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The economic crisis of imperialism, oligarchic capitalism, and the authoritarian state.
By
Professor (em)
Gorm Winther
White House press secretary Karine Jean-Pierre insisted in early June that the US economy was supposedly better
off than it has been at any time in US economic history. One is, of course, that the politically correct appointment
of this black LGBTQ+ spokesperson after the leaving of former press secretary Jen Psaki is in beautiful harmony
with the identity political hysteria surrounding minorities in the United States. Another thing is that the press
secretary's statement is a shocking example of incompetence when it comes to the American economy. Race or
sexual orientation notwithstanding, it is in a world characterized by hunger, poverty, climate crisis, recessions,
mass death, and increased exploitation of human labor not irrelevant what one says about the most important
imperialist economy in the West. The American economy, despite its global downturn, remains still a giant in the
Western global imperialist world order. When the giant sneezes, it will invariably affect most of the world
economy. Among professional economists, this is called the international transmission of business cycles. Yet
taking this further than short-term fluctuations it is ultimately in the case of crisis and depression a sign of a rate
of profit showing a continued downward trend since 1945; some have even claimed that you can go further back
in time without the trend being washed away. This applies to the United States and several leading OECD
economies. With Jean-Pierre's appointment as press secretary, it appears that political correctness and the
privileges of a minority are more important than basic professional economic issues. The White House's identity
politics focus is a desperate attempt to veil basic socio-economic problems, increased exploitation, an economic
crisis, oppression, and the erosion of the American "middle class", which has been the backbone of the American
economy's ability to develop since the Second World War.
Jean-Pierre told an astonished crowd of journalists that
" What I'm trying to say is that the economy is in a better place than it's been historically. We feel
here in this administration and among other experts that we're in a good position to address
inflation. We're in a good position to really start working to lower prices .”
This nonsense is challenged by independent economists and Marxist economists such as Richard Wolff, who
points out that wages in the United States have not followed price developments; purchasing power was eroded
before the Western failed sanctions policy against the Russian economy kicked in and worsened the living
conditions of both the European and North American wage-working class, retirees, students, and others on
transfer incomes. In all Western economies, it will be the working class and the less well-off who will bear the
burden that the Western ruling class and economic imperialism have dumped on the weakest shoulders of the
societies. The US and European economies are in a continuing crisis that has nothing to do with surface
phenomena such as the COVID epidemic and the US proxy war with Russia.
Maybe the giant doesn't sneeze that much?
Several socio-economic data tell us that the international transmission of business cycles from the American
economy is based on a negative development trend that has been going on for several years. One is the cyclical
fluctuations, and another and even more important is the long-term trend surrounded by short-term
fluctuations. How the international transmission of business cycles will develop when aggregate demand falls is
here a further point for debate. It is a fact that capital concentration and an enhanced unequal distribution of
income that becomes accumulated Capital (Assets) does not increase aggregate demand as much as
redistribution to the working class and the less prosperous segments of the population. The ruling class is so rich
- after all, a poor rich thing must live - that the reverse Robin Hood policy does not turn into consumption.
Instead, it turns into wealth accumulation (capital accumulation), Capital left bare, and mainly investments in
financial products that are anything but productive. A redistribution of income and wealth to the less well-off
segments of the population would reduce the negative consequences of the international transmission of the
crisis in the American economy. Households with lower income can increase consumption relatively more than
this is the case when the distribution of wealth and income becomes more unequal because the rate of
exploitation of labor increases.
A mere 1% decrease in aggregate demand because of the increased inequality will be felt in all Western
economies, while the Russian economy will be relatively unaffected. This is because the sanctions increase the
requirement in the Russian economy for the establishment of import-substituting production and the closure of
the gaps in production chains. This will lead to an increased domestic investment rate. New import substituting
investments already take place; this is an unique opportunity to create industrial complexes that are freed of
foreign competition in the short run which in the long run may develop into Russian exports with China, the other
BRIC countries, and the rest of the nonwestern economies. Moreover, Russia can expropriate assets, as this has
been done in the West of Russian assets. Nationalizing Western corporations will give the Russian economy a
“free transfer of technology”, that can be reproduced or even improved. That Western strategists think they can
suffocate Russia, as they have been trying this unsuccessfully for years with Cuba and now Venezuela, is
ridiculous wishful thinking.
