Ruling Class Angst

There is a profound difference between the economic crisis of 2007-2009 and the evolving crisis of 2022. In 2007, capitalists feared the collapse of their own enterprises, but they had no doubt that the system was salvageable, albeit at costs that might prove difficult to impose. They knew that if the politicians could be won over to endorsing Wall Street’s prescriptions, if the people kept their pitchforks tucked away, and if the capitalists, in their greed, could be kept from devouring each other, then there was a good chance that an elite economic version of an “EMS” rescue team could save capitalism from further decline. Sure, the executives at Lehman Brothers, Bank of America, AIG, and many other firms had every right to fear for the future of their companies. But few capitalists imagined an existential threat to the system; few failed to believe in a way out.

This time is different.

Stagflation is a different kind of beast and that beast has the bourgeoisie, its friends, and its hangers-on terrified. The problem is that economic “science,” as they know it, only offers one possible escape and it has dire economic and political consequences. Once they recognized that inflation was not simply a momentary speed bump (as I predicted nearly a year ago), Central Bankers and economic gurus who have studied the 1970s-- the long, painful decade of stagflation-- prescribed a drastic remedy of slamming on the brakes of economic growth to contain inflation. Some nonetheless fear a long period of inflation and stagnant growth.

The 1970s taught that cheerleading, patience, and half-measures would not work. The Whip Inflation Now (WIN) campaign, price controls, and other approaches failed until the then-Federal Reserve chair, Paul Volker, boldly imposed draconian interest-rate increases that threw the economy into deep recession. Inflation tamed. Lesson learned. 

Certainly, no political regime wants to be associated with income-and-wealth-devouring inflation. But neither would it want to suffer through a job-devouring, wage-declining recession. Voters and subjects seek to punish the politicians in office when either situation arises. 

Thus, politicians and rulers are caught on the horns of a dilemma. If they ignore inflation, they pay a political price. If they attack inflation and bring on economic decline, they also incur the wrath of the electorate or their subjects. Either option taken constitutes a deep threat to the incumbent party or the ruling regime. 

Recently, some politicians have chosen to ignore the lesson that bourgeois economists have drawn from the 1970s bout with stagflation. Turkish president Erdogan decided to defy the convention by coercing the country’s central bank into lowering interest rates in the face of growing inflation, betting that the benefits of economic growth would outweigh any increase in inflation. He was wrong. Inflation has soared with devastating results on the people’s living standards and security.

Even more recently, the newly selected Conservative UK prime minister, Liz Truss, out of sheer arrogance or a profound economic ignorance, offered a budget based upon promoting growth (predictably through tax cuts for the rich!) and ignoring the anti-inflation moves of the Bank of England (BOE). Financial markets immediately reacted violently, forcing the BOE to go on a corrective bond-buying spree, and earning a rare rebuke of European government policy from the International Monetary Fund. Once again, the lesson of the 1970s stagnation crisis was harshly driven home.

With an interim election only weeks away, the ruling party in the US fears a severe beatdown from the angry electorate, devastated by sharp price increases imposed by profit-hungry monopoly corporations, declining incomes, and exploding interest payments on loans. At best, President Biden can only browbeat his Saudi allies for sustaining high energy prices in a global market disrupted by US corporate interests and US-instigated war, while the Federal Reserve slams on the economic brakes.

Liberal and social democratic labor leaders, party leaders, and pundits correctly object to the frequent blaming of inflation upon “greedy” workers or bloated union contracts. Even a cursory glance at the Bureau of Labor Statistics demonstrates that throughout this inflationary period income growth trailed and did not lead the growth in prices. That said, what do they think caused this persisting inflation? What can they offer in response to the bitter pill prescribed by bourgeois economists and the Central Banks?

Hell bent on saving capitalism from itself, some liberal and left thinkers like Dean Baker and Richard Wolff see price controls, ration cards, or public commissions as possible approaches (I refute these solutions here). Even if these fixes were likely to be enforced by governments thoroughly captured by capitalism, it would be unlikely that they could even be adopted in today’s volatile political atmosphere. The impending severe crisis cannot be met by wishful bromides or failed tactics.

More seriously, some on the left point to “financialization” as the cause of capitalism’s ills today. While the much-abused term begs many questions, it does describe one side of the restructuring of roles assumed by the leading capitalist countries as a response to the previous, 1970s version of stagflation. That is, so-called “financialization” was the new role of some advanced capitalist countries that deindustrialized after the stagflation of the 1970s. The flight of industry to low-wage countries was part of the answer to 1970s stagflation, stabilizing global capitalism and restoring the rate of profit for most of the next two decades. 

“Financialization” was the accompanying new role for those capitalist countries that surrendered their industries to emergent low-wage countries.

The stagflation of the 1970s caused the demise of the Keynesian consensus that had come to dominate economic policy since the Great Depression. That toolbox contained nothing to fix what was over a decade of roaring inflation. Indeed, many orthodox economists blamed the Keynesian tools for creating the conditions that led to that round of stagflation. In any event, it was the “financialization” era that superseded 1970s stagflation and was then believed to restore capitalist accumulation after its assault by stagflation. Therefore, it’s difficult to envision “financialization” as both a solution and cause of stagflation. 

While it is fashionable, since the crisis of 2007-2009, to see the dramatic rise of financial engineering and activity-- centered on the development of the many new financial instruments-- as the sand in the gears of capitalism, there is no reason to believe that it is any more than another adaptive stage in a resilient, but constantly crisis-plagued socio-economic system. 

It is difficult to foresee an easy, relatively painless capitalist solution to stagflation. That is not to discount the durability of capitalism. But the history of the 1970s teaches that any answer comes with enormous pain. We are only beginning to experience the rising costs from interest payments on top of the rising consumer prices. We are only beginning to feel the effects of galloping inflation compounded by stagnant incomes and growing unemployment. We are only beginning to recognize the strain on retirement funds and 401k’s. The lessons of the 1970s are distant and poorly remembered. But they are there for those who wish to heed them.

