of their existing plant — though never all — because it can now function as capital. Therefore, the industrial capitalists are under pressure to expand their existing plant and equipment. Existing factories are enlarged and new factories are built. The intensity of the boom is measured by how much of the existing productive forces are utilized. In a weak boom, there is still a lot of excess capacity while in a strong boom there is very little.

Of more importance to the working class is that the quantity of idle potential variable capital, which is nothing but the ability of the unemployed and underemployed workers to work, is relatively low. What the economists call “full employment” or even “overfull employment” prevails. The stronger the boom the greater the portion of even chronically unemployed that are drawn into active employment.

Though constant capital is expanding more rapidly than variable capital — workers actively employed by the industrial capitalists producing surplus value — in absolute terms variable capital is expanding because of the rapid overall expansion of productive capital as a whole. The quantity of variable capital is measured by the number of hours of labor put in by the employed working class in a given period. Since the demand for labor power is high, the labor market tilts in favor of the sellers of labor power relative to the buyers of labor power. As a result, wages rise putting downward pressure on the rate of surplus value and therefore the rate of profit. These conditions always point to lower profit rates ahead, but as long as the boom lasts both the mass and rate of profit appear to be high.

The main reason for higher than normal profits during the boom is the rapid turnover of variable capital. This reflects the vigorous state of the circulation of commodities, or in everyday language the brisk pace of sales. The overjoyed capitalists sometimes describe this situation “as our stock is flying off the shelves.” This makes it possible to realize a large quantity of surplus value in a given period, the inverse of the situation that prevails during the stagnation phase.

Another reason for the above-average rate of profit that prevails during the boom is that the rise in market prices as prices rise from below to above their values — or prices of production. Profits are not calculated in “real (physical) terms” by the industrial capitalists — bourgeois economists, especially those influenced by Piero Sraffa, like to calculate profits in real terms but not practical capitalists — but in terms of money. As market prices transition from being below to above the prices of production, profits both in terms of mass and rate are given a temporary boost.

However, once market prices rise above production prices, the rate of profit in the branch of production that produces money material transitions from above to below the average rate of profit. This causes capital to move from the branch of production that produces money material to other now more profitable branches of production. This causes the production of money material to decline, which progressively undermines the ability of the capitalists to realize the value of commodities in terms of money material. The longer the boom persists the greater the realization difficulties become. In the language of the market, the high prices of commodities and the high mass and rate of profit becomes a “bubble.”

As the boom continues, the quantity of money becomes increasingly scarce relative to the total quantity of commodities that it circulates. The growing scarcity of money causes previously idle hoards of money to be thrown into circulation, which results in a rise in the velocity of circulation of the currency. The money supply that was used “inefficiently” during the stagnation to generate demand is now used with ever greater “efficiency” to generate the maximum amount of “monetarily effective demand” it can support. Keynes, so to speak, again goes out of fashion. (8)

The problem is no longer that money is not being spent by the industrial capitalists but rather that the money supply is not growing at a sufficient rate to support the expanding demands of commodity circulation. Therefore, despite the efficient way in which the total money supply is being used, money is increasingly scarce. As a result, the balance of forces on the money market shifts in favor of the suppliers of loan money capital — the money capitalists — and against the borrowers. As a result, credit increasingly replaces cash and credit money replaces “hard cash,” causing interest rates to rise. This means that the money capitalists appropriate a greater proportion of the total surplus value at the expense of the active industrial and commercial capitalists.

The boom tends to grow more intense — that is, excess capacity shrinks and unemployment continues to fall — until it runs into the limits of the market. These limits at first appear as a shortage of credit, and superficial observers blame the shortage on the stingy monetary policies of the central bankers. What is happening is that the rate of growth of money material is “insufficient” relative to the growth of the number of commodities being thrown on the market. In other words, the production of commodities has grown faster than the market — a general relative overproduction of commodities has occurred. The credit system, which enabled the overproduction of commodities to persist for a considerable period, has become a “house of cards” that finally collapses. Credit dries up and interest rates soar, and not only the stock market but the economy as a whole “crashes.” The central bankers are then blamed for failing to “create enough money” and of overestimating the danger of inflation while underestimating the danger of recession/crisis.

Both stagnation and boom phases occur to one degree or another in every industrial cycle. Let’s now examine two types of stagnation that do not occur in every industrial cycle, secular, longer-term stagnation and stagflation.