The interest rate and the inflation rate
Central to an explanation of the crisis and the negative consequences of the downturn in the American economy
is the development of several macroeconomic variables, which have a negative impact on the world economy,
and here, especially on the North American and European economies. That Imperialism is in crisis is as mentioned
seen by the tendency of the profit rate to fall, expressed by a negatively sloping trend line over the last 25 years.
In June, the US central bank (The Federal Reserve or the FED) raised the interest rate by 0.75%, which is the
highest interest rate increase since 1994, and this happened at the same time as the decline in purchasing power
due to inflation took place. This cannot only strain household and business finances, but it will also affect
aggregate demand. Most consumer durables, credit card purchases, investments in land and real estate,
investments that increase employment, and repairs and maintenance require loan financing. When the Fed
raises the central interest rate, the goal is to increase credit costs throughout the economy to reduce inflation.
Yet, this will be accompanied by rising unemployment. High-interest rates make loans more expensive for both
companies and consumers, who end up spending more and more money on interest payments. This should then
at the same time encourage increased savings to earn higher interest rates. Depending on the interest rate
margin this nonetheless could increase profits and Capital accumulation left bare in the banking sector.
As is well known, the central bank is the banks' bank. The FED decides what the banks must pay to be able to
borrow money from each other, or they decide what it will cost to carry out a withdrawal at the central bank. In
terms of monetary policy, the increase in the discount rate should dampen inflation, which does not seem to be
happening.
Regarding the international transmission of business cycles, the rising interest rate can lead to an incentive for
foreign investors who will increase their investments in the United States, if the interest rate span between the
American and the foreign interest rates are so high that it increases profits for foreign investors ventures in the
US. On the other hand, the fall in total demand due to the high interest rate and a rising inflation rate that erodes
the purchasing power of households will cause other economies to experience falling exports, lower their capital
imports, and the domestic propensity to invest. This is explained by domestic investors' export capital to the US.
In times of crisis, it is a failed economic policy to resort to monetary policy tightening; instead, there is a need
for expansionary fiscal and monetary policies that could spread to the entire world capitalist system and could
have an expansionary impact on the domestic economy.
According to data from the US Department of Labor published on August 10 annual inflation rate development
for the US of 8.5% for the 12th month ending with July 2022. The year before we saw the highest rise since
November 1981 with a 7% annual rate. The annual rates before the recent years were fluctuating around 2 %
with 2014 and 2015 at a record low of almost stagnating at 0.8% and 0.7%. Already in 2021, the inflation rate
rose to 7% (calendar year) and 8.5% in 2022 (July 2022 compared to July 2021) despite a COVID epidemic where
you could expect a fall in the inflation rate due to a falling level of economic activity. Instead, you got stagflation.
Hence, when the senile Joe Biden stands up and accuses the Russians of being the cause of the declining
purchasing power of households, it is gross demagoguery. Blaming the special military operation in Ukraine 4
months before the closing time of the latest census for the inflationary development is far-fetched. The fact is
that the inflation rate has shown an increasing trend since 2016, without wage increases equalizing price
increases. Yet apologetics in Washington tries to embellish the price increases. As the consumer price index
shows, it may appear that if food and energy are removed from the index, there will not be nearly as strong an
inflation. This is because food and energy weigh heavily and are primary drivers in the inflation scenario as some
bourgeois sources will argue. When the index rises more than the index without these two, it should supposedly
mean that food and energy are a significant part of the problem. It is assumed here that the war in Ukraine
causes both food and energy shortages, and that this increases the price level. The rate of inflation will therefore
fall by a few percentage points without this war. And although a 6% inflation rate is abnormally high compared
to the years with low rates, it is better than a 9% inflation rate (!).
What the apologetics "forget" here is that the existing oil and gas reserves before the Ukraine war started were
purchased at old prices (gouging by the pump), just as the monopolism in the American and European economy
opens the possibility that extra profits can be realized by taking advantage of a situation such as the special
military operation. In both cases, price increases are due to "profit push" and monopoly profits. The neo-liberal
(neo-classic) bogus about scarcity is rooted in the microeconomic standard textbook “totem pole” of the crossing
graphs of supply and demand. This “theory” veils the gist of the matter – the cause of inflation is rooted in above-
normal profits realized by corporate monopolies and other market imperfections.