It should not be lost to anyone studying those lessons that hourly wages in the US adjusted for inflation have remained stagnant since the 1970s. More families now have two or more earners to compensate. Household debt has risen to counteract the loss in earning power. And income and wealth inequality has exploded, topping any other historic period. 

With a lost decade to stagflation and forty subsequent years of a tepid, crisis-ridden “recovery,” it is hard to imagine how people can endure another round of stagflation. It is hard to imagine how people can fail to explore the alternative to the capitalist system that brings so much unnecessary pain and misery.

Of course, part of the reason for ideological stagnation lies with the political parties, institutions, and misleaders that are so deeply invested in seeing capitalism persist. There would be no “social justice” industry-- the tens of thousands of foundations, NGOs, and charities-- without capitalism. Their criticism of capitalism ends, when the subject of socialism arises. Similarly, educators, writers, and media figures cannot risk alienating those who guarantee their stature and incomes. It goes without saying that both major US political parties are entirely invested in capitalism.

Yet their cynicism and hypocrisy would evaporate if it weren’t for the enormous material resources that capitalism makes available to those who safeguard the system's future. That will not change until the masses of the people use the power of their numbers to change it.

Whatever joy we may derive from the ruling class’s fears and anxiety over the current crisis is overshadowed by the hardships yet to disrupt the lives of millions of working people. 

Socialism is the alternative.

Greg Godels

zzsblogml@gmail.com

Stagflation: Stagnation, Inflation, and Beyond

Since my prediction in April of 2007 of an impending economic crash, I've vowed not to risk my unblemished record with any further predictions. But a simple thing that I learned from the run-up to that catastrophe was when the “little people” -- the “every man and every-woman” -- found their way into stock market speculation, trouble was looming. Early in 2007, I recall acquaintances then announcing that they were day-traders, bragging that they were making more money buying and selling on their devices than from their regular job. 

The Wall Street Journal headlined in early October that More Working-Class Americans Than Ever Are in the Stock Market. “Among Americans with incomes between $30,000 and $80,000, 54% now have taxable investment accounts. Half of these investments have entered the market in the last five years according to…Commonwealth and the BlackRock Foundation.” 

A red flag.

And also, I learned that when the investment commentariat-- not the media cheerleaders-- sound the alarm, Marxists should listen. It’s a curious thing that academic Marxist economists, who frequently claim to foresee future crises in broad terms of overproduction and rate of profit, seldom cite the views of those solely driven by money-making realities. The Wall Street Journal, hedge fund managers, investor consultants, and others of the pursuing-alpha herd are good sources of alarm for market volatility as opposed to the capitalism-boosters of The New York Times and The Washington Post.

When a few weeks pass with the front page of The Wall Street Journal warning Credit Markets Are Hot, But Froth Is Worry and OpenAI’s For-Profit Restructuring Draws Pushback, Rattling Executives and Persistent Inflation, Soft Jobs Data Pull Fed in Two Directions and Shutdown Starting To Exact Its Toll on Business and Volatility Returns To Haunt Stock Market, it might be time to sit up and take notice.

When financial sites like QTR’s Fringe Finance-- not one to mince words-- announces Sh*t is Breaking… And it’s Going To Get Worse or when Reuters Morning Bid coins the jingle Bubble, bubble toil and trouble or when Wolf Street raises the alarm that Corporate Profits in Nonfinancial Industries Plunge by Most Ever in $, amid Massive Downward Revisions, it might be just the moment to question the health of the US economy.

More red flags.

The truth is that the US economy is strapped with two intractable, life-sucking issues.

First, the post-2007-2009 economic crisis has never been resolved. The US has foisted the damage onto its partners, subsidized sick and floundering corporations, run up enormous debts through monetary pump-priming schemes, fostered new armament production through escalating global confrontations, and sold investors on shaky, over-hyped “innovations.” That same concerted effort to overcome the deflationary tendency spawned by the financial collapse overshot the mark, generating a powerful inflationary trend. 

As I’ve argued emphatically since 2021-- contrary to the punditry-- inflation is rarely, if ever, a momentary, episodic development. It does not go away with policy tinkering or rebalancing. Once prices begin to rise, businesses and corporations try to catch up or get ahead. The floodgates of profit-taking and profit-preservation will not be easily closed. For those who fashionably love to borrow Marx’s concept of commodity fetishism, the conventional thinking on inflation fetishizes price rises, hiding the fact that inflation is the result of human decisions and human (capitalist) interests. And when capitalists see an opportunity to raise prices, they seize it.

Compounding the last four years of persistent inflation is stagnation in the non-financial economy. Economic growth-- apart from the stock market, the pocketbooks of the very rich, and the bloated military budget-- is slow and slowing. In November of 2021, I reminded readers of the dangerous return of 1970s “stagflation” in an article aptly entitled When Have We Seen This Before?. Of course, the dilemma is that government efforts to invigorate the stalling economy will only further increase inflation.

Second, the economy is currently in the hands of a helmsman without a compass. President Trump’s economic policies are decidedly a departure from the conventional reliance on the Federal Reserve as a somewhat independent arbiter and navigator of economic policy, from the reliance on and guidance from Bureau of Labor Statistics and Commerce Department data, from some self-preserving restraint of corporate and financial excess, and from muting obscenely deep and unrestrained graft and corruption. Trumpism is elite enrichment on steroids, the public be damned. Reportedly, Communist Party of China Chairman Xi believes that Trump is not ideological, but “transactional.” That would well summarize his economic program.

Whether Trump’s approach is politically sustainable is one question. Whether it will add confusion and misdirection to escaping stagflation is not in question. It will make things worse.

What are the markers, suggesting economic hardship and a rocky road ahead?

• Inflation shows no sign of a letup, still well above the consensus goal. While Trump has “declared” it defeated, consumers are even more alarmed than the numbers suggest, with grocery store prices a particularly sensitive arena for shoppers. The full weight of Trump’s tariffs has yet to spread through the economy, promising even further price elevation.

• Hiring is falling off; businesses are hiring fewer people. Though limited hiring has not yet resulted in a dramatic change in unemployment, it foretells an increase in those jobless.