Secular stagnation defined

As previously indicated, the intensity of booms and stagnation can be measured by capacity utilization. The higher capacity utilization is the greater the quantity of the existing means of production that is functioning as capital by the industrial capitalists. Secular stagnation is a situation where “excess capacity” remains relatively high and the growth in employment remains modest during the boom. In the U.S. during the 2007-2020 industrial cycle, capacity utilization never rose to even 80 percent, which is lower than some recession lows in the past. For example, in August 2019 the best figure in the last year U.S. industrial capacity utilization, if we are to believe the Federal Reserve figures, stood at 77.8 percent. This at a time when the U.S. capitalist media was prattling about “record low unemployment” based on the U-3 unemployment rate, designed to show the lowest possible rate of unemployment.

Despite the “low” U-3 unemployment as calculated by the U.S. Labor Department, a low rate of employment was reflected in the reduced percentage of the population participating in the labor force. This hid the reality that not only a large portion of the potential constant capital, measured more or less by the capacity utilization figures, was being kept idle and a large portion of the potential variable capital was lying idle as well. Remember, these figures are from the very peak of the 2007-2020 industrial cycle.


Stagflation is not a regular phase of the industrial cycle, and it cannot develop without a “fiat money system.” It never occurs under a gold or gold-exchange standard. The 1970s stagflation is the classic case. It developed when the global central bank — the U.S. Federal Reserve System, which under both the dying Bretton Woods gold-dollar exchange standard and the emerging dollar standard acted as the central bank of the entire capitalist world — attempted to keep the upswings in the industrial cycle going after the industrial cycle had reached its “critical point.” The policymakers in the capitalist governments and central banks fell victim to the “commonsense” notion that if the quantity of metallic money is insufficient, the remedy is to replace metallic money with legal-tender paper money.

The symptoms of the stagflation that emerged in the 1970s were a rising dollar price of gold — the U.S. dollar functioning as the world currency was being devalued against gold — rising interest rates in term of dollars, a high velocity of circulation, tight credit despite the rapid rate of growth in the number of paper dollars and commercial bank reserves as well as the broader “money supply” (including commercial bank-created credit money), and negative rates of interest and profits when calculated in terms of actual money material — gold. Except for some “collectibles” such as rare paintings — so-called cyber-currencies had not been invented yet — simply hoarding gold bullion was the most “profitable” investment of the entire decade.

However, when profits are measured in terms of gold bullion, the proper way to calculate profit, the rate of profit — leaving out storage costs — on gold bullion is by definition zero. Gold bullion represents a simple “M,” not an M’. A gold bar or gold coin locked in the vault has never been known to breed another gold bar or gold coin. Therefore, while profits were positive during the 1970s in terms of dollars, and though to a considerably lesser extent in “real terms” in the sense that productive forces were still expanding though at a reduced rate during stagflation, the rate of profit in terms of actual money material was negative for the decade.

The capitalists of the 1970s did not necessarily understand the subtleties of Marx’s value theory, but as the blind agents of the economic laws that govern capitalism, they didn’t have to. As the practical capitalists saw it, investing in gold bullion was the most “profitable” field of investment around. As a result, more and more capital flowed into this suddenly very “profitable” field of investment. What was happening was that capital was increasingly stagnating in the form of M — gold bullion — as the capitalists class was being converted into a class of misers. As a “side effect,” the international monetary system centered on the U.S. dollar was being progressively destroyed.

During stagflation, the velocity of circulation of the currency is high in contrast to “ordinary” stagnation, where it is low. Old debts are being wiped out by inflation, but new debts are created due to the rising cost prices in terms of the depreciating currency as well the rising cost of living in terms of the same currency.

In a stagflation-beset economy, credit-sensitive sectors of the consumer economy, generally durable consumer goods industries like housing and automobiles that are almost always purchased with credit, not with money, are in recession due to a shortage of credit. These industries have high levels of excess capacity and low levels of employment. However, during stagflation the capital goods sectors of industry are booming as the industrial capitalists seek to convert their depreciating money capital into real capital as fast as possible. Even if stagflation escalates into hyperinflation, money capital held in the form of legal-tender currency — or credit money convertible into legal-tender currency — is wiped out, but capital held in the form of plant and equipment, though it may temporarily depreciate against gold or non-depreciating currencies if there are any — will not be wiped out. In the long run, real capital will return to its normal exchange value in terms of gold when the currency system is once again stabilized.

