US Economy: On the "rails" of a full-frontal conflict
The following article is translated, edited, and republished by the New Worker Editorial Board from Rizospastis.
Pages upon pages were written before and after the results of the American elections, focusing on the agonizing question of what Trump's election will mean for the USA…
And it's not us saying it, but the CEO of BlackRock - the largest investment fund in the world - Larry Fink , who said at a conference in October that “I’m tired of hearing this is the biggest election in your lifetime. The reality is over time, it doesn’t matter,”, noting that the investment fund works with both Democratic and Republican administrations and has engaged in discussions with both 2024 presidential candidates.
Such outbursts of honesty do not mean, of course, that there were no differences between the two candidates. In fact, big differences came rushing to the surface throughout the previous period, expressing the very deep division within the US bourgeoisie. But they capture the reality of the matter, the rails on which this struggle moves.
And in the case of the new Trump administration, these rails are none other than the battle with China for primacy in the imperialist system, with open war fronts around the world and the possibility of a new international capitalist crisis looming. These, then, determined the election of Trump and will set the tone of his administration.
Some of these figures and the estimates are recorded below.
The Elephant in the Room is Here
As far as the economy is concerned, the elephant in the room is none other than another lurking crisis of capital overaccumulation. The warning signs are plenty, from the collapse of a number of US banks in the spring of 2023, to the "black Monday” of the US stock market last July.
It is the funds that do not find profitable exits that head full speed to another capitalist crisis, while the estimates and what is recorded in a recent report by Delloite (Table 1), such as for example:
[-] The jump for the current year of the Real inventory accumulation index ("Real inventory accumulation", which captures the accumulation of goods that cannot be sold, reflecting the accumulation of capital)
[-] The temporary decline in pre-tax profits
[-] The intensity of exploitation and the all-out attack on the working class, with the relevant "labor cost" index predicted to continuously decline until 2028
(Table 1) : Delloite Report on Business Sector
The estimates also suggest that in the USA, labor market participation rates are expected to rise across many age groups, particularly among those aged 55 and older, reflecting an extension in working years. Although unemployment, which reached record pandemic levels last July—indicating, according to analysts, the onset of a new recession—is anticipated to decrease, this decline will likely be slow. Meanwhile, real wages are projected to continue falling alongside a decrease in inflation, leaving many workers at a loss.
As for Trump's declarations of the “largest immigration deportation program in history", such measures are actually a symptom and policy of managing the "surplus" for labor capital. In fact, reversing cause and effect, the Peterson Institute calculates that deporting 1.3 million workers would mean a contraction of the US capitalist economy by 2.1%, leading it into recession.
Amidst all this, rampant exploitation, intensified workloads, and starvation wages are reaching a breaking point, leading, in many cases—such as with the "Amazon" monopoly—to worker backlash, as they organize and fight.
Besides, a look at the chasm that is constantly opening between the jump in productivity and fixed wages (Graph 2), shows the prescribed course but also exposes the myths that the bourgeois parties peddle here about fair capitalist development and about wages that will rise in parallel with productivity.
At the same time, despite what bourgeois economists claimed before the election about "consumption that endures despite inflation in the USA" and "constitutes one of the main components that fuels the endurance of its economy"—aided by recent years' "expansionary" packages from the Democratic administration to support business turnover—there is no concealing the continuous decline in workers' living standards. The skyrocketing cost of living continues to erode real income for ordinary people, under successive governments, Democrat and Republican alike.
Over two decades in the US:
[-] The profits of healthcare entrepreneurs shot up 100% and much more the corresponding cost of care for the workers
[-] All kinds of fees paid by the lower classes shot up by 170%
[-] As far as housing is concerned , American families now pay more than 35% of their income in rent, after the "invasion" of large funds in the past decade into residential housing (indicatively, "Blackstone" is now the largest owner of land and properties, accumulating in just one two-year period, from 2021 to 2023, 200,000 additional houses in its portfolio, proceeding with mass evictions, with tens of thousands of new homeless).
Somehow, the class gap is constantly widening in the USA, where, according to the data of the Central Bank, the 50% of the poorest Americans now "own"... 2.6% of the country's wealth , while the the richest 10% own more than 67%, the richest 1% more than 30% and the richest 0.1% 14%.
In the coming years, there will be an even more intense, all-out assault on the working class, which will be called upon to bear new sacrifices for the overarching struggle of the bourgeoisie—the battle with China for supremacy within the imperialist system.
(Graph 2): Productivity and Wage Growth
Wear and Tear
Another issue is that which concerns the attempt to find outlets elsewhere for the accumulated funds that cause suffocation in the capitalist economy.
What is the data?
[-]That the huge packages of subsidies and green projects of more than 1 trillion dollars that the Biden presidency approved in previous years, with legislation such as the Inflation Reduction Act, which offer tax breaks of 369 billion dollars for the production of electric vehicles, batteries, hydrogen or solar panels in the United States, could only temporarily and to a limited extent prevent a new crisis by "kicking the can down the road". For example, the construction sector benefited from these measures, with investment soaring 13.2% in 2023, only to come back down very sharply and quickly to 2.9% in 2025 (as forecast). Moreover, U.S. "green" goods struggle to compete with the No. 1 rival, China, which capitalizes on its cheaper, more skilled labor force, vast industrial base, and near-total control over rare materials and earths.