• Real average hourly earnings growth is tepid, growing .7% from August 2024 to August 2025. Median household incomes remained largely unchanged last year, adjusted for inflation. When higher incomes are extracted, the numbers for most households are in decline.

• Outlandish financial schemes are back and collapsing, especially around the used-car market. As in 2007-2009, irrational, super-exploitive lending patterns have generated unserviceable debt with lower-income consumers. Car-loan delinquencies have reached 5.1%, a level approaching that of the earlier financial crisis.

• While stocks appear to be booming, their price-to-earnings ratio-- a traditional measure of overvaluation recently hit 22.5, one of the highest readings in the last forty years.

• Investor fear of market volatility is reflected in the great demand for the safety of gold, a commodity hitting its all-time high in price. Other signs of the turn toward safety are emerging. 

• The driver of stock-market growth is almost entirely artificial intelligence (AI) and its data centers. With immediate investment in AI estimated in hundreds of billions of dollars (as much as three-quarters of a trillion globally), little return on investment has materialized. OpenAI is expected to return only $13 billion this year. Morgan Stanley calculates that the entire industry only sold $45 billion in products last year. Many see a bubble much like the fiber-optic mania of 2000.

• Bank failures have prompted JP Morgan Chase’s top dog, Jamie Dimon, to quip “When you see one cockroach, there are probably more”.

• Private, direct credit-- a growing factor in finance-- has a default rate of over 8%, the highest ever.

• Class divisions are intensifying. Annual wage and salary growth for the bottom third of households through August of this year was lower than any year since 2016. At the same time, growth for the top third grew four times faster than that of the lower third. For the first time, consumer spending by the top 10% of earners was nearly half of total consumption.

• The Black unemployment rate went from 6.1% last August to 7.5% this August, a harbinger of employment trends: last hired, first fired.

• Recent college graduates are experiencing one of the highest unemployment rates of the last decade, another harbinger of a weak labor market.

• More children are claimed to suffer from some food inadequacy than at any time in nearly a decade; the US Department of Agriculture estimated the number at 13.8 million in its 2023 report. The Census Bureau similarly reports that nearly ten million children live in poverty, the most since 2018. The Trump Administration has halted the USDA survey of hunger in the US.

The high interest rates established to contain inflation are predictably slowing real, material economic activity and large consumer purchases for the majority. Four years of rising interest rates have made debt service a growing burden, as well as making the refinancing of debt costly. 

Economic royalty and their courtiers are publicly downplaying the growing inflation in a desperate effort to convince the Federal Reserve to lower interest rates and stimulate tepid economic activity. Should the Federal Reserve comply, inflation will undoubtedly accelerate to the great harm of most working people. Historically, stagflation ends with a deep recession, like the painful Reagan recession of 1981-1982. 

Many in ruling-class circles believe that a new wave of innovation will rescue the sluggish, fragile economy with the exploitation of Artificial Intelligence. They foresee a new age of high productivity and growth. 

However, research by JP Morgan Chase economists has failed to find a significant connection yet between the use of AI and industrial productivity. So far, it has boosted stock market values enormously, without showing a concurrent return on investment.

James Meek, writing in the October 9, 2025 issue of The London Review of Books, may well have captured where AI has taken us and how far it has to go:

Leaving aside the known problems…-- their massive energy use, their ability in malign human hands to create convincing fake versions of people and events, their exploitation without compensation of human creative work, their baffling promise to investors that they will make money by taking the jobs of the very people who are expected to subscribe to them, their acquired biases, their difficulty in telling the difference between finding things out and making things up, their de-intellectualizing of learning by doing students’ assignments for them, and their emerging tendency to reinforce whatever delusions or anxieties their mentally fragile users already carry-- leaving aside all this, the deep limitations of generative AI make it hard to see it as anything but a dead end if AGI is the goal.

Faith that AI is more than a possibly malign novelty is based on confidence that the tech oligarchs have a vision of our future that benefits us all.

Not likely.

Is economic reckoning on the horizon?

Greg Godels

zzsblogml@gmail.com

When Have We Seen this Before?

Fifty years ago, global capitalism came to a crossroads. The enormous costs of the US’s long, costly Asian war produced great debt and pressure on the gold-backed US dollar. The imperialist alliance with Israel brought a disruptive, unprecedented boycott on the part of the oil-producing nations resisting Israel’s occupation of Arab territories. Intense competition between the dominant US economy and the resurgent Euro-Asian economies was shrinking profit margins. Traditional macroeconomic tools failed to meet the challenges of this new situation. The ensuing crisis came to be called the era of stagflation-- stagnant economic growth coupled with persistent, intractable inflation.

Stagflation persisted through most of the decade and ended with shock therapy-- a radical dose of deregulation, privatization, and market fetishism, a regimen of austerity now prescribed by all mainstream parties.

The crisis of the 1970s bears some similarities with today’s turmoil.

The pandemic, like the oil crisis, has shocked the global economy. The US economy and subordinate economies have been running on the fumes of fiat money and central bank stimulation, exposing remedies that are losing their effectiveness. Despite the lack of even phantom existential threats, the US has conjured costly foreign adventures and an extraordinarily wasteful and large military budget and “security” spending, crowding out social spending and amplifying national indebtedness. Commodity scarcity generates rising prices. And both slow growth and inflation are now reappearing and promise to continue.

Does this mean that we are bound to relive the crisis of the 1970s? Are we seeing a replay?

Maybe, maybe not. Time will tell. But we would be foolish not to study the 1970s to distill the lessons that might apply to today.

Despite the admonitions of the central bankers and financial gurus, inflation seldom self-corrects. It rarely runs its course. Instead, inflation tends to gather momentum because all the economic actors attempt to catch up and get ahead of it.

In the 1970s, it was popular with the capitalist media to blame workers who were demanding cost-of-living adjustments (COLAs) to ward off inflation. “Greedy” unions, welfare, senior, and disability advocacy organizations were claimed as the causes of inflation’s persistence and deepening.

Cynically, all were asked to sacrifice equally, while it was monopoly corporations that were raising the prices that constituted the core of inflation. They were using “catching up” as an opportunity to “profit up.” Under the guise of responding to inflation, dominant corporations raised prices beyond their growing costs to expand their profit margins.