The high inflation in the US is promoted by monetary policy measures because The FED raised interest rates and
scaled back the purchase of bonds. The Biden administration's fiscal policy suffered a disappointing fate because,
50 Republican senators and one Democrat, Joe Manchin, voted against the plan believing in the philosophy that
a balanced public budget is possible, which is rarely, if ever, possible. The need for an expansionary fiscal policy,
which could have had an expansionist effect, diminished because the original "Build Back Better Plan" was
abandoned. The planned budget of $2 trillion for increased welfare, an improvement of the environment through
the "New Green Deal", and reinvestments in an outdated infrastructure shrunk to just under 500 billions. The
expansionary effect, which could have had a positive effect on the transmission of international business cycles,
shrank to almost nothing. What is left is a hardline class policy directed against the working class, which must
bear the burden of the crisis in the United States and other Western economies.
Milking the consumers
In July this year, eight oil companies reported record profits for the second quarter of 2022 of approx. 52 billion
dollars. The review of the statements was carried out by a group of watchdogs from Accountable.US, where it
was possible to reveal that Chevron, Equinor, ExxonMobil, Hess Corp, Phillips 66, Shell, and TechnipFMC had
realized these sky-high profits when compared to the same period the year before; profits increased by a 235%.
Executives at Equinor, Halliburton, Hess Corp, and TechnipFMC had boasted of "excellent quarterly results while
denying that this meant high prices for consumers." Jordan Schreiber of Accountable.US found the companies'
profit push to be unusual when considering that energy price increases lead to a large transfer of wealth from
working- and middle-class people to the companies, to wealthy oil executives, and the companies' shareholders.
The American energy giants Chevron and Exxon's profits were in the second quarter of 2022 staggering 11.62
billion dollars and 17.85 billion dollars together with Europe's largest oil company, Shell’s bottom line of 11.47
billion dollars. That this drew widespread criticism along with calls for action from congressional lawmakers and
the Biden administration can hardly come as a surprise; however, the same Biden administration has done
nothing whatsoever to bring at least some of the profits back to consumers via taxation.
Inequality and the Second Secession in the United States
Wealth and income inequality confirm in the very long term since the 80's "Reaganomics" until approx. 2010 the
well-known fact that income inequality and wealth inequality have steadily increased. Thomas Piketty is perhaps
the leading expert in the statistical analysis of income and wealth inequality because he focuses precisely on the
increasing concentration of income in the hands of a small economic elite. Piketty has confirmed in his work
"Capital - in the 21st century" that 1% of the income groups in the world capitalist system sit on an ever-
considerable share of the incomes and assets increasing the concentration of capital. The appropriation of the
surplus value created by the working class has increased and still turns the appropriated surplus value into capital
accumulation. The neo-liberal concept of "trickle-down economics" has very limited explanatory value. Or in
other words, to use a Danish saying, it may well be that it has rained on the clergymen but it has not to an
increased degree trickled down on the parish clerk. Instead, the trickles have weakened.
According to Piketty, income distribution in the United States is now as extremely skewed as it was in Europe
immediately before the First World War. With current trends in the US economy, a projection would show that
by 2030, the top 10% of income earners will receive 60% of the national income, while the share of the bottom
50% of incomes will have shrunk to 15%.
This invariably raises the question of whether American capitalism will even be able to survive the pervasive
impoverishment of the largest part of the population – including the proletarianized middle class – without this
leading to a social revolution. There is nothing in the current situation that even remotely suggests that anything
has been set in motion that could counteract inequality and the potential for a Civil War in the United States.
The weakened USA with an internal conflict, production stoppages, and destruction of the coherence of the
American economy will in the long run only further strengthen the negative consequences in connection with an
international transmission of business cycles. When both Europe and North America face a period of stagnation
and economic crisis due to a failed policy of economic sanctions, hyperinflation in the long run, and massive
unemployment, it is not too much to expect the “closing of the gardens of the west”.
An opinion poll published in 2022 in January already shows - surprisingly for some - that support for secession
from the federal state was increasing in the months after 6 January. It was on this day that, despite Trump's
attempts to call on the protesters to end the public meeting peacefully, a group of rioters stormed the Capitol.
