03.06.2021

Where is America going?

Has there been a social democratic turn following Joe Biden’s victory? Now, after all, his administration promises not only to tax the rich, but help the poor. Then there is China, the EU and the so-called third world. This is an edited version of the talk Hillel Ticktin gave to the May 27 Online Communist Forum

Not many people expected the United States to be in the current political situation: that is to say, to have a Democratic president, who then began to talk about reversing policy back to a period before 1980. That is something that we must consider, in terms of the capitalist class adopting a different set of policies from those under Ronald Reagan and Margaret Thatcher. Basically any discussion of the present has to be in these terms - the attempt to reverse the failures of the period from 1980 to the present day.

The general policy after World War II was one of making limited concessions to the working class. In Britain and elsewhere that meant full employment, while in the United States it meant greater employment than had existed previously. What is clear is that, since 2008 down to the present, the global capitalist economy has stagnated. This is usually described as a ‘great recession’: that is to say, it is not a depression like the one prior to the war, but still significant.

But it seems to me that this is nonsense. You can, of course, define ‘depression’ and ‘recession’ in any way you like and that is what we have seen. We have actually had in the world economy, from around 2008, stagnation which has taken a crisis form in which the whole system is threatened - something that is now being admitted. It is interesting that this stagnation has remained in place despite the slight ups and downs, and ‘crisis’ is the term that has been used. But something that lasts for more than a dozen years stops being a crisis - it needs some other name! When there is growth, as there is in some countries, it is at a very low rate and the third world has been hit the most. For example, in South Africa there has been no growth at all for the last few years and those who are predicting it there are probably being a little too optimistic.

So what we have seen in this whole period down to the present is an overall downturn, which the capitalist class has not been able to counter. Its major feature, which most people in the ruling class are ignoring, is that they are just not investing - or perhaps doing so only in a routine way. Obviously that means that growth is low and the rise in productivity is near zero. There is no question about this problem - clearly the capitalist class does not see any great need in investing. That does not mean, of course, that there is no investment whatsoever, but there is nothing in addition over and above the standard reinvestment, compared to previous years, even if the rate of profit would allow it.

The example I usually give is that of the Bank of New York Mellon. The lack of investment is illustrated by the fact that it is custodian to assets of more than $41 trillion, while the US gross domestic product is just over $20 trillion (of course, this cannot be compared to other countries, such as Britain, in terms of its size). So this $41 trillion is doing nothing other than being partly invested in the usual routine way. So there is no US expansion in any real way.

That does mean that the standard of living of the majority of the population is, to put it mildly, not increasing - and in fact for many it is falling. It is quite clear that it was not only the agrarian sector that was in trouble, so it is not surprising that in a situation where neither of the two main parties were proposing any real change something new would be sought, which was found in the shape of Donald Trump. So, while the US economy can hardly be described as highly successful, it can continue what amounts to its own economic loss-setting.

Predicament

Today a substantial part of the population has suffered a declining standard of living and a substantial part of the intelligentsia and of young people are critical of the system. That applies to Britain too, of course, where a large part of the population between 18 and 39 vote left, which is not surprising.

In principle you would expect the ruling class to try to find a way out of the current impasse. Obviously, when such a large proportion of their assets is doing next to nothing, that must be of some concern. But they are not threatened, of course. The average income of the highest sector in the United States is huge. Forbes estimates that there are 600-700 people in the US whose wealth is in the billions.

The way out which a section of the ruling class appears to have taken is precisely to support Biden. An obvious example is James Dimon, the director of JP Morgan Chase, which is the biggest bank in the USA, if not the world.¹ It is very unusual for a top banker to support a ‘left’ politician, though, obviously, Biden is not left, despite the fact that there are those who regard him in that way, because some of his slogans are those of post-war social democracy. For example, he calls for the resuscitation of trade unions.

We are talking now of a budget being put before Congress, in which Biden is proposing expenditure of over $6 trillion - substantially more than the $4 trillion previously predicted. He is proposing a series of measures which will help young children, students, the poor, the elderly and the unemployed, and a fiscal stimulus of more than 15% of GDP is expected. The Financial Times says that this is something “historically associated with wartime”. Biden will also be unveiling an infrastructure bill, which will cost more than £3 trillion over 10 years.