Unlike monopoly corporations, small businesses were limited in their ability to raise prices because of intense competition. They were caught in a profit squeeze between their need to remain competitive and the grinding increases in their costs of doing business. They are especially victimized by inflation.

At the same time, inflation cheapened the value of debt, especially corporate debt, while choking new consumer debt with high interest rates.

Today, rising prices are eating up workers’ gains just as they did in the 1970s. Let the Bureau of Labor Statistics (BLS) explain it: “From April 2020 to March 2021, the 12-month changes in real average earnings were all increases, between 4.0 percent to 7.4 percent. Prior to that, from January 2017 until March 2020, the over-the-year change in real average weekly earnings ranged from −0.5 percent to 2.0 percent.” But: “Real average weekly earnings of employees on private nonfarm payrolls decreased 1.6 percent from October 2020 to October 2021. In every month from April 2021 to October 2021, the 12-month changes in real average weekly earnings have been decreases, ranging from −0.8 percent to −2.6 percent” [my emphasis].

In other words, real average weekly earnings exploded with the labor shortages induced by the pandemic, but they were wiped out by the five months of over 5% inflation culminating in the 6.2% rise in October, a 31-year high.

It is not workers’ wages that are driving inflation, but something else.

In a revealing article, The Wall Street Journal exposes the real cause of escalating inflation. Inflation Helps Boost Profit Margins: Companies seize rare opportunity to increase prices and outrun their own rising costs [print edition] tells that “[n]early two out of three of the biggest U.S. publicly traded companies have reported fatter profit margins so far this year than they did over the same stretch of 2019… Nearly 100 of these giants have booked profit margins-- the share of each dollar of sales a company can pocket-- that are at least 50% above 2019 levels” [my emphasis]. The authors note: “Executives are seizing a once in a generation opportunity to raise prices…”

It is apparent from this candid article that monopoly capitalism is leading this profiteering. And it is important to recognize that this profit-taking has and will continue to fuel inflation. Once again, the commanding heights of the US economy-- the monopoly corporations-- are using the excuse of catching-up to profit-up.

If history’s repeat is not to be farcical, the workers’ movement must avoid the mistakes of the 1970s. It must fight against monopoly price increases and not join the purveyors of common sacrifice, like the silly WIN (Whip Inflation Now) campaign of that period.

The workers’ movement must not follow its false partner, the Democratic Party, down the road of wage and benefit restraint. The inflation-directed restraint of the 1970s gave way to the give-backs of the 1980s and 1990s.

Workers must understand that inflation is not a self-inflicted wound, but a feature of the capitalist system, especially in its finance-dominated, monopoly stage. And it must be contained by attacking the profit-taking that spurs the inflationary spiral.

Further, the working class must bring this understanding to the frightened petty bourgeoisie who feel threatened and are threatened by the scourge of inflation, a stratum that otherwise turns in great numbers to the extreme right for answers.

Of course, this task would be made easier if we had a robust Communist movement in all of the capitalist countries.

Greg Godels
zzsblogml@gmail.com

Sinking in the Economic Quicksand

In late November of last year, I wrote of the dangers of stagflation-- stagnant or declining growth and price inflation-- suggesting that the global economy was heading for a history-repeating reckoning: “The crisis of the 1970s bears some similarities with today’s turmoil.”

In January, I explained the source and persistence of inflation, thusly:

…the Federal Reserve engaged in a massive inflation of financial assets to fend off the deflationary pressures inherited from the 2007-9 catastrophe, presenting investors and bankers with the gift that kept on giving: perpetual asset inflation and an assurance that the Fed would always have their back… It is a misconception to see inflation as only arising in 2021. The first signs of fast-rising consumer inflation were indeed in 2021, but artificially induced asset inflation had preceded this for nearly a decade.

At the end of May, I wrote that these projections were proving to be accurate and ominous and the available tools placed policy makers in a tenuous situation:

 

The raging inflation that emerged late in 2021 places the masters of the capitalist economic universe in a policy vice. To stem inflation, they must raise interest rates, which invariably dampens economic growth. But economic growth has already slowed-- indeed, turned negative in the US for the first quarter of this year. With so many economic indicators declining or going negative, rising interest rates will only accelerate the slowdown of consumer spending, productivity, wage growth, investment, and social spending, while increasing debt and its costs.

Since then, Jamie Dimon, the head of the US’s largest bank and a celebrity financial pundit, has declared before investors and analysts that it is time to prepare for an economic “hurricane”: “That hurricane is right out there down the road coming our way. You just have to brace yourself.” His counterpart at Goldman Sachs, David Solomon, sees a reasonable risk of a recession. And Solomon’s predecessor at Goldman Sachs and Elon Musk also joined in pointing to the growing danger of recession. Talk of a “soft landing” -- avoiding a deep recession-- has dissipated.

It’s fair to say that today a majority of economists, politicians, even TV stock market cheerleaders expect continued inflation and likely recession-- a cruel brew for all, but especially the working class.

As mid-year approaches, the foretold crisis appears even more inevitable and more severe.

While the growth figures for the second quarter won’t be in for several weeks, the Atlanta Federal Reserve optimistically projects US Gross Domestic Product (GDP) to grow by a mere .9% (annualized). Couple that with the 1st quarter drop of 1.5% and we technically already are in recession.

Both the Organization for Economic Cooperation and Development (OECD) and the World Bank have recently drastically lowered their global growth estimates for 2022, by a third and more than a quarter, respectively.

Stock markets continue to deflate, losing trillions of dollars in nominal value. US equity markets have lost value for ten of the last twelve weeks. As of Monday, June 13, the Standard and Poor’s market index fell 21% from its January high, officially becoming what investors call a bear market, associated with recessions. Equity losses affect most those who are farther up the economic ladder; they create a negative wealth effect, discouraging spending on the part of the upper income, wealthiest sector. A bear market also applies pressure on middle and lower strata retirement funds, especially for those employed in the public sector.