Especially among Republicans in the South, the poll shows a growing desire for secession among states where
Republicans won the presidential election. The surveyed citizens who want to secede from the United States
were a staggering 37% of voters of both parties among the respondents in the South. Support among Republicans
in the South alone grew from polls taken in January that showed 50 percent in favor of secession. The figure in
June was up to 66 percent. In other words, a social revolution or civil war is a topic of public debate in the US.
Barbara F. Walter, professor of political science at the University of California in San Diego, is quoted in The
Washington Post as saying that so-called American democracy is in a dangerous state. Barbara F. Walter is the
author of the book "How Civil Wars Start: And How to Stop Them". She has spent several years studying civil
wars and investigating risk factors, as well as the difficulties involving solution strategies aimed at preventing and
ending conflicts. Walther's main point is that extremism can lead to a modern civil war, as previously seen in
Yugoslavia in the 90s, and as seen today in connection with Ukrainian fascism's war of terror against the Russian
minority in Donbas. The modern insurgency tends to be more decentralized and is fought with the participation
of multiple, sometimes competing, sometimes coordinating groups. The underlying extremism has historically
seen targeted infrastructure and civilians, using domestic terror and guerilla warfare as its instruments.
The American rate of profit since 1945
Various calculations and estimates of the rate of profit in the American economy and the leading OECD
economies point unanimously that the tendential decline in the rate of profit since 1945 finds its empirical
confirmation in the data we can access. Some of the analyzes even go back as far as 1869 without affecting the
trend. The many calculations consistently show that the trend of the profit rate has been falling. As is well known,
the profit rate formula rests on the thesis that the accumulation of capital always rests on the increase of the
constant capital (means of production) increasing faster than the value of the variable capital (wages, labor costs
of reproduction). This led to the profit rate falling, because the working class, who are also consumers, overall
demand fewer consumer goods, while the capital owners continue to produce and demand capital – you create
an over-accumulation of capital, which must lie fallow if you cannot find new investment opportunities. The
increasing propensity to invest in financial "products" can as mentioned above to some extent inflate the
economies until the bubble bursts. However, the long-term need is aimed at new productive investment
opportunities and markets, and therefore the West casts its eyes on the Russian economy from the 90s when
the wild privatizations and the transition from the plan to the domestic comprador bourgeoisie taking over the
state assets were launched. Hence, imperialist forces will probably also in the future try to destroy China and
Russia, as well as friendly countries such as Serbia and Hungary.
The increasing organic composition (constant capital/variable capital) and the efforts to reduce labor costs by
replacing labor with capital is the main determinant of the tendency for the rate of profit to fall.
Countermeasures that the capital owners could implement are not sufficient in the long term to counteract the
tendentious fall in the rate of profit. There are physical limits to how much you can increase the degree of
exploitation, even if the working day is lengthened and the productivity of work increases. And making the
elements of the constant capital cheaper is not enough either, even if individual elements of the capital
equipment can generally become cheaper. Technological development constantly leads to Capital components
becoming cheaper through incorporation into the new production systems that on the other hand contain
greater value as the innovation processes progress. In the long term, it is e.g., such that computer control is
cheaper than a few decades ago. But when the competitive struggle continues to lead to the need to introduce
labor-saving technology through the incorporation of robots and computer-controlled production systems, we
see, despite the cheapening of elements in the constant capital, that there is an increased organic composition
c/v. Total demand will then fall, and the falling profitability and effective competition between capitals will cause
constant pressure for capital accumulation to continue.
The ideological rearmament
Oligarchic capitalism will increase oppression, impoverishment, and inequality due to the economic crisis. The
possibility of an alternative development is certainly present if the international Left knows it is time to act. The
authoritarian state and oligarchic capitalism could increase the revolutionary tendency of the non-proprietary
class. The problem, however, is that the left opportunistically accepts Capital's offensive and not least Capital's
ideological rearmament through the suppression of system critics, identity politics, the demonization of the
Russians, and cognitive brainwashing through the information monopoly of the big tech giants. When the
counteroffensive of the left and the progressive forces are as weak as it is in the United States, the American
working class and the proletarianized middle class have only Donald Trump's fascist protest movement to draw
their support from. The Democratic Party, on the other hand, also is the political force behind the subtle fascism
expressed by the authoritarian state and oligarchic capitalism.