Stagflation, unlike ordinary stagnation, is an unstable state of the capitalist economy. Due to currency depreciation, prices rise faster than the monetary base — or high-powered money in the lingo of the economists — which tightens up the money market. However, as long as stagflation reigns, the central bank in an attempt to stave off full-scale recession accelerates the growth in the monetary base in an attempt to ease the money market. This, however, further increases the rate of the depreciation of the currency — the rate of increase in the currency price of gold — which feeds the ongoing currency-devaluation inflation.

The rise in prices in terms of the devaluing currency accelerates as the central bank creates more “paper money” pushing inflation even higher without relieving — at least not for very long — the recession in the durable consumer goods industries. Nominal interest rates rise as the money capitalists attempt to protect themselves against the accelerating inflation by charging higher interest rates in terms of currency while interest rates and profits remain negative when calculated in terms of money material.

While ordinary cyclical stagnation is followed by an acceleration of economic activity, stagflation is always succeeded by recession. Once stagflation develops, the only way out is for the central bank to refuse to feed the accelerating currency-devaluation inflation. This causes interest rates to initially spike sharply upward, which causes a section of the money capitalists to shift from gold to interest-bearing securities. There is never a situation where a sufficient rise in the rate of interest fails to halt the currency devaluation. When interest rates rise sufficiently, the devaluation of the currency is halted, or what comes to the same thing, the currency price of gold falls.

As soon as the currency recovers at least some of its lost value, inflation expectations drop and the industrial capitalists slash their capital spending and begin to accumulate legal-tender currency — or commercial bank money convertible into legal currency on demand — once again. As soon as this happens, the boom in the capital goods industries gives way to recession because as soon the industrial capitalists’ confidence in the currency is restored they stop their flight from currency into real capital. Now the capitalists flee real capital — or more accurately physical productive forces that are not able to function as capital — in favor of rebuilding their supplies of currency, which is now appreciating rather than depreciating against money material. The currency carries a positive rate of interest in terms of money material and is, therefore, better than gold. When the currency becomes “better than gold,” the stagflation is over.

After post-stagflation recession comes financialization

The central bank can always end “stagflation” as long as it is willing to allow interest rates to rise enough. However, the price is always a recession. Stagflation ends when the point is reached when the capitalist policymakers who control the central bank finally conclude that the dangers of worsening stagflation are greater than a recession/crisis. The exact point where stagflation finally ends, assuming it doesn’t end with the currency losing its nature as money entirely — full-scale hyperinflation — is governed not so much by economic as by political factors.

However, the end of stagflation means a fall in investment, which means a generalized recession where contracting levels of employment in virtually all industries replaces the stagflation. The longer the stagflation was allowed to progress and accelerate, the higher the rate of interest will be when stagflation ends. High currency rates of interest are converted into high real rates of interest, and most importantly into even higher rates of interest in gold bullion as currency gold prices fall. If stagflation has lasted for a significant period, the long-term rate of interest will be above the general rate of profit when stagflation ends.

When long-term interest rates rise above the rate of profit, a section of the industrial capitalists convert themselves into money capitalists, since it is more profitable to lend money — or purchase bonds — than to invest in expanded industrial production. The result is a credit explosion beyond what is seen in a normal boom. The credit explosion that followed the 1970s stagflation has even received a name — financialization. Financialization can be defined as an abnormal expansion of credit that follows a severe and prolonged episode of stagflation, where the rate of interest has risen above the rate profit. A section of the industrial capitalists, again acting as the blind agents of economic laws, convert themselves into money capitalists as they move their capital from productive investments to money lending, which under these exceptional circumstances yield a higher rate of profit.

Since “capital investment” will be low and even negative for a while after stagflation has ended, a good deal of the post-stagflation credit expansion that occurs will be in consumer credit, lending to the government, or the financing of non-productive activities of industrial corporations. These later involve financing the circulation of titles of ownership such as purchasing shares of one corporation by another corporation, mergers of corporations, or the purchasing of high-yielding bonds or mortgages As long as the post-stagflation financialization continues, the trend of interest rates will be downward. Since stagflation ended 40 years ago, interest rates have fallen from record highs to today’s record lows.