How will all these ‘social democratic’ measures be received? The Financial Times points out that “the Internal Revenue Service has shrunk by more than a fifth over the past decade and increasingly avoids auditing the very wealthy”.² So what Biden is proposing is precisely ... ‘Tax the rich’. Not many people would have expected him to take this measure and that the rich would have accepted it - and a substantial section of the rich have accepted it. The FT states that up to $70 billion a year of corporate taxes goes uncollected “due to various offshore accounting schemes”, and there seems to be some recognition that this situation must change.

So the intention is to raise the level of taxation in order to pay for a budget which will actually help the majority of the population, as opposed to the rich, which is what happened under Trump. Biden is proposing stronger trade union rights, increased tax credit for the low-paid, a higher minimum wage, the creation of more jobs, etc. So it is clear we have a US government that will not only tax the rich, but help the poor.

However, at the same time Biden wants to win the support of the ruling class. He does not want to provoke a ‘civil war’. But, of course, he does not have a majority in the Senate - although vice-president Kamala Harris, who acts as chair of the Senate, will, of course, vote for the Democrats, whereas the odd Democratic senator may not follow the party line (in the lower house, unlike the Senate, the Democrats do have a clear majority).

The question is, will Biden be able to win over the majority of the US population or will Trump gain sufficient support to win the next presidential election? The way it looks to me is that the population is becoming much more in Biden’s favour. After all, they would support a return to Barack Obama’s provision of free healthcare, as well as the implementation of a minimum wage, which Biden is trying to get through in one way or another, thus achieving some sort of consensus. (Not that $15 an hour is a tremendous burden on the capitalist class. It is amazing that the legal minimum wage has been fixed at just $7.)

Quite obviously, however, a substantial minority of the ruling class is opposing Biden, but that is what tends to happen in similar situations. However, an ever-wealthier ruling class majority seems to be taking the opposite line, in going along with Biden’s logic. Why would any US president seek to punish the majority of the population? Why would he not want a more stable country? It is clear that, given the number of riots and the constant use of the police (with the extreme ideology that many of them have), that the United States would be a better place even for the rich if such reforms were made.

Global situation

In other words, a substantial section of the ruling class will be prepared to concede gains for the majority of the population. Under conditions where an increasing number are supporting greater equality, you would expect that, given there is no ‘external threat’ like the Soviet Union (apart from climate change, a matter which Biden has taken up), such concessions can easily be made.

Having said that, what Biden intends to do is to go slowly in order to secure support - although it is not at all clear that he will succeed in that. I do not know how far things will go, but I suspect that it will be sufficient to achieve some degree of change and thus inspire an increasing section of the population.

It is rather odd that at this time the USA is regarded by many as the bastion of the far right. An incipient left of some sort is actually forming, although the various left groups are not themselves going very far, including the Democratic Socialists of America, which has almost 100,000 supporters, including in the top-end of the Democratic Party.

One can, of course, be too optimistic about what is happening in the United States. However, it does seem to me that there really is not much choice for the ruling class. After all, there are substantial numbers supporting Trump from the right and, if they were somehow to take power, in the end the ruling class itself would lose out. It does not bear thinking about what the right would do to the country. Eventually, but inevitably, a serious left will have to be formed in response.

It would be utterly stupid for the ruling class to go for a dictatorial form and it would be prepared to make concessions, as it is now, to avoid that happening. It will not tolerate socialism, of course, but it is prepared to tolerate concessions - call them ‘social democracy’ if you like. Under Biden’s budget proposals, etc there will be a rise in the standard of living.

That is the situation as I see it in the USA, which is the global hegemonic power. But Trump directly attacked that concept, which meant that the United States could do what it liked without having to develop cooperative interactions with other powers. The USA would act in its own interests, as Trump made very clear, but its own interests, contrary to Trump’s beliefs, cannot be achieved without viewing the world as a whole, and the US role within it. That is the kind of viewpoint that any rational person would take.