Inflation continues to rise unabated, hitting another four-decade high with a May annualized growth of 8.6%. Prognosticators thought that the slight drop in April might signal a peak, but the May acceleration put an end to their wishful thinking.

Galloping inflation again took a big bite out of real average hourly wages, with the average dropping .6% from April to May, or 3% for the last twelve months. The 3% May-to-May comparison actually amounts to a 3.9% drop in real average weekly earnings, given a drop in the hours worked.

For the first time this year, consumer spending is down, dropping .3% from April to May. Consumer spending-- by far the largest component of total national economic growth-- was the last bastion of optimism available to the few remaining academic and media pollyannas.

The first signs of a deteriorating housing market are appearing, with mortgage demand at the lowest level in 22 years. For the week of June 5th, applications for home mortgages were down 7%, and 21% against the same week in 2021. And refinancing was down 75% against the same week a year ago.

A revealing, but seldom explored, set of statistics addresses the US economy from the perspective of the capitalist or the investor. Non-farm business sector labor productivity dropped 7.3% in the first quarter, the most since the 3rd quarter of 1947. And unit labor costs increased 12.6%, the highest increase since the 3rd quarter of 1982.

These two results describe the costs of the commodity--labor-- in terms of how much the capitalist pays for that commodity relative to what the capitalist acquires from the use of that commodity, a rough measure of the rate that labor is exploited. Further, taken together, they are an indicator of profit expectations when taking account of the cost of the commodity, labor. Put simply, when labor productivity drops and the cost of labor to the capitalist rises, profits are expected to drop.

In the first quarter of 2022, even though workers worked 5.4% more hours, they produced 2.3% less (reflected in the 7.3% productivity decline). At the same time, their hourly compensation, not adjusted for inflation, rose 4.4%.

So, capitalists paid workers more, worked them longer hours, while the workers produced less. This is not a happy result for the capitalist class.

How could this happen?

With an extremely tight, competitive labor market, capitalists are paying more to acquire and retain workers-- they are hoarding labor, just as they might any other commodity-- even though they are getting less production from them. This has and will result in lower profits.

The Wall Street Journal notes on June 13 (Weaker Earnings Pose New Threat to Markets): “...recent days have cast doubt on the durability of corporate profit growth, further darkening the outlet for stocks. Companies from Target to Microsoft Corp. have warned that their results will be lower than expected, while analysts have trimmed earnings forecasts across industries.”

As in previous downturns with sinking labor productivity, the capitalist class will respond with layoffs in an attempt to discipline labor, to squeeze more from the workers. The resulting unemployment, absent a fighting labor movement, will undermine labor's bargaining power, tend to restore the rate of exploitation, and increase capital’s share of the economic product.

Forced unemployment will surely be the coming corporate response to falling profit.

Though the strategy will remain behind a veil of official obfuscation, the captains of industry and the lieutenants of capital understand the mechanism. A revealing article in the June 14th edition of The Wall Street Journal tells us that: “Federal Reserve officials are beginning to signal that higher unemployment rates might be a necessary consequence of their efforts to damp inflation by raising interest rates.”

A commentator cited in the article advised his clients: “We should prepare ourselves for projections intended to communicate the Fed’s resolve to reduce inflation by targeting a higher level of unemployment.”

Once again, pundits are discussing the mythical “natural rate” of unemployment. The WSJ reminds us that a decade ago, the “natural rate” was seen as between 5 and 6% (it currently is 3.6%). Prepare for more unemployment!

So workers are working more for less, with their wages eaten away by galloping inflation. A recession is here or looming on the near horizon. They have depleted their savings and are maxing out their credit cards. And rising unemployment is imminent.

In the US, neither political party offers any relief for workers. The Republicans preach the ugly, stale, and counterproductive sermon of austerity. The Democrats pretend that everything is or will soon be better.

Both parties obsess over symbols, cultural choices, and manners, while the material foundations of social life rapidly deteriorate. Both parties worship at the altar of individualism and herald the singular value of free choice, while the conditions necessary for informed choices and wise decisions are swept away by a cynical, corrupted capitalist media. Both parties place the claims of capital ahead of the urgent needs of the working masses and oppressed peoples.

With economic storms battering the people for the third time in twenty-two years, as inequality continues to expand, as the quality of life is threatened and vulgarized, as stresses erupt in violence and nihilism, as war continues to be the constant of daily life, one must wonder if this is the time for new ideas, new approaches-- out with the old, in with the new.

Are the dominant political parties and organizations in the capitalist world up to these challenges? Are the old social democrats or their new incarnations addressing these catastrophic crises? Do the rising populists of the right or left offer solutions or distractions?

Time is running out.

Greg Godels
zzsblogml@gmail.com

Some Thoughts on THE ELECTION

In the wake of the election-- THE ELECTION, in capital letters and with strong emphasis-- I have read many insightful and thoughtful assessments of how we have arrived at the point where Donald Trump was re-elected. I highly recommend the recent scathing essay by my colleague at Marxism-Leninism Today, Chris Townsend, on the crying need for an alternative to the two-party charade and the bankruptcy of the Democratic Party as a representative for working people.

But for every good analysis, there are a dozen awful commentaries that ultimately blame the voters’ judgment or endorse their worst fears. 

However, if pressed for a simple explanation of the election results, one might consider the following:

Once again, offered the odious, devil's choice between two candidates who are rich, elitist, and completely detached from “ordinary” people, the US voter chose a candidate who was rich, elitist, and completely detached from the lives and interests of most people. 

Of course, people want to know why the voters chose this particular rich elitist at this particular time. That question calls forth both a specific, practical response and a far deeper, concerning answer.

Polls and disregarded economic data show that most voters have a profoundly negative and often painful relationship with their economic status-- they are not doing well. They typically punish incumbents when under economic distress. This should come as no surprise. But the highly paid consultants of both parties-- with approaching two billion dollars to spend-- chose to press many other issues as well and deal with the economy only superficially. 

But in the end, exit polls show that economic distress played a decisive role in shaping voters’ choices. Apparently, the pundits forgot how persistent, value-sucking inflation led to the election of Ronald Reagan forty-four years ago. 