The post-stagflation financialization has therefore led to extremely high levels of debt relative to the real economy. As interest rates have fallen from the record highs of 40 years ago to today’s record-low interest rates, the economy has become addicted to these extremely low rates. A return to anything like the “normal” rates of interest of the pre-stagflation years, not to speak of the interest rates of 40 years ago, would have devastating effects on the capitalist economy. Herein lies the threat of a dreaded “Greater Depression,” sometimes called “Depression II.”

The COVID recession as an external shock

Capitalist “business cycle” experts often claim that recessions are caused by “outside shocks.” In this way, the economists’ claim that general relative overproduction cannot occur is reconciled with the reality of successive recessions/crises. We don’t need to resort to outside shocks to explain the successive industrial cycle and the periodic crises that crown them.

However, this doesn’t mean that outside shocks never occur. They do. Leaving aside war, examples of outside shocks are harvest failures, acute raw material shortages, mistakes made by central bankers, or mistaken or harmful fiscal policies — taxation, spending and borrowing — by the government. For example, the years after the end of the Napoleonic (9) wars were marked by some of the coldest weather in recorded history centering on the year 1816. That year became known as “the year without a summer.” The resulting harvest failures led to widespread economic stagnation and unemployment.

The resulting stagnation spurred a discussion between economists Ricardo, Malthus and Sismondi on whether a “general glut” of commodities was possible. Since the crisis of 1825, which marks the beginning of the modern capitalist industrial cycle proper, the analysis of any concrete economic situation always revolves around specific “outside shocks” and their ongoing interaction with the industrial cycle.

One example is Marx’s analysis of the role that the terrible crop failures centered on the Irish potato famine of 1846 played in the crisis of 1847. The crop failures caused the price of food to spike sharply. Then, in 1847, a return of good harvests caused a dramatic collapse of food prices that dragged down many capitalists who had been speculating on further increases in the price of food. This played no small role in the crisis of 1847, which in turn triggered the wave of European revolutions of 1848.

Right after the crisis of 1847 came another “outside shock” that worked in the opposite direction. This occurred in the form of the gold discoveries in California in 1848 and Australia in 1851 that first accelerated the arrival of and greatly strengthened the upward phase of the industrial cycle that began with the 1847 crisis. The resulting strong prosperity with its high levels of employment and rising wages caused the European revolutions of 1848 to quickly die down. Instead of an early European socialist revolution that the young Marx and Engels had expected in 1848, there was instead a revolution in world trade and industry.

A similar “outside shock” occurred in the mid-1890s when a combination of the cyanide process and the gold discoveries in Alaska and Canada — the last great “gold rush” — devalued gold while greatly expanding its quantity over a short period. The result was perhaps the most intense series of booms in capitalist history, which led to the emergence of the “revisionist” movement in the German Social Democratic Party — the largest Marxist party of the time. This revisionist movement reflected the growth in opportunism within the German workers’ movement — and not only the German workers’ movement — that was partially the result of the powerful economic booms that began in the latter part of the 1890s.

While the opportunism that the revisionist movement represented reflected the transition to the imperialist phase of capitalism that was then underway, the booms of the late 1890s and the first years of the 20th century greatly accelerated the growth of opportunism. But these booms also accelerated the uneven development of capitalism. This led to an accelerated decline of Britain relative to Germany and above all the United States, setting the stage for World War I.

World War I was itself a huge “outside shock” inflating market prices in terms of gold well above production prices, which depressed global gold production and resulted in the “super-crisis” of 1929-32 (3) and the Great Depression of the 1930s. The Iranian revolution of 1979 played a role of an outside shock by accelerating the spike in the dollar oil price in 1979. This spike in dollar oil prices, though not the fundamental factor behind the intensifying stagflation in the U.S. and world capitalist economy, certainly accelerated it. The worsening stagflation of 1979 led to the “Volcker shock” recession of 1979-82.

The capitalist counterrevolution in the Soviet Union after 1989 was yet another “outside shock.” It led to the dumping of large amounts of Soviet gold on the world market. This combined with the expansion of the area for capitalist investment and trade as Eastern Europe and the former Soviet Union, as well as the explosive growth of capitalism in China that itself was furthered intensified by the dumping of Soviet gold, led to the relatively strong capitalist expansion of the 1990s.

After that came another “outside shock” that worked in the opposite direction. That was the depletion of the South African gold mines, which led to a sharp drop in the output of the South African gold mines beginning in 2001. This brought the relative prosperity of the 1990s to an end and culminated in the Great Recession of 2007-09.

