The latest indictment of Donald Trump, his fourth criminal case this year, marks another new stage in the dysfunctional, chaotic, fractured current-day USA. “America is history’s most successful failing state”, the Financial Times put it last year.
This time Trump faces a ‘RICO’ charge, originally brought out to convict mafia and organised crime figures. Ironically, taking on mafia bosses with RICO charges is how Trump’s ex-lawyer Rudy Giuliani made his name in New York City. Now it’s him facing the charges!
The US finds itself at a crossroads. Domestically it has aspects of extreme social polarisation – riddled by division and debt – and a society ravaged with increasing inequality and poverty.
Still the world’s biggest economy and in decline, the US is no longer the single dominant force with the ability to set the framework for world capitalism – stoking further economic fracturing, conflict and war, and a decline in capitalist cooperation and globalisation.
US protectionist policies go further under Joe Biden than they did under Trump. 20 years ago when China joined the World Trade Organisation (WTO), the US complained China had protectionist chip policies. Now its China reporting the US!
The US and China are trapped in a ‘toxic relationship’ – reliant on each other economically but also in competition and provoking each other. Both nations have huge underlying economic problems domestically and internationally that could open up new economic crises with huge effects on the wider world economy.
Biden’s Inflation Reduction Act (IRA) and the CHIPS and Science Act, alongside Trump’s tariffs that are still in place, are limiting the export of high-tech microchips to China, squeezing the Chinese economy.
But it’s not only China that is angered. Sections of US big business see the Acts as an attack on the free market. American greed and the interests of some sections of US capitalism are running into conflict with American ‘security values’ being pursued by Biden and a section of the US capitalist class.
China’s reliance on imported equipment is aggravated by US imperialism. Simultaneously, China is retaliating with export restrictions on important minerals for semiconductor production.
At the same time, the US’s increasing protectionist measures have inevitably been met with steps in the same direction by other trading blocs. Biden’s IRA, aiming to encourage US green tech investment – giving $369 billion in subsidies to US industry – is in effect part of its trade war against China, and it is attempting to draw Western allies behind it.
But economic pressures limit agreement on China policy. Germany is twice as reliant on China as the US. Japan and the EU announced similar plans to subsidise their own industries in response to the IRA. Today there are around 35,000 protectionist measures in place globally, up from 9,000 ten years ago.
The dollar still reigns supreme as the lender of last resort but China is increasingly trying to edge itself in as an alternative. Since 2008, $240 billion has been used to bailout banks and sovereign nations around the world.
There are elements of a doom loop for US capitalism – the international and domestic political situation provoking economic crisis and fracturing, triggering a worsening political situation in turn.
This year has seen the second-, third- and fourth-biggest bank failures in US history. In effect, all were bailed out either by arrangement with the Federal Reserve or privately by the biggest banks.
But none of the underlying issues have been dealt with. Silicon Valley Bank failed because it owned too much of what should be on paper the safest asset to have – long-term US Treasury Bonds. But that US government debt has dropped massively in value due to the record interest rate rises to try to combat inflation. There is the potential for further outbreaks and failures, as we have already seen this year but also for a crisis on the scale of, or even greater than, 2008.
None of the systemic issues of 2008 have been dealt with. Instead, the US relied on Quantitative Easing, the use of China as a cheap mass manufacturer of goods, and taking on huge levels of debt.
Today US banks are still sitting on over $650 billion of unrealised losses in the form of US long-dated bonds. Already many are resorting to emergency short-term borrowing to meet depositors’ cash demands.
US capitalism is riddled with debt throughout, a legacy of the previous period of ‘cheap money’. Federal debt stands at $32 trillion, close to 130% of GDP, ordinary Americans hold $17 trillion of household debt and there is around $20 trillion of corporate debt.
Record-rate interest rate rises have exposed fractures and fault lines in all corners of the US and world economy, with more still to surface. ‘Zombie companies’ and commercial real estate owners exist only able to pay interest on their loans. They are increasingly unable to afford even that.
