Having watched and read about the Conference of the Paranoid, Angry and just plain Crazy (CPAC), including the Orange Merkin’s return to the political centre stage, I am more convinced then ever that if US conservatism, and indeed the US itself, is to find its way back to some semblance of stability, it is US capitalists who will have to lead the charge. This may seem odd for a left-leaning blog to say, but the logic underlying the rescue lies in some structural imperatives and some non-structural pathologies.
As has been written before in these pages, the State and Society in the US and places like NZ are capitalist because they depend on a profit-driven system of capital accumulation and distribution for the welfare of capitalists and workers alike. Capitalists invest and pay wages out of profits, so both overall economic and specific wage growth depend on the continuation of the profit-investment cycle. Capitalists borrow from other capitalists in order to grow their businesses, which in turn help expand the web of opportunity (measured in employment and/or higher wages) for wage-earners down the productive chain. In other words, the material welfare of everyone depends on the investment decisions of capitalists.
This is the structural imperative: the State and Society are capitalist because of their material dependence on a system of private accumulation and economic decision-making. Even state capitalist systems abide by the immutable laws of the profit-investment cycle, but in the US (and NZ) the vast majority of decisions about accumulation and distribution ultimately rest with capitalists. So long as capitalists invest and workers produce so that profitability is sustained, current welfare and future growth is safeguarded.
In order to maintain this cycle and encourage capitalists to re-invest in the domestic economy, the State uses tax and social policy to sustain economic growth and otherwise frame the investment “climate” in ways conducive to investor confidence. The ways in which it can do so and the effectiveness of what it does is influenced, when not determined, by the political and social climate of the current moment and the outlook for the future. That is because above all, capitalists want two things in tandem: stability and certainty over time. Socio-economic and political stability lends certainty to the investment environment, which encourages regular rates of investment and return on which to make future decisions on investment and wage-setting. The more this becomes a self-perpetuating cycle, the more a capitalist nation-state grows and prospers, thereby reaffirming the utility of the economic model under specific political conditions.
That is the notion that lies at the heart of classic liberalism: the combination of market-driven economies and democratic political institutions is considered to be the most preferable (or least bad) political-economic model because it places (theoretically at least) a premium on private choice and individual freedom. Within parameters broadly set by a State led and managed by a political bureaucracy, capitalists chose where to invest and workers chose where to work given where investment flows. Or at least that is the general idea.
Here is where the superstructural problem starts for the US. Under Trump, the Republican Party has increasingly become untethered from its pro-business bias and devolved into a national-populist cult of personality. The events of January 6 and sociopathic displays at CPAC–displays not isolated to Trump himself–clearly demonstrate that conservatism in the US is no longer based on pro-market ideologies and an understanding of the structural dependence of the State and Society on Capital. Instead, it is now the fevered product of a hodgepodge of conspiracy theories, religious opportunism, racism, bigotry, prejudice and xenophobia, with many of these inimical to maintaining business growth. Trump is the poster-boy of this collective derangement but the GOP is awash in it far beyond him.
That is bad for business. The threat of irrational political leadership and the distinct and ongoing possibility of civil unrest, including irregular collective violence, undermines the stability-certainty cycle because there is a mutual or co-dependence between the political superstructure and the economic base. Political and social instability can and often does lead to economic instability, something that is bad for all concerned.
Under such conditions overall demand drops, many businesses slow production, workers are laid off and investors hedge, sell and take profits rather than make long-term investment plays. Shorter investment horizons add to market uncertainties, which in the US is compounded by the practices of “shorting” stocks (whereby anticipating further value losses the investor borrows stock and sells it at current market value in anticipation of buying it back a future lower price before the loan expiration date) and stock buy-backs (where companies use profits to buy stocks in the company in order to reduce the number of stocks freely available and thereby squeeze the stock price upwards).