On the one hand, we see internally in the so-called democracies of the West a repeal of the liberal rights around
political democracy, freedom of expression, the fight against censorship, and the right to private property. Yet
due to Capital's subtle fascist offensive. Neoliberalism must give way to what Sarah Wagenknecht has called
illiberalism. When Oligarchic Capitalism as a paradigm substitutes our freedom rights a critique of the system is
silenced on social media where we disappear and are discriminated against through a deliberately implemented
blocking of our views - we become, as it is called, "canceled". Those who dare to question the oligarchic
oppression of both the Democratic Party and the Republican parties in the US and pro-EU and NATO
governments in Europe are labeled conspiracy theorists. The ruling capitalist class which has bought and
corrupted the ruling class's political strata, academia, and the mass media is the new illiberal ruling class. The
suppression of system critics, the working class, and other proletarianized groups such as the young and the
elderly necessitate the authoritarian state, which continues to act in the interests of the ruling class. The news
coverage takes place under censorship exercised by Big Tech. The four apocalyptic horsemen of John's revelation
are reborn with Apple, Amazon, Google, and Facebook and an undergrowth of social portals that all breathe the
hysterical identity politics sermon, the war hysteria, the hatred of Russia, and the spiral of armaments using
sophisticated psychological methods. Cognitive brainwashing is inhumane because it serves to make people who
are physically and mentally weak feel guilty. If you accidentally go against the current agendas in the gentle
stream of fake news we are bombarded with daily, you will immediately be blocked by the censorship of the
media giants and the CIA. When what you see does not correspond to the infallible opinions of an apparent
majority on various "People's portals" such as Facebook, Twitter, and others, you are exposed to peer pressure
that few can stand against. We are all vulnerable when exposed to sophisticated intelligence services and the
use of manipulative techniques by those in power. That the CIA has a secret CIA program with the goal of
brainwashing the public should be something that would interest a critical journalist. However, critical journalists
are so rare today that one should consider having them stuffed and exhibited in a museum for a long-gone era
in press history. It is in this way the authoritarian state and oligarchic capitalism is a subtle form of fascism. The
original primitive fascism arose before the Second World War in the wake of the economic crisis of capitalism. In
Germany, it was the agrarian and urban petty bourgeois who formed the class base of Nazism, today it is the
urban petty bourgeoisie that has penetrated the European Left who acts as a stand-in for the ruling class's
apparatus of oppression.
On the other hand, the inter-imperialist contradictions between Western monopoly capitalism and Chinese
Etatism (state capitalism) are an expression of Capitalism's long-term crisis, the need to gain access to the
resource base and cheap well-educated labor of Russia and China. The limits of capital accumulation in the West
open for the pursuit of profits in the overseas markets, primarily the former colonies, the Arctic, Russia, and
eventually China. It is in this light that the aggression since the nineties of NATO, the EU, and the US imperialism
in Eastern and Central Europe, the Balkans, Ukraine, and the Russian commonwealth CIS countries as well as
Taiwan and Hong Kong must be seen.
Transmission of business cycles or imperialism?
The transmission theory only looks at trade in goods and capital movements between the Western economies
and, until recently, the rest of the world economy. What the theory covers is that internal economic crises in the
USA and leading western economies also are an expression of imperialism that, with the dissolution of the Soviet
Union, was mainly dominated by American and European capital interests. The most important point concerning
economic imperialism is that the search for profits, new markets, and investment opportunities is caused by
imperialism, and the spread of the power structures of the class society is explained by declining profit rates in
the capitalist center economies. Moreover, it is also explained by Capital's attempt to control the former colonies
and partly the two rival superpowers China and Russia. When capital "lies fallow" in the economy of the
economic centers - more capital was accumulated than could be invested - and when the owners of capital could
not realize abnormal profits in the centers, new non-capitalist markets had to be sought in the former colonies,
and China and Russia. The Owners of multinational companies play an active role here because they partly have
the above-mentioned interest in expansion opportunities to observe, and partly also in the long term want access
to cheap raw materials, food, and labor, which they can exploit and later export as accumulated capital back to
the economic centers.