Biden is seeking to interact with the other leading powers. He is about to meet Vladimir Putin, for example, and the reason Biden is doing so is not because he likes Putin - he has called him a “killer” after all - but because he wants to maintain the US hegemonic position.

Finance capital is necessarily international, but not in the sense of sharing its wealth and working for the common interest. It is international from the point of view of US capital in the sense of maintaining a world in which the United States can grow. In that sense the US does need other countries - not to allow a permanent slump, but to allow the world within which US capital is interacting to expand.

Of course, it wants the United States to remain in overall control and for US capital to benefit as a result, with dividends flowing in its direction. If it is not in control it will not maintain those dividends - which are flowing in its direction right now (the US has a monthly deficit with the rest of the world of around $50-60 billion).

China

As I have said, the USA plays a critical role in terms of overall development of the global economy - and that includes in China.

It has been pointed out that something like 60%-80% of Chinese industry is under private enterprise. Whereas a section of the left has called China ‘state capitalist’, now that is a standard term used by some of the right too. There is no questioning of China’s actual economic development, especially following the 2002 deal with the World Trade Organisation, which opened things up. It has developed phenomenally. Although things have been held back by the spreading of the Coronavirus pandemic, China was able, using what amounts to Stalinist tactics, to drastically reduce and limit the number of cases - there was only a tiny fraction in percentage terms of many other countries.

So there is no question of China’s importance today. As a result, many transnational companies are directly investing in China (for example, through the US-based Black Rock company). I am not clear what the aims of the Chinese leadership are and where it is actually going - its name is still ‘Communist Party’, of course. But the United States is effectively cooperating with it in industrial terms, when it comes to China’s accelerated development, compared to the earlier period. The US leadership has essentially agreed that it will invest there.

By contrast, Trump took what amounts to a very hostile line, but up to now, as far as I know, the USA has not brought to an end the various measures introduced by the last president. The USA and China had a meeting in Alaska in March and, although both sides wanted to come to deal, it seems they were not able to do so. But no-one is really certain what this means.

The original intention of the Communist Party of China was to allow the country to develop under its control and give big Chinese firms an international role. But it is not going to accept western controls over that role and that fight is going to continue (from the point of view of the left, it is not possible to take either side), but the interaction between the US and China is bound to continue. The idea that China could ‘take over the world’ is absurd, but the US does want to establish American investment and control there.

Obviously China has as much to do with socialism as my dog, so we are not talking about any progressive development, even though some on the left believe that is the case.

Third world

Outside the US and China, it seems to me that the situation in the third world is absolutely dire, with the exception of a number of countries in east Asia.

That is certainly the position in Africa, and it is even worse in South Africa, for instance. There the standard of living is low, the development of industry hardly exists and things have actually gone backwards. Clearly a globalist United States will have to consider what its policy towards Africa in particular, as well as parts of South America, should be.

As for Europe, it seems to be in an utter muddle. That part of it which was once under the control of the former Soviet Union really does not know where to go. A rise in the standard of living was clearly expected - to the same level as, say, France or Britain. While that has occurred to an extent, the rise has been extremely limited. Much of the industry there - in East Germany, for example - has been all but wiped out. These countries are now effectively ‘semi-colonies’ of the more developed states within the European Union.

Of course, the United States remains the dominant power, politically and economically - its hegemony is financial too. While things have continued in that form, Biden has recognised that some kind of change is needed - in favour of a US role that appears less dominant and less exploitative; that the USA itself can provide for the population as a whole. If Biden is successful in his domestic aims, logically that would have to extend to the rest of the world too. In other words, there is no doubt that what happens in the United States is crucial.

It is clear that the left is not in control there (indeed it is very small), but we need to ask, why has there been this change? To answer this, we need to go back to first principles. In 1917 there was a revolution which overthrew capitalism in Russia and it brought the world into a condition of transition, where we remain today.

1. See ft.com/content/c33c9577-0faf-424d-919e-68bda2052867.↩︎

2. ft.com/content/d301648c-71a3-4bd2-bef7-8d773dfcc26f.↩︎