And then there are the knock-on effects on the holders of these debts. In 2008, it took around only 5% of subprime mortgages to bring the towers of mortgage bonds tumbling down.
Recession is still on the cards, and a prolonged period of stagflationary debt crisis could see a rapid rise of unemployment, pay cuts and further intense rises in poverty.
But like in 2008, and has already been shown again this year, the capitalist class will go to huge lengths to try to avoid a new spiralling crisis – of course, on the backs of the working class.
Eventually Congress agreed to lift the debt ceiling this Spring. But Biden and Congress are heading for a possible government shutdown in September before a deal gets done on the budget. Debt levels are set to increase further, as will interest payments.
Already over $1 trillion of debt has been sold since the debt ceiling was lifted. But increasingly the question will be raised – who’s going to buy it?
The fact that the US government came so close to default is just the latest example of its dysfunctional nature – it erodes the stability of US capitalism and confidence in its institutions further.
The emergency use of a trillion dollar coin is the go-to headline grabber when different scenarios to avoid a default are discussed by commentators. But other tools such as perpetual or consul bonds (bonds with no maturity date), or the use of the fourteenth amendment (a post-civil war law that demands US government always pays its debts) can’t be ruled out in the future. That would further widen the extreme social polarisation and divisions that have opened up in all aspects of society and in the institutions of the state.
Within the Republican Party, in the Senate, House of Representatives, state by state, and within states and cities, fault lines are deepening. It took 16 votes for Republican Kevin McCarthy to be elected speaker of the house by his own party, such are the divisions between the many wings of Trump’s supporters and the ‘traditional’ Republican bloc.
Roe vs Wade
Currently no US generals are being appointed because one senator from Alabama is refusing to give his vote to the ceremonial ‘unanimous’ vote required to appoint them, in protest at the Pentagon allowing female members of the military to access abortions in whatever state they may live after the removal of Roe vs Wade. Not that the Pentagon has suddenly become the bastion of women’s rights!
But the historic attack on women’s rights by the Supreme Court, in removing Roe vs Wade, has further exposed the divisions within the US. The Economist front cover around the time of the Supreme Court’s actions last year: “How to save the Supreme Court”, gave a hint of the panic and concern about the weakening confidence in the institution by huge sections of ordinary people, and the dilemma it presents for the American ruling class.
Earlier this year, a federal court in Texas passed a verdict banning abortion pills. About 20 minutes or so later, a Washington federal judge passed a law affirming the legality of abortion pills. Such conflicting policies and decisions are now the norm within the US.
A piece in the Economist last year headlined “American policy is splitting, state by state, into two blocs”, summed up the situation perfectly, highlighting the completely opposite directions of travel on policy between California and Mississippi on all manner of issues from abortion, the environment, education, healthcare, employment rights, and immigration.
Next year’s presidential elections are likely to see a further hardening of one-party states, federal states where one party has complete control. The number currently stands at 37 – the highest ever. Divisions are not only state by state but within states and cities as well.
Trump appears to be on his way to being the Republican candidate, a nightmare scenario for the stability of US capitalism, and it cannot be ruled out he wins – even with fewer votes given the Electoral College system. This would further weaken the already feeble credibility of capitalist democratic process in the US.
The election is likely to see even more intense battles and disputes over votes, reflecting the hardening of fractured political blocs. Even today many electoral officials, from state attorneys to lower-down electoral workers, believe Trump won the last election. More scenes of the character of the 6 January coup attempt cannot be ruled out.
At this stage, there is no mass political voice for the working class. In June, well-known activist Cornel West declared an independent left challenge for the presidency in 2024. West’s declaration is a welcome initial step forward. The Democratic Socialists of America remain completely attached to the Democrats.