Both of these are forms of speculation rather than productive investment and are a hallmark of the US financial markets. They have also attracted the attention of so-called mom and pop “retail” or “day” traders and semi-organised small investor groups whose goals are individual self-enrichment rather than contributing to industry profitability, job creation, technological innovation or overall economic growth. These speculative practices by small and large investors have a negative impact on investment, employment and wage stability, further undermining popular faith in the economic system and the political edifice that serves and protects it.
The combination of anarchic (and self-serving) financial market behaviour and increasingly anti-business fanaticism in Republican/conservative ranks (think of the constant attacks on the techno-oligarchy for de-platforming extremist speech on social media) has attracted the negative attention of credit rating agencies, where debates about lowering the US government credit rating from AAA (outstanding) to something else, previously unthinkable for the global reserve currency issuer, are now common practice. When combined with the possibility of labour conflicts and industrial slowdowns tied to civil unrest, the rise of deranged demagogic politics within the US political Right is a threat to, literally, business as usual.
It is said that, according to the invisible hand of the market, economic actors are self-interested maximisers of opportunity and that the sum result of their self-interested actions clears the market at the collective level. That may or may not be true. What is true is that the “market” involves political as well as purely economic factors and agents, and when political actors interfere with the the profitability of self-interested maximisers of economic opportunity, then measures must be taken to mitigate or overcome those political obstacles.
For US capitalists the problem is not one of class struggle but about class survival. It is not about class war but about self-preservation. The threat to their status comes not from the working classes radicalised by anti-capitalist ideologies but by self-professed capitalist supporters. Not all supporters of capitalism are capitalists themselves or understand the relationship between capital accumulation and distribution at a macro level, and many do not add value and wealth to society but in fact subtract value and wealth from it (be it in their rent-seeking microeconomic behaviours or other forms of myopic malfeasance). Moreover, US capitalist classes are variegated and often in conflict, with ascendent and descendent class fractions competing for political as well as economic dominance (think high tech versus industrial manufacturing elites).
Trump and his supporters represent a large but descendent segment of the capitalist class constellation, but they are not the only or the dominant faction and are a clear threat to the interests of other (ascendent) capitalist class factions (again, think of the techno-oligarchy). Not all corporate elites in the US favour Trump’s behind-the-wall, low skill, low education, industrial-era blue collar form of economic nationalism, and many see it as a simple wave to the past in the face of (and impediment to) an automated and transnationalised productive future. The political fight is consequently as much more or within the capitalist classes as it is between them and the working/subaltern classes and, however couched in the language of cultural conflict and competing value systems, that fight is microcosmically distilled in the struggles over the direction of the Republican Party.
Let me be clear. This does not mean that anti-Trump capitalist elites are good people or interested in the overall welfare of the nation. People like Jeff Bezos and Elon Musk are as much innovative exploiters of the many as they are creators of wealth and opportunity for some. The entire financial industry is populated by selfish people and greedy logics and is in desperate need of major reform (since the post 2008 crash reforms were cosmetic at best). But the necessity of the situation dictates that these type of people be seen as tactical allies in the fight against neo-fascism at a time when progressive forces do not have the strength to help stem the deterioration of the American Right. In other words, desperate times require desperate measures, and the appeal to anti-Trump capitalists is one such thing. Nothing more.
In some countries, the military serves as the saviour of economic elites under stress. In the US that possibility used to be dismissed as laughable but in recent years became a topic of discussion. Although it continues to be seen as a remote option, the ongoing viability of national-populist sentiment in the Republican Party and emergence of an insurrectionist movement within broader political Right circles keep alive the issue of external intervention in the discussion about how to rescue that side of the political system from itself.
This is why US capitalists have to ride to the rescue of the Republican Party. If they do not do so then others may have to, and it will not be revolutionary workers or the peasantry who will be the ones to step up. Inviting military intervention could be catastrophic to the Nation, assuming for a second that the US military would even consider such a move. Social movements will not have the clout to impress Republicans into reform and change away from what they have become. It is therefore up to capitalists to undertake the task.