The shock of the global pandemic that began in late 2019 and spread around the world during the first half of 2020 has had a devastating effect on the global capitalist economy. As capitalist governments, however reluctantly, closed down to varying degrees non-essential business, and as people on their own became fearful of contracting the deadly virus if they went to the malls, the sales of numerous commodities dropped off sharply. The sale of a few commodities such as sterilizing cleansers and toilet paper soared as people rushed to stock up on them, but the sales of other commodities experienced a sharp drop in demand. Among the hardest-hit commodities was oil, whose futures price briefly dipped into negative territory at one point in May.

Now as the dollar price of gold has surpassed $1,800 an ounce, the Federal Reserve System in recent weeks has removed some of the dollars it created when the COVID-19 epidemic hit. The Fed is not unaware of the dangers that a new stagflation could lead to something like Roubini’s “Greater Depression” as early as the middle of the current decade. However, the destruction of some extra dollars and the expiration of the extra $600 in unemployment pay and end of eviction protections, combined with looming state and local government layoffs, could produce a deflationary shock that could slow and possibly abort the expected surge in GDP growth in the third and four quarters of this year. Even if the expected GDP surge does occur, the approaching deflationary shock could lead to a renewed recession in 2021.

But if the Fed does not destroy enough of the extra dollars it created or resumes its creation of additional dollars in an attempt to neutralize the deflationary pressures, to that extent the dollar system will be further undermined. This would cause the demand for gold bullion — money material — to increase. The demand for gold bullion increases when the total quantity of commodities measured in terms of their prices grows faster than the quantity of gold bullion grows unless the demand for gold is checked by a sufficient rise in interest rates.

The demand for gold bullion also increases whenever the confidence of the capitalists in the monetary system is shaken by the excessive creation of new currency relative to the quantity of gold. Therefore, even if the creation of new dollars at an inflationary rate by the Federal Reserve increases demand and successfully stimulates recovery from the “COVID recession” in the short run, it will undermine the growth of demand in the long run, increasing the danger of a “Greater Depression” by the middle or end of the current decade.

As we examine economic prospects as the current industrial cycle unfolds, we will have to analyze carefully how outside shocks that range from the changing levels of gold production to political events interact with the new industrial cycle.

To be continued.


1 Thirty years ago with capitalist counterrevolution triumphant in what was quickly becoming the “former Soviet Union” and in Eastern Europe and with China on the path of capitalist development, the U.S. ruling class declared that they had defeated Marxism and communism once and for all. But now with socialism resurgent, especially among young people in the U.S. itself, times have changed. (back)

2 These days the U.S. claims to be Vietnam’s friend against Chinese aggression. For people of a certain age, the hypocrisy of the U.S.’s concern over Chinese aggression is, to say the least, obvious. The concern the U.S. government expresses about Chinese aggression toward Vietnam is part of the U.S. policy of encircling both countries. This is reminiscent of Britain’s policy of encircling Germany during the first years of the 20th century. And we all know how that ended. (back)

3 April is a chilly month throughout much of the U.S., where warm weather doesn’t usually arrive before May. (back)

4 The sixties radicalization challenged the traditional racist views among white people and at the very end of the decade began to challenge the traditional sexist views toward women and then the traditional anti-LGBTQ bigotry. The latter was accepted even by many so-called revolutionary Marxists from the 1930s through the 1960s. However, the radical movement of the 1960s was a minority movement among young people, especially young white people.

More than 50 years later, anti-racism is becoming the majority view for the first time among the younger generation. This is a sea-change, also reflected in the swing towards socialism among the young. However, a minority of white youth — those young people who support Trump — are still holding on to the traditional racist, misogynist and homophobic attitudes, sometimes in even more extreme forms than their elders. Herein lies the danger of fascism if the growing social crisis of American capitalism in the coming years doesn’t end in a victorious socialist revolution. (back)

5 The “stars and bars,” which has only in recent weeks (July 2020) been removed from the Mississippi state flag, has long been the symbol of African slavery and racism. The “stars and bars” has now joined the Nazi swastika as a symbol of fascism. (back)

6 Voter suppression has become vastly easier since the Republican majority on the Supreme Court in a 2013 decision voided much of the Voting Rights Act.