The capitalist class is united in fearing the working class reacting to their dysfunctional system by finding its own voice. Even in response to Trump’s 2020 coup attempt there were discussions in the trade unions on a general strike. The Socialist Party’s sister organisation in the US, Independent Socialist Group (ISG), continues to fight for every gain possible for the working class, and to build forces struggling for socialist change wherever we can.
Part of that struggle is raising the need for, and fighting for, a mass workers’ party. A party democratically organised, funded and controlled by workers, unions, youth, socialists and grassroots campaigns, not corporations. That would give an organised political voice and tool to working people’s fight against capitalist exploitation and oppression.
Workers Fighting Back
Despite no political vehicle to express its increasingly desperate conditions, the American working class has begun to flex some of its huge potential force, albeit on a limited scale at this stage.
The ‘Striketober’ movement of 2021, that saw over 25,000 workers on strike, was a small glimpse of a developing mood. Since, there have been important industrial strikes, mainly at local level. Nationally, union recruitment and recognition drives, such as at Amazon, Starbucks and numerous sections of education workers, have gained huge attention but, as with many of the strikes and disputes that have developed, have often been limited by the union bureaucracies and anti-union laws and legislations.
However, many of these movements have still acted as a pole of attraction, particularly Amazon, in sparking growing support for workers’ rights and union solidarity.
Throughout the major cities, there will be some sort of ‘event’ organised by a union or union activists daily, be it a strike, stunt or protest – such is the growing discontent.
Railroad workers and, most recently, UPS workers are two powerful groups of workers that came within a whisker of a national strike that would have seen US capitalism come to a standstill, and could have had a huge effect on the outlook of millions. Last-minute agreements, aggressively pushed through by union bureaucracies, stopped both struggles developing after they had barely got started.
Both sets of workers could have won far more and, with a fighting programme of action and organisation, could have won exactly what they demanded. However, in both cases the bosses and ruling class had to act desperately to avert strike action, fearing the impact of a strike on their profits.
Biden had to step in to impose a contract on the tens of thousands of rail workers in the four unions that had voted no to the tentative agreement. Both parties acted within 72 hours including self-identified ‘progressives’ in the Democratic Party like Alexandria Ocasio-Cortez. Congress has the power to force a contract on the railroad unions due to the anti-union Railway Labor Act.
UPS bosses had to concede and rush last-minute deals through to get the Teamster leadership on board. “They blinked: UPS call led to $30 billion Teamsters win”, a Bloomberg headline read.
New Teamsters union leader representing UPS workers, Sean O’Brian, has had to talk left and militant since his election, despite himself having come from a split with the old bureaucracy. However, despite his rhetoric, both pay disputes highlight the important work ISG and the Committee for a Workers’ International (CWI) conduct around the world to transform unions into fighting democratic organisations that can lead and organise struggle.
But, like the economic issues that have been kicked down the road by the US capitalist class, the rising working class discontent won’t be put to bed by any number of concession stitch-up deals. The rising heat under the surface is getting hotter and hotter. The United Auto Workers union has just voted to strike across the major US car makers, over 150 000 workers in total, if no new deal is agreed by 15 September.
Co-leader of the Russian Revolution Leon Trotsky, in his writings on Britain, commented that the roots and foundations of the 1926 general strike were inherent within the situation in Britain through the years after World War One. In many ways, a similar situation exists in the USA today. Huge and decisive strike action and movements of the working class have not yet been sparked or found an expression. But the many fractures and potential crises that could explode, could quite quickly spur the gigantic US working class into life on a mass scale.
One of the mistakes the British capitalist class made in 1926 was to mistake the timid weakness and unwillingness to fight of the right-wing trade union leaders as representative of the British working class who, in contrast, were determined and willing to strike and to rock the foundations of capitalist rule. The US ruling class has shown hints of similar errors, as has much of the so-called left.
Massive battles are brewing in the US. Historic opportunities and possibilities are opening up to build support for revolutionary socialist ideas amongst the US working class, which is what ISG and CWI are fighting for.