The Republican rescue involves tough love. In order to save it, the GOP must be broken from the grasp of the national-populists, cultists, MAGA morons and conspiracy theorists. The best way to do so is with the threat or use of a specific type of capital strike. The corporate elite need to threaten the Republican Party with a complete withdrawal of political funding if Trump and his acolytes are not purged. If that threat is not heeded then the funding should be withdrawn, preferably before the next election cycle begins.
The insurance policy to what otherwise would seem to be a risky strategy is the Democratic Party and Biden administration. For all the talk of socialists and radical Leftists, capitalists know that their bread is buttered by the structural dependence of the State and Society on Capital, and Democrats clearly understand this fact. US capitalists may have a more restrained partner in Democrats and may need to concede more on issues of accumulation versus distribution when they are in power, but at least the Democrats are not led by an irresponsible and utterly self-serving myopic cabal that no longer seems to understand the bread/butter relationship.
One gets the feeling that some of this may already be going on. But to be effective the capitalist political strike against the Republican MAGA wing must be public and comprehensive in scope. Winks, nods and quiet backhanders will not suffice. The move has to be out in the open, at least among the economic and political elites.
If that does not happen or does not work to kick the MAGA morons to the curb, then the possibility of a real capital strike must be considered. It can come in the form of a Wall Street sell-off/downturn manipulated by interests most closely associated with the Republican Party or industry slow-downs in regions where Republican support is strongest (say, places where the fossil fuel industry is dominant). Consumer and advertiser boycotts of and slowdowns in supply chain servicing of privately held companies affiliated with Trump are additional forms of capitalist strike.
Needless to say, however sector-specific any economic downturn will be seen over the short-term as a rebuke of the Biden administration, but if quiet assurances are made as to the real intent of the ploy, then both the administration and the productive sectors involved will survive the moment. After all, the goal is to send a message to the Republican political establishment that business will no longer tolerate the national-populist threat to making money, not to kill off profit-making entirely.
In a weird way, this ploy should come naturally to Corporate America. They sell on the future of a Republican Party dominated by Trump and other national-populists and they buy (short term) on Democrats buttering their bread while they bet long term on non-MAGA Republicans restoring the GOP to its status as preferred political interlocutor. There is risk in this strategy but for the private sector, the US as a society, the political system as a whole and the Republican Party as a political institution, the rewards of embracing it will be well worth the challenge.
After all, capitalism is all about risk-taking under conditions of limited information involving structural and super-structural constraints, so the field is open for private opportunity-taking in the national interest.
Lots of food for thought here.
Ha Ha! Perhaps “convoluted and circuitous” might be a more appropriate description. But if it does give pause to reflect, then all is well. Cheers!
It would be good to see the US working class and allies appear somewhere in this mix, not to restore old school Republicanism, but to help clear the toxic fog that MAGA inspired cognitive malfunction and empathy meltdown has generated.
Joe Bidenâ€™s encouraging remarks about union organising may yet pay off. Despite the generalised tenor, he was aiming at Amazon and everyone knows it. If he tips the balance in the union vote at Bessema, Alabama it would be a great thing, and liable to spread.
This links to Pabloâ€™s labyrinth in terms of Trump supporters often being discarded and bruised working class. Trump convinced them he felt their painâ€“but of course never intended to do anything concrete about itâ€“like raising min. wageâ€“except enable their misdirected rage. So if working people began to gain some power again and feel better about themselves it might be a positive development all round for the USA.
But yes, capitalism and finance capital and neo liberal hegemony are of course dominant at the moment and might be enlisted to do the occasional good service, but I would not call resuscitating the GOP that useful. How about pushing for a proportional system? Election reform, or working around the Electoral College and gerrymandering?. The state by state campaign for EC electors to promise to support the popular vote winner for instance.
