The Crisis of Capitalism

"The world is fundamentally changing. Wealth and power are rapidly becoming concentrated at the top and the big global corporations are making massive amounts of money. Meanwhile, the American middle class is being systematically wiped out of existence as U.S. workers are slowly being merged into the new 'global' labor pool." Michael Snyder, The Business Insider

But that has now ended. We are now in a period of a prolonged and deep structural crisis of capitalism, not only in the U.S. but on a global scale. This underlying crisis of the economy, combined with neo-liberal policies, is responsible for the falling living standards of workers in the U.S. over the last 30 years.

The growth of the 1990s and 2000s was unhealthy, based mainly on pilling up massive debts and feverish speculation. The consequences of this were seen in the implosion of the housing boom and the financial meltdown in 2008, marking the end of that period of slow growth.

The motor that has kept U.S. capitalism growing during this period is broken. That motor was already flawed, since it was based on a steady accumulation of debt and the creation of fictitious bubbles. This was a policy that would always end in collapse.

Decline in Manufacturing Industry

The whole reason for capitalism's success as a system has been its ability to create a powerful productive system that creates goods. When production was done in the U.S. and unions were strong, this led to higher wages and the emergence of the much-described middle class.

But starting in the 1970s and accelerating in recent years, big business gave up investing in new manufacturing facilities in the U.S. and went in search of higher profits overseas. Profits extracted from the labor of workers here were reinvested in new competitive industries built overseas. This also led to a massive wave of speculation in financial markets. The result was the loss of living-wage jobs here and the creation of ever more speculative bubbles.

The result has been the de-industrialization of the U.S. Well-paid industrial jobs have been replaced by low-paying service jobs. In 1965, manufacturing accounted for 53% of the economy. Manufacturing now accounts for only 12% of U.S. jobs (Financial Times, 7/31/10).

As the crisis has deepened, big business has demanded that its political parties adopt a neo-liberal agenda. The aim of this neo-liberal agenda is to reverse reforms won from the 1930s to the 1970s. This agenda includes efforts to deregulate key industries, cut federal spending on middle- and working-class programs, freeze the minimum wage, cut government regulation, cut wages, work rules, and benefits at work, weaken labor unions, cut taxes on the rich and business, and build up the U.S. military.

Neo-Liberalism and the Democratic Party

Under the leadership of Bill Clinton, the Democrats created the Democratic Leadership Council to craft a clear neo-liberal doctrine for the Democratic Party that became enshrined as their main policy. Promising to adopt these policies, Bill Clinton won widespread corporate endorsement as the candidate for the Democratic Party in 1992.

The same policies of neo-liberalism are now at the heart of both political parties. Both are committed to profit maximization for the tiny elite that owns the major companies and the places we work. In the present crisis, this capitalist elite is not reinvesting to rebuild the U.S. economy. At present, big business is sitting on $1.5 trillion. It refuses to invest in productive jobs, yet it demands massive cutbacks in Medicaid and other social services.

This takes us to the main problem of our time. Capitalism can't continue to grow the economy. It has chocked on the massive debt bubble it has created. It is now turning inward to take back the gains won in the past by workers. In order to become profitable, it is demanding we reduce the share of wealth we as workers get.

The Financial Times of London documented three main trends that are devastating the living standards of working people in the U.S. First is a longer-term decline of U.S. capitalism since 1973. In that time, the annual income growth of the bottom 90% has been flat while the income of the richest 1% has tripled. Second is the fact that this decline has sped up in the last decade. Even during the boom from January 2002 to December 2007, the median U.S. household income fell by $2,000.

It states: "Combine those two deep-seated trends with a third - steeply rising inequality - and you get the slow-burning crisis of American capitalism. It is one thing to suffer grinding income stagnation. It is another to realize that you have a diminishing likelihood of escaping it - particularly when the fortunate few living across the proverbial tracks seem more pampered each time you catch a glimpse." (Financial Times, 7/31/10)

But leaders of the labor movement and other social movements have failed to recognize the nature of this new period. It is not a question of the Republicans being "mean-spirited" in promoting their corporate agenda, as many on the left would argue, and electing "better" Democrats. There is a bipartisan agenda on neo-liberalism. While the speeches and tone of the two parties may differ, the underlying content will be of a very similar nature.

The key issue facing working people, the poor, and youth is not whether Democrats or Republicans are elected in 2010 or 2012. It is whether we, the working class, i.e. the vast majority whose main source of income is working, can organize and defeat this coming attack by the rich elite to take back the gains we won in the past.

The agenda of the Democrats is not based on our needs, but on those of Corporate America. That's why we need to take off the rose-colored glasses and look at the real substance of the Democrats, not their flowery rhetoric and comforting promises. Until we grasp this, we will be ineffective in mounting any defense of our interests.

Eroding the Base of the Two-Party System

At a time when we are told to prop up the Democrats, there is growing support for breaking from the two-party system. Most people vote against the other party rather than showing genuine enthusiasm for "their" party. The number of voters registering as "independent" is growing.

According to a CBS News-New York Times poll in February 2010, 75% of Americans disapproved of the job Congress was doing, with only 8% of Americans wanting the members of Congress to be re-elected. A Wall Street Journal poll in early December 2009 found over 50% said they wanted a new political party.

This demonstrates the enormous anger at the establishment political parties, and the huge potential for a big political movement outside the two-party system in the coming period.

Serious journals of capitalism, such as the Financial Times of London, see the size of the crisis and the threat it poses for this system. "When the next crisis hits, and it will, [the] frustrated public is likely to turn, not just on politicians who have been negligently lavish with public funds, or on bankers, but on the market system. What is at stake now may not just be the future of finance, but the future of capitalism." (John Kay, "'Too Big to Fail' Is Too Dumb an Idea to Keep", Financial Times, 10/27/09)

The shattering of middle-class living standards has removed the main force that has stabilized the two-party political system in the U.S. The gulf between the haves and have-nots is undermining support for the two corporate parties. This can open up a period of radicalization and the emergence of new political forces to fill this political vacuum.