Again, like today, the 1970s were a period of realignment. The Democrats had lost the South to the Republicans over desegregation and the Civil Rights legislation. After the Nixonian scandals associated with the Watergate burglaries and other dirty tricks, the Democrats won over suburbanites disgusted with Republican chicaneries-- a demographic thought by many functionaries to be the needed replacement for the lost South.

In 1976, the Democrats swept in with a squeaky-clean, untarnished candidate, James Carter. With the decade-long stagflation coming to a climax, the Carter regime was short-lived; despite a rightward turn on his part, Carter was beaten by an ultra-right movie star turned politician, Ronald Reagan. Reagan was the default choice for voters wanting change after a lost decade.

For those who like their history repeating from tragedy to farce, consider the transition from the self-righteous old red-baiter, Ronald Reagan, to the pompous, supercilious windbag, Donald Trump. History has a wicked sense of humor.

Few pundits acknowledge that Democratic Party strategists decided in the 1980s that the future of the party would be determined by the interests and concerns of metropolitan voters, especially those in the suburban upper-middle stratum who were “super voters,” economically secure, and attuned to lifestyle and identity liberalism. While they represented the legacy of “white flight,” the suburbanites contradictorily espoused the urbanity of tolerance and personal choice.

Coincident with the embrace of the suburban vote, Democratic Party strategists saw no need to attend to past central components of their coalition: the working class and multi-class Blacks. Loyal union leaders would corral the working-class vote and ascendant Black leaders would rally African Americans of all classes.

Besides, it was believed that neither had any other place to go besides the Democratic Party.

Senate majority leader, Chuck Schumer, revealed this thinking in 2016, when he said: “For every blue-collar Democrat we lose in western Pennsylvania, we will pick up two moderate Republicans in the suburbs in Philadelphia, and you can repeat that in Ohio and Illinois and Wisconsin.” Even before that careless remark, both Hilary Clinton and Barack Obama-- in moments of candor-- revealed their contempt for working people outside of the metropolis.

This election stamped “paid” on this program, with nearly all the assumed components of the Democratic coalition drifting towards the Republicans. 

The always insightful Adam Tooze, writing in The London Review of Books, concludes that the Democratic Party failings demonstrate “the high-achieving, insincere, vacuous incoherence that thrives at the top of the American political class.”

There is, however, a far deeper explanation of the Trump phenomenon seldom mentioned by mainstream commentators. Those who cite the specific issues of abortion rights, immigration, trans rights, crime, racism, etc.-- issues that indeed played a role in the November election-- neglect the fact that Trumpism is part of an international trend that infects the politics of such far-flung countries as India, Japan, and Argentina, as well as many European countries for often vastly different reasons. The rise of right populism in virtually all European countries-- Orban’s Hungary, Meloni’s Italy, RN in France, AfD in Germany, Vox in Spain, Chega in Portugal, and similar parties in virtually every other European country-- share one defining feature with the politics of India’s Modi and Argentina’s Milei: a rejection of centrist, traditional parties. 

Right populism rises as a response to the ineffectiveness of the politics of normality. It reflects the dissatisfaction with business as usual.

For hundreds of millions throughout the world, the twenty-first century has brought a series of crises eroding, even destroying their quality of life. Ruling classes have stubbornly refused to address these crises through the indifference of traditional bourgeois political parties. Voters have punished these parties by turning to opportunist right-populist formations that promise to give voice to their anger. Of course, this often takes the form of ugly, reprehensible claims and slogans-- appealing to the basest of motives.

But it is not enough to denounce these backward policies without addressing the desperation that unfortunately popularizes those policies. It is not helpful to righteously raise the alarm of “fascism” if we fail to offer an alternative that will answer the hopelessness and misery that serves as the fertile soil for reaction.     

From the tragedy of the Reagan election to the farce of the Trump re-election, we have suffered from two sham parties taking turns representing the “people,” while neither did. Isn’t it time for an independent people's party-- a party of the working class majority-- that addresses the twenty-first century economic crises and their aftermath, the acute environmental crisis, the broken public health and health care systems, the insidious impoverishment of inflation, the crumbling infrastructure, and a host of other urgent demands, a party dedicated to serving the working people of the US and not its wealthy and powerful?

Greg Godels

zzsblogml@gmail.com

What is Independent Political Action?

I recently found an unpublished essay written in 1979 by a comrade from Western Pennsylvania who argued passionately for the urgent necessity of independent political action. In The Time is Now: A Position Paper on Independent Political Action, Bob Bonner challenged the left to begin the process of building independent political organizations and to convince the people to support them.

Bob is not a starry-eyed academic or a know-it-all armchair socialist, but a keen observer of local politics, its limitations, and its possibilities. 

He was then a worker, a founding leader of the Clairton Coalition, a leader in a local independent political party that scored some notable electoral victories, and a founder of the Pittsburgh Coalition for Independent Politics. He grew up in Clairton, PA breathing the foul air of the country’s largest cokeworks, a virtual company town that knew every corporate injustice that one found in the industrial heartland. It has become fashionable to refer to people like Bob as community organizers; I prefer to see him simply as a peoples’ leader.

There are many parallels today with the world that Bonner wrote about in 1979. Jimmy Carter had run and won in 1976 on the most progressive party program that the Democrats had offered since the New Deal; but by 1978, he had jettisoned the program and turned to policies that presaged the policies of the soon-to-be-president, FBI snitch and B-actor, Ronald Reagan. By the midterm elections of 1978, Carter had reneged on virtually every progressive campaign promise and was saddled with brutal inflation.

Bonner wrote at the time: “America’s two-party system has reached an all-time low in the eyes of the voters… rendering the concepts of majority parties and representative government meaningless and, to some, a laughing stock… 62.1% of American voters, or 90 million people, stayed home last election day, an increase of another one and a half percent from 1974… Millions more can’t be motivated enough to even register [to vote].”

Citing a New York Times-CBS poll, Bonner notes that “fully half of those who participated in the two-party charade felt that the outcome would have no appreciable effect on their lives.”

Bonner goes on to show that despite dire media assessments of a rightward trend, where progressives or independents offered voters a real choice, they were met with enthusiasm, often victory. 