I agree about the bigger picture and the need for much broader reform. But I am a realist and believe the first order of business is to rid the US political system of the national populists as a political force, and that is a problem on only one side of the aisle. By purge I mean everywhere, by juridical, economic and political means. Only then can we look to the deeper changes that clearly need to be done, which are reflective of the changing electoral demographic, and which are being so assiduously resisted via voter suppression and gerrymandering schemes by the GOP leadership.
And because I am a small “d” democrat I believe that the US needs the Republican, Democratic and other parties and a heck of a lot social readjustment in order to become a substantive democracy by any honest definition of the term.
I hope what you suggest happens, Pablo. I don’t hold out much hope though. A recent online catch up with friends who live in the US (he’s a Kiwi) was illuminating when I asked how their lives were now that Trump (who they professed to loathe) was no longer POTUS and the reply completely took me by surprise when he said “One thing you can say about Trump was that he was great for the stock market”. Self interest will rule the day, whether it is big business or private individuals who influence the direction the country will go in, I think. I did reply by saying that the stock market did well in spite of him, however the tax cuts given to the wealthy set the ball rolling. And then there’s been all that quantative easing….
You are correct to tell your friends that the stock market did well in spite, not because of Trump. Also remember that as I mentioned in the post, the US stock market is now dominated by speculators, not real producers of actual value and economic growth. Sure, there were plenty of opportunists who jumped on Trump’s tax cuts and anti-regulatory bandwagon, but that was just a short term taking of advantage while the moment was ripe. They knew all along that given the cyclic nature of democratic politics, the moment would not last and corrections would be made down the road, so their focus was on making opportunistic gains while it lasted.
For the producers of actual wealth (remembering that I am not a fan of capitalism to begin with and therefore see workers as the ultimate producers of productive wealth in a capitalist society), Trump was a mixed blessing at best. But now his attempts to usurp the constitutional order and prolong his increasingly authoritarian reign increasingly interferes with the business of making money. Civil strife, political demagoguery, race-baiting and dog whistling–none of these make for a stable socio-economic climate in which to make investment decisions. So it is in big businesses’ self-interest to see Trump gone regardless of whatever civic mindedness might also be in the mix.
Here is a pertinent anecdote. My father was an industrial capitalist. He used to tell me about his contempt for finance capital. His explanation was simple. Producers of actual material goods (in his case, automobiles) need stability and low interests rates on which to borrow for, say the construction of a 100 million dollar production plant. Finance capitalists, on the other hand, live off of the interest on money initially made by others. Since interests rates go up in times of uncertainty and instability, they have a structural stake in pushing instability and uncertainty in the markets because it improves their profitability bottom lines. There are many ways in which to do this, from manipulating country credit ratings to fomenting coups. This threatens the profitability of material producers like the old man, whose investment return time horizons are longer and whose stake is in material things (land, physical plant, workers) rather than just money.
So while the stock and financial markets may see profit in Trump’s irrationality and erraticism, many capitalists understand him for what he is: a conman speculator who likes to play people for suckers and who had added little tangible wealth to anyone but himself and who now is threatening the entire edifice of corporate supremacy with his national-populist antics.
That is why they must act against him.
I find the whole US thing horribly depressing. The unquenchable thirst for money epitomised in Trump, the falsity of exceptionalism, the endless lies and manipulation, the orchestrated push to disenfranchise the ‘other.’ (The SC at the moment dealing with legislation re Arizona voting rights). Maybe more capitalism is the answer??? What about guiding the system towards greater personal sovereignty and towards class rather than ethnicity? Or is that just about assimilation or a ghastly version of UK snobbery? You’re not Hispanic or African American you’re a successful teacher, plumber or doctor. Living a very sheltered life, politically, as a New Zealander doesn’t equip you to comprehend what it may be like to live under a different regime. As an example why is giving people the minimum wage (US $15) so fraught? This relatively small redistribution of wealth in such a bloated economy would hardly cause a ripple, or am I talking rubbish? (So many questions!) I kind of despair of it all. At least it is a relief no longer to have Trump in our faces every hour of every day. I guess, like a lot of NZers I’m just pretty simple and differently socialised. The huge complexity of US power politics is beyond me.