One form is felony disenfranchisement, under which people who have been convicted of a felony are barred from voting even after they have served their sentence. In Florida, a former slave and then Jim Crow state that joined the Slave Owners’ Rebellion against the U.S. in 1861, the voters approved a proposition that repeals the state disenfranchisement law.

However, the Republican legislature and governor passed a law the requires felons who have fully served their prison sentences to pay “restitution” for their crimes before they can recover the right to vote. This law is currently being challenged in the courts, but at least in the 2020 election former felons will not be allowed to vote. And as everybody knows, former felons are disproportionately people of color very unlikely to vote Republican.

The second method of voter suppression is a slew of recent laws passed in Southern and Republican-dominated states that require voters to present picture identification before they are allowed to vote.

State-issued picture IDs generally take the form of driver licenses. However, many African-Americans and other people of color cannot afford automobiles and therefore do not have driver licenses and therefore can’t vote.

A third method is the policy of closing down voting places located in African-American and other poor working-class as well as college neighborhoods. As a result, if you live in these neighborhoods and want to vote, you have to stand in line for many hours. If that were not enough, elections are held on a workday in the U.S. and you may lose your day’s wages or even risk your job if you exercise your right to vote.

A fourth method, applied especially in Republican-dominated states of the U.S. South, is the policy of purging voter rolls. For example, many African-Americans share similar names since their ancestors adopted the family names of their former owners from slave times. The Republican “purgers” claim that people with the same or similar names are registered in other states and therefore remove them from the voting rolls. When these people, largely African-Americans, arrive at the polls, they are informed that their names do not appear on the voting rolls and therefore they cannot vote.

Republicans, with Trump as their cheerleader, also oppose the move to allow voting by mail. Voting by mail largely overcomes the problems of standing in line for hours and the fact that the elections are held on a workday. Trump recently complained that if mail-in voting continues to spread, not a single Republican would be elected in the future.

Related to this is that virtually all the Republicans in Congress voted against a bill to make Washington, D.C., a city with a large African-American majority, a separate U.S. state, much like Berlin the capital of Germany is a German state. If this were done, the African-Americans of the new state would gain a representative in the U.S. House of Representatives and two U.S. senators. But as things stand now, the African-Americans who live in the U.S. capital have no representation in the U.S. Congress.

The Democrats voted for the bill to make Washington, D.C., a state. But they did not offer a resolution to condemn the Republicans who voted against the basic (bourgeois) democratic right to allow the African-American residents of the U.S. capital the kind of representation in the U.S. Congress that white residents of thinly populated Republican-dominated states have.

Even though such a resolution would have been voted down in the U.S. Senate and wouldn’t have the force of law, it would expose the anti-(bourgeois) democratic nature of the Republican Party. The Democrats want to make sure that they continue to run against only the Republican Party and not a party that would represent the interests of the wage-earning majority. If the modern Republicans are more and more in opposition to basic (bourgeois) democracy, the Democrats are their enablers. Just like the Republican Party saved the Democratic Party after the War of the Slave Owners’ Rebellion, today’s Democrats are going out of their way to allow the Republican Party to keep itself viable through voter suppression. They have not taken up the late African-American Democratic congressman and Civil Rights leader John Lewis’s proposal to amend the U.S. Constitution so that every American who has reached voting age would have the right to vote.

The Jim Crow South was largely built on voter suppression, which during and after Reconstruction was sponsored by the Democratic Party. And as we know, the “modern” Republican Party is as much the heir of the Jim Crow Democrats as it is the heir of the historic Republican Party. (back)

7 Bank money is defined as checkable accounts held by the “non-bank” public in commercial banks, while central bank money is defined as deposits held by the commercial banks in the central bank. (back)

8 Keynes goes in out of fashion depending on whether the economy is in a state of cyclical boom (when Keynes goes out of style) or cyclical recession/stagnation (when he comes back into style). If stagflation comes again, Keynes will go out of style for an extended period just like he did between the 1970s and 2008. After the crisis of 2008, progressives counting on a resurgence of Keynesian policies declared “neo-liberalism” dead and Keynes resurgent. However, the Keynesian revival associated with the crisis of 2008 proved to be short-lived even though stagflation was avoided.

Now many progressives, counting on resurgent Keynesianism, declare neo-liberalism dead once again. However, it could be that the Keynesian resurgence, with Modern Monetary Theory in the vanguard, will be short-lived this time as well. That will be all the more true if stagflation returns. (back)

9 Called by Marx the anti-Jacobin wars. (back)