[-] But also in the so-called digital economy, the picture is described by the reports of civil staffs which predict that, according to Delloite, the growth of investment in intellectual property is expected to slow down compared to the gains observed in 2021 and 2022, despite the continued integration of artificial intelligence and other technologies into a range of industries. We should also recall that the collapse of several U.S. banks in the spring of 2023, along with the stock market downturn in the summer, centered precisely on these sectors. A significant portion of large investors grew concerned that massive investments in artificial intelligence and other cutting-edge technologies—where trillions of dollars have been poured—are not yielding returns as quickly as anticipated. These "concerns" sharply reflect the decline in the average rate of profit.
With this data in mind, alongside priorities like "frontline readiness," "energy sufficiency," "self-sufficiency," and "inflation reduction”, the new Trump presidency states that it will partially prioritize competing interests, such as those of fossil fuels, using as leverages the reorientation of state funds as well as new huge tax breaks and other privileges to business groups following what he legislated in his first term (and "enriched" by the Biden presidency such as by subsidizing their energy costs).
At the same time, the course of deterioration, the loss of global influence and the questioning of the primacy of the USA in the imperialist system are also reflected in a number of other economic data, such as, for example:
[-] Soaring borrowing costs, with Delloite noting that "the average corporate borrowing rate rose to nearly 7% by the end of 2023 and remained elevated through the first half of 2024, posing a barrier to businesses needing to borrow for to invest"
[-] The large national debts , which now exceed $35 trillion, raise the debt to 99% of US GDP (up from 31% in 1981), almost as high as its peak at the end of World War II.
[-] The challenging of the dollar , as shown by the recent BRICS Summit, with plans to replace it as a "world currency" are openly on the table. In combination with the relative retreat of the "investment position" of the USA globally, as echoed by the course of the so-called NIIP index (it can be considered the balance sheet of a country with the rest of the world - see graph 3), it shows that problems lie ahead for the US economy.
(Graph 3): U.S. International Investment Position and Assets and Liabilities
Notably, the above shows from yet another point of view that no form of management can solve the inherent contradictions in the capitalist system: All the doctors of economic and political management that were deployed to deal with both the 2009 crisis and the pandemic, simply complicated the problem further, magnifying the problem. As former Soros partner and current chairman of Beeland Interests Inc, J. Rogers recently said, “America’s never gone this long without a recession in its history,” and it’s “overdue” for more economic problems. “I do know there’s going to be a recession again, and I do know it’s going to be extremely bad.”
Headed Full Speed for the Collision
In fact, all of the above shows that the American economy needs something more drastic to deal with the huge problem that is in the DNA of capitalist system, and this is none other than the most decisive turn to the war economy, in conditions that the tone is set by the all-out confrontation with the rival imperialist camp.
As JPMorgan Chase & Co. chief Jamie Dimon remarked at the recent annual Institute of International Finance (IIF) event in Washington, there are growing geopolitical threats that could harm the global economy. He stated that the enemies of the USA aim to overturn the world order, warning that the Russia-Ukraine and Israel-Hamas conflicts could escalate into a new world war. He emphasized, “World War III has already begun. You already have battles on the ground being coordinated in multiple countries.”
Besides, despite the fairy tales about a peace-loving Trump, his program itself provides for the surge of military spending. The experience of his first term with the surge of these expenses (Graph 1), at the same time when the rearrangement of the US military forces (i.e.its withdrawal from Afghanistan) was progressing so that they could focus on China, speaks for itself.
This is especially true because the war economy extends beyond military spending; it encompasses the entire orientation of economic policy toward the central issue, as clearly outlined in the agenda of the Trump presidency:
“By far the most significant threat to the security, freedoms and prosperity of Americans is China. China is by all accounts the most powerful state in the world, except for the United States itself. It obviously aspires to dominate Asia and then, from that position, to become a world dominant. If Beijing could achieve this goal, it could dramatically undermine America's core interests, including by limiting US access to the world's most important market. Preventing that from happening must be the top priority of American foreign and defense policy."
Therefore, based on this (common to all US wings) assessment, the Trump presidency heralds both the attempt to insert a wedge into the attempt to form the Eurasian camp, especially in Russia-China relations, and the concentration of the target on China, with military as well as economic measures, since, as Deloitte also wrote, "geopolitical conflicts are not only fought with weapons - trade policy is increasingly a field of competition".
Elements of this puzzle - on the essence of war preparation - are:
[-] The trade war with China and the EU, with Trump announcing a new jump in tariffs, by up to 60%, on Chinese products, and 10-20% on all goods from abroad, causing a storm and inside the Euro-Atlantic camp
[-] The new economic and other sanctions against a number of states and companies that cooperate in one way or another with China, Russia, etc., and while already in force there are over 15,000 sanctions, against ⅓ of the world's countries. It should be noted that one of the last bipartisan projects of Democrats and Republicans in Congress last September was the passing of 25 laws "to deal with the threats of the Chinese Communist Party" .
[-] The effort to ensure control over critical raw materials and supply chains , with the creation of alternative routes for transporting Energy and goods, such as the infamous India-EU corridor, for which Israel has been slaughtering the entire Middle East for a year.
[-] The effort to "stimulate" the domestic industry, by reducing the dependence in terms of production from China, but also maintaining the primacy in new technologies.
Of course, the main issue is different, and this is also clearly described in Project 2025:
“Technology is critical to maintaining our warfighting primacy, but we must be leery of the siren song that technology alone can protect us. More important is how new technologies are developed, tested, procured, and used, and that relies on the true competitive advantages of our people: ingenuity, common sense, and thoughtfulness grounded in a free society. Because war will continue to be the most stressful and consequential human endeavor, the most powerful weapon systems will remain the six inches between the ears of our citizens and the strength of their hearts and content of their souls.”
It is precisely this soul of the peoples that all the imperialist centers are trying to enlist in the war for their interests.
Tasos Galanopoulos