Rest assured that you are not simple (you would not be reading KP if you were) or the only person dismayed and confused by US politics. Many US citizens are as well. And a lot of that is a product of deliberate policies designed to confuse the electorate or divert from the real issues. Take for example the matter of class. That is the one big no-no is US politics. Under no conditions should Democrats or Republicans focus on class conflict as a historical fact and contemporary problem. Instead, focus on any number of non-class issues because that helps divert attention away from the class basis of US society and the fact that economic benefits flow upwards rather than more equitably (remember the “1 percent”).
After all, if you can get white redneck proletarians to think that Hispanic, Afro-American, Asian and other proletarians are the biggest threat to their way of life, then you can keep them fighting each other over crumbs rather than for control over the whole cake.
Heck, even Bernie and Elizabeth Warren tiptoe around the subject, instead referring “middle America,” the “average citizen” or some other platitudinous claptrap when calling for reform of the tax, financial and corporate systems upon which the entire edifice of political power ultimately rests.
Cherry picking part of a sentence in your essay.
” and many do not add value and wealth to society but in fact subtract value and wealth from it ”
This reminds me of Dr. Michael Hudson who talks about the ” FIRE ” economy.
Finance – Insurance and Real Estate
The only sectors that benefit in economies of rising asset prices and these same sectors are costs to productive businesses.. that is.. subtracting wealth and value
Thank you for your considered and thorough reply, Pablo. Like you, I have not been a fan of capitalism but realise this is the system we have therefore it needs to be as fair and decent as possible, and it is the workers that create the wealth (I guess the entrepeneurs take the risk with ideas and borrowed capital). Barbara’s post is interesting too, as I’d never really considered class issues as such in the US -but of course they exist – and your answer is illuminating in that regard.
It’s hard to know if global monetary systems will recover and go back to what used to be thought of as normal. I expect there will be changes over the next few years as countries’ recovery from the ravages of Covid will happen at different rates. The West will probably be ok, but third world countries will suffer more. As a result I see the global picture possibly being worse on the whole for third world counties, bringing fresh global problems to be tackled. How that will affect monetary systems and things like interest rates remains to be seen. If Biden does manage to make inroads into getting the economy back on track (and it appears promising so far) then he will get more backing from those that may have been traditional GOP backers. Would it be too much to hope that he could have a “Jacinda” moment and gather momentum from the right side of the spectrum, leaving the MAGA brigade to wallow in their own awfulness?
Yes indeed. But we must differentiate between real estate, which makes profit on the buy and sale of tangible assets that can (potentially) be used for productive purposes, and finance, which uses other peoples money and interest to generate profits without true productive value. I alluded to this in my reply to Di’s earlier comment.
That is true, Pablo.
Very good deconstruction of the ‘class’ issue. Thank you.
Maybe it’s different in America with all the fundraising, but my experience talking to a few in business in NZ is that they really aren’t interested in politics. They may be aware of a few talking points but generally haven’t thought about them, or about any part of government other than regulations they deal with directly. Is my experience skewed?
I am referring not to individual business owners, many of whom are not smart enough or broad-horizoned in their perspectives outside of their immediate profit motive (and that can be in seven figures) to comprehend the bigger play. I have met plenty of them, usually looking for free advice about market conditions and investment “climates.”
Here I am talking about what in Spanish is called “the captains of industry,” i.e. those who control productive sectors and can look beyond the immediate interests of their individual firms and fortunes. Those are the people that matter, and they can see the threat represented by the MAGA occupation of the GOP. This week the WSJ editorial board alluded to as much. https://www.wsj.com/articles/the-grievances-of-trump-past-11614641726