The then-left-oriented Congressional Black Caucus picked up three new members in the interim election, and arch-reactionary Frank Rizzo was denied a third term in Philadelphia. “The massive monopoly effort in Missouri to pass an anti-union ‘right to work (for less)’ law through a referendum failed, and in some states liberal to progressive tax initiatives won,” Bonner reminds. Communist Party candidates, running as Communists, received vote totals unprecedented since the 1940s. There was a sense that inroads were possible for independent politics.

With regard to the then-emerging danger of the so-called “new right” of Reagan and his ilk, Bonner had this to say: “The high visibility of the ‘new’ right is made possible by the huge gap that exists between the direction of the two main parties and the urgent pressing needs of the people as a whole. The ruling class has recognized this gap and has smartly and opportunistically shoved reactionary one-issue groups into this vacuum in order to confuse and misdirect the voting public.”

Ironically, today’s corporate Democrats have followed this Republican strategy by placing single issues front and center at the expense of a popular program meant to resonate with all working people.

Bonner believes that “[t]he electorate is searching for meaningful alternatives. That is why they vote for ‘mavericks’; that is why Black people voted for Republicans in the last election…”

Forty-five years later, this obvious point is missed by the elite pundits who denounce working-class “deplorables” turning to unlikely “mavericks” like Donald Trump and Robert Kennedy Jr. They are surprised and alarmed that polls show many Black and Latino/Latina voters-- ignored by Democratic Party leaders-- leaning toward Trump’s false promises of change.

Today, one-issue groups abound, with foundations doling out financial support, designer NGOs staffing causes, academics offering studies, and consultants mapping strategies. Talk of “intersections” are just that, with more and more divisions denying any basis for common cause, as our common plight grows more desperate.

And when the two parties’ thinkers offer even a hint of prospective benefits in exchange for their votes, it is not a vision, but a reminiscence. The Republicans promise a return to the land of milk and honey before “freedom”-restricting laws on civil rights, the environment, workplace safety, and unions. 

The Democrats, on the other hand, offer an idyllic time before the Reagan revolution-- the so-called Neoliberal era ushered in with the 1980 election-- conveniently forgetting the long, painful, previous decade of stagflation. In essence, we are given two different versions of “Make America Great Again.” Neither promise works for the twenty-first century.

Sounding eerily prescient, Bonner cites the opposition to the unbearable weight of the military budget and the threat of war, actions against the energy monopolies, a militant women’s movement for women’s rights, the fight against police brutality, the miners’ strike, and the struggle for the Dellums National Health Service Act as a basis for bringing together a united, independent movement escaping the political inertia of 1979. “There is absolutely no reason and no excuse for not pulling several of these forces together and entering the political arena…,” Bonner asserts.

Forty-five years later, we have yet to create this needed movement, and the battles of 1979 are yet to be won.

We must recognize that a mere declaration of independence is not enough, as our own US Revolution shows. Achieving independence is an arduous process. In our time, it is a battle against the dependency that comes from taking the money offered from corporations, foundations, non-profits, NGOs, and governments, and from uncritically accepting the influence of think tanks, universities, academic “authorities,” and consultants. 

Most importantly, political independence only begins with a concerted effort to fight capture by the two parties. Far too many left initiatives have been absorbed and suffocated by the Democratic Party. In its essence, independence is always independence from some external force that doesn’t share our values and goals.

We must also judge independence by acts and not rhetoric or posture. The fallacy of celebrity, the fetishism of personality, is a sure barrier to independence. Instead, the steps away from wealth and power should be our measuring stick of independent political action. Where independence exists, we must nurture it; where it doesn’t, we should sow it.

In the forthcoming election, how will we express our political independence?

Greg Godels
zzsblogml@gmail.com

What History Teaches…

The years of reaction (1907–10). Tsarism was victorious. All the revolutionary and opposition parties were smashed. Depression, demoralisation, splits, discord, defection, and pornography took the place of politics. There was an ever greater drift towards philosophical idealism; mysticism became the garb of counter-revolutionary sentiments. At the same time, however, it was this great defeat that taught the revolutionary parties and the revolutionary class a real and very useful lesson, a lesson in historical dialectics, a lesson in an understanding of the political struggle, and in the art and science of waging that struggle. It is at moments of need that one learns who one’s friends are. Defeated armies learn their lesson. V I Lenin, “Left-wing” Communism, an Infantile Disorder

What does history tell us about where we are today, well into the first half of the twenty-first century? 

It surely tells us that capitalism remains the greatest obstacle to solving the manifold injustices, irrationalities, and existential threats that face humanity. History also teaches us that the false answers of nationalism, racialism, and social exclusion remain leading obstacles to overcoming capitalism and the class divide at the center of capitalist social relations. Division-- the separation of potential allies in the struggle against capitalism-- remains a deep infection immobilizing those seeking social justice for all, a lesson the advocates of both casually chosen and deeply personal identities seem to have missed. 

We are even further removed from defeating capitalism when we construct unlimited identity barriers to unity, when who we are as an individual comes before who we are as a class. 

History’s lessons are easily lost to hasty generalizations and wishful thinking. The “victory” of the US over the Soviet Union in 1991 was thought to usher in the end of history and, in the mind of celebrated intellectual, Francis Fukuyama, the global ascension of US values and US rule over the global order. Within a decade, this conclusion met determined resistance on many fronts, as the US attempted to enforce its dominance, only to be challenged on all counts by independent rising powers, insurgencies, and defiant forces in Asia, the Middle East, and South America. The two-decade long war in Afghanistan is but one dramatic example of that stubborn resistance to US power.

Unfortunately, popular resistance in the capitalist powers of Europe and North America took a different turn after 1991. A “third way” center left, buoyed by the setback to Communism, abandoned class politics for “a rising tide lifts all boats” economic policy, as well as cultural politics, the chosen field of battle favored by the political right. This “respectable” left-- respectable to power and wealth-- paid an electoral price over the following decades with the erosion of working-class votes. Today, the Euroamerican center left, along with its center-right counterpart, struggle weakly to dominate politics, as they have since World War II.