Every time it is the same strategy. The ruling class is prepared to demonize state leaders - perhaps an entire
people who stand up against US imperialism, and the imperialism of the EU and NATO; you support subversive
activities aimed at a state's internal security, initiate sanctions, commit assassinations, organize coups d’état,
and install "friendly governments", where it does not matter in principle whether you ally yourself with Islamist,
fascist, neo-Nazi or other authoritarian forces. The important thing is always whether this serves the interests of
the USA and the West in promoting economic imperialism, where it is the USA and the USA through NATO that
believes itself entitled to be "the world's policeman". Behind these surface phenomena, one glimpses the
structures of class society, where the real power holders are not politicians, supranational bureaucracies, and
national bureaucracies. Instead, it is multinational corporations that control the central political and
administrative decision-makers financially and through lobbying and advocacy. Since the Second World War, the
United States has been involved in 19 wars, and if you count from the bloodiest conflicts in Korea and Vietnam
to Iraq, Afghanistan, and Ukraine, you get the macabre result that the United States is responsible for millions of
deaths, including many civilians. There was a lot of speculation about genocide in the former Yugoslavia, but it is
for nothing compared to the monstrous casualty figures we mention here. Despite this, we see only to a lesser
extent the same condemnation and the same demands for sanctions to the USA, as demanded in relation to
Russia. Who has for instance ever heard of sanctions towards a brutal medieval despotic regime in Saudi Arabia;
yet sanctions against states in Latin America, Cuba, and other regimes in opposition to US imperialism are
considered justified?
This also means that it was Western militarism and the economic imperialism of the United States that are
responsible for the danger of war and a subsequent Russian special military operation launched eight years after
the US instigated the Maidan coup d’état. Since the 90s, NATO and the USA have tried to encircle Russia, so that
they would be able to win a war and appropriate Russia's enormous reservoir of resources, just as they would
be able to increase the rate of exploitation. The USA itself would never - and remembering the Cuban crisis it
never has - with the Monroe Doctrine in hand, approve a threat of the same magnitude as that Russia has been
exposed to since the 90s. The Monroe Doctrine legitimizes US direct interventions or indirect ones in proxy wars
in Latin America and the Caribbeans. The same was instigated through NATO and movements whose subversive
activities the US has financed and supported through CIA mole operations in other parts of the world. Thus, also
in Ukraine and in connection with Nancy Pelosi's untimely provocation of China, where, via the visit to Taiwan,
the US ran away from the agreement that there is only one China. Just like James Baker's false promise in the
90s that NATO did not intend to expand beyond the former GDR, just shows that the US and Europe are unreliable
negotiating partners.
Conclusions
The essential thing regarding the global world order is that the American economy is in a crisis that is being
transferred to other leading economies within Western economic imperialism. A paradigmatic shift from the
arrival of Neoliberalism in the 70s is now happening before our eyes. Oligarchic capitalism with its authoritarian
state represents new subtle fascism that is economically transferred to Western economies alone because the
world is no longer characterized by US imperialist hegemony. With the Etatist (state capitalist) Chinese and
Russian systems, the world order is again multilateral rather than unilateral. The economic crisis in the Western
centers due to macroeconomic instability, increasing income and wealth inequality, falling profit rates,
overaccumulation, and the abnormal profits of transnational monopolies creates the need for new markets and
investment opportunities for Capital. Russia's vast resource base and cheap highly skilled labor could create new
opportunities for imperialism's need to correct declining profit rates and the lack of capital appreciation through
plunder and an intensified export of capital back to the centers. For the same reason, NATO expanded eastward
to the Russian borders, and it is in this context that wars in Ukraine must be understood. It is not a war between
Ukraine under the leadership of a fascist comprador bourgeoisie and Russia. Russia's special military operation
in defense of the Russian minority and the fight against fascism in its various forms ranging from raw original
fascism in Ukraine to subtle fascism in the West is a war between the USA / NATO and Russia, where the goal for
NATO is to "colonize" the Russian economy and bring it under the control of the multinational corporations. At
the same time, the authoritarian state, oligarchic Capitalism, and economic imperialism represent an ideological
armament that serves to obscure the understanding of the basic economic crisis signs through identity political
hysteria, the atomization of the understanding of capitalism, the suppression of system critics and cognitive
brainwashing of the populations.