The multifaceted crises of capitalism-- unemployment, slack economic growth, inflation, recession, political illegitimacy, inequality, eviscerated social services, rotting infrastructure, and environmental degradation-- have all struck at one time or another since capitalism’s “triumph” in 1991. The lowering of mass expectations and the rising of mass deprivation have presented the radical left with the objective opportunity for change only imagined in earlier generations. 

But the radical left was not ready for the challenge, convinced after 1991 that socialism, as we came to know it, was either impossible or too far off in the distant future to be our project. The self-annihilation and mutation of Europe’s two largest Communist Parties only added to the pessimism. It was a time not unlike the years after the failed 1905 Russian revolution, as described by Lenin: 

Tsarism [capitalism] was victorious. All the revolutionary and opposition parties were smashed. Depression, demoralisation, splits, discord, defection, and pornography took the place of politics. There was an ever greater drift towards philosophical idealism; mysticism became the garb of counter-revolutionary sentiments. At the same time, however, it was this great defeat that taught the revolutionary parties and the revolutionary class a real and very useful lesson, a lesson in historical dialectics, a lesson in an understanding of the political struggle, and in the art and science of waging that struggle.

Except the radical left largely drew no useful lessons from the 1991 setback, beyond the abandonment of the socialist project. When jobs migrated in huge numbers to low wage countries, the left blamed “globalization” -- a process commonly and frequently encountered in the capitalist accumulation process. It is far easier, but far less effective to fight a phase --- a phase soon to be transcended by a resurgent economic nationalism-- for society’s ills than to attack its parent: capitalism. It is as though people believed that they could actually turn back the clock to some imagined, more benign era of capitalism.

Others in the diluted socialist movement designated the enemy as another phase of capitalism: “neoliberalism” -- a set of ruling class policies designed to escape the 1970s collapse of the post-war Keynes/demand-side paradigm. 

During that lost decade, Stagflation and aggressive foreign competition brought the class-collaboration model into disrepute, with the monopoly corporations turning viciously on their counterpart, the class-collaborationist labor leadership; decades of capitalist offensive followed, with a rout of working people’s liberal and “progressive” former allies; many past gains were reversed. 

After 1991 and with far too many having abandoned the socialist project, the broad left chose not to attack the cancer of capitalism, instead, choosing to try to dull the painful symptom of neoliberalism. 

The drift to “philosophical idealism” described by Lenin was everywhere in the wake of the fall of the Soviet Union. Academics diminished Lenin’s theory of imperialism, with wild fantasies of the decline of the nation-state (a fantasy embarrassed by the aggressive global reach of the US empire-- the preeminent, most powerful nation-state of all time). Other thinkers saw transnational capitalist corporations overshadowing and superseding the nation-state, as though the nation-state was not intimately fused with monopoly capital. This drift from Lenin’s historical-materialist analysis reached its ludicrous peak with the infamous tract of Hardt and Negri, Empire, positing that history was now grounded in a mysterious, totalizing force that they called “Empire,” an obscure, ineffable entity rivaling Hegel’s Absolute. 

Some on the international left saw a possible socialist revival in the righteous rejection of US domination by social movements in Latin America, the so-called “pink” revolution. Elections brought to power several promising charismatic leaders who openly and strongly defied the long-imposed dictates of US imperialism. Most notably, Hugo Chavez mocked and scorned US government arrogance, establishing an independent foreign policy and embarking upon a generous and humane welfare state based on Venezuela's then-ample resource revenue. 

Other leaders in Central and South America were inspired to join this anti-US imperialist, social democratic front, with the goal of Bolivarian independence from neo-colonialism (a sovereignty project) their most common feature. Because of “socialist” rhetoric, many on the left elevated these multi-class, reformist movements to the status of “twenty-first-century socialism”. In fairness, some leaders truly aspired and envisioned socialism, though they lacked a program, a revolutionary party, and the necessary understanding. 

Twenty-first-century socialism, without an existential confrontation with capitalism, has proven to be an elusive goal, especially with a US-supported domestic bourgeoisie still holding vast economic power. The social democratic dream of taming, while partnering with capitalism has nowhere sustained the support of the working classes. With a hostile behemoth on its doorstep, it is not succeeding in Latin America, either.

The latest notion distracting the left from socialism is the doctrine that global multipolarity --removing the unipolar US from the pinnacle of the imperialist heap-- will somehow produce a more just world and even move us closer to socialism. While capitalists in many countries would welcome leveling the economic playing field and freeing markets for others to exploit, a multipolar world offers no obvious benefit to working people. Without question, the iron grip that US capitalists have had on international economic institutions and the promiscuous use of US sanctions and tariffs has incensed US rivals and weakened US hegemony. But their success in blunting US power holds little consequence for exploited workers in Asia, Central and South America or Africa, who continue to be exploited. 

Like the period after the 1905 Russian revolution described by Lenin, the period after the exit of the Soviet Union has been difficult for the international left. After dalliances with bizarre, “novel,” and foolish answers to what many perceive as the failure of socialism, the left has offered a beleaguered working class few victories. In the last thirty-three years, theorists have contrived new enemies: neoliberal capitalism, disaster capitalism, racial capitalism, crony capitalism, hyper-capitalism, coronavirus capitalism, unipolar capitalism and a host of other hyphenated capitalisms. What all of these theories share is a fatal hesitation to call out the capitalist system itself. They all share a faith in a reformed, managed capitalism that --shorn of its deviations-- will somehow serve all classes. 

After thirty-three years, this experiment in rescuing capitalism from itself should be discarded. It is time for the left to draw “a real and very useful lesson, a lesson in historical dialectics, a lesson in an understanding of the political struggle, and in the art and science of waging that struggle,” in Lenin’s words. If defeating capitalism is our goal, it requires tried and tested forms of political organization: a revolutionary political organization. It requires a bold, independent party embodying both democracy and centrism-- a Leninist party-- with a clear program based on enlisting working people to the greatest project of the twenty-first century: winning and constructing socialism. That is what history teaches.

Greg Godels

zzsblogml@gmail.com