by RICHARD D. WOLFF
Early U.S. capitalism was centered in New England. After some time, the pursuit of profit led many capitalists to leave that area and move production to New York and the mid-Atlantic states. Much of New England was left with abandoned factory buildings and depressed towns evident to this day. Eventually employers moved again, abandoning New York and the mid-Atlantic for the Midwest. The same story kept repeating as capitalism’s center relocated to the Far West, the South, and the Southwest. Descriptive terms like “Rust Belt,” “deindustrialization,” and “manufacturing desert” increasingly applied to ever more portions of U.S. capitalism.
So long as capitalism’s movements stayed mostly within the U.S., the alarms raised by its abandoned victims remained regional, not becoming a national issue yet. Over recent decades, however, many capitalists have moved production facilities and investments outside the U.S., relocating them to other countries, especially to China. Ongoing controversies and alarms surround this capitalist exodus. Even the celebrated hi-tech sectors, arguably U.S. capitalism’s only remaining robust center, have invested heavily elsewhere.
Since the 1970s, wages were far lower abroad and markets were growing faster there too. Ever more U.S. capitalists had to leave or risk losing their competitive edge over those capitalists (European and Japanese, as well as U.S.) who had left earlier for China and were showing stunningly improved profit rates. Beyond China, other Asian, South American, and African countries also provided incentives of low wages and growing markets, which eventually drew U.S. capitalists and others to move investments there.
Profits from those capitalists’ movements stimulated more movements. Rising profits flowed back to rally U.S. stock markets and produced great gains in income and wealth. That chiefly benefited the already rich corporate shareholders and top corporate executives. They in turn promoted and funded ideological claims that capitalism’s abandonment of the U.S. was actually a great gain for U.S. society as a whole. Those claims, categorized under the headings of “neoliberalism” and “globalization” served neatly to hide or obscure one key fact: higher profits mainly for the richest few was the chief goal and the result of capitalists abandoning the U.S.
Neoliberalism was a new version of an old economic theory that justified capitalists’ “free choices” as the necessary means to achieve optimal efficiency for entire economies. According to the neoliberal view, governments should minimize any regulation or other interference in capitalists’ profit-driven decisions. Neoliberalism celebrated “globalization,” its preferred name for capitalists’ choosing to specifically move production overseas. That “free choice” was said to enable “more efficient” production of goods and services because capitalists could tap globally sourced resources. The point and punchline flowing from exaltations of neoliberalism, capitalists’ free choices, and globalization were that all citizens benefited when capitalism moved on. Excepting a few dissenters (including some unions), politicians, mass media, and academicians largely joined the intense cheerleading for capitalism’s neoliberal globalization.
The economic consequences of capitalism’s profit-driven movement out of its old centers (Western Europe, North America, and Japan) brought capitalism there to its current crisis. First, real wages stagnated in the old centers. Employers who could export jobs (especially in manufacturing) did so. Employers who could not (especially in service sectors) automated them. As U.S. job opportunities stopped rising, so did wages. Since globalization and automation boosted corporate profits and stock markets while wages stagnated, capitalism’s old centers exhibited extreme widening of income and wealth gaps. Deepening social divisions followed and culminated in capitalism’s crisis now.
Second, unlike many other poor countries, China possessed the ideology and organization to make sure that investments made by capitalists served China’s own development plan and economic strategy. China required the sharing of incoming capitalists’ advanced technologies (in exchange for those capitalists’ access to low-wage Chinese labor and rapidly expanding Chinese markets). The capitalists entering the Beijing markets were also required to facilitate partnerships between Chinese producers and distribution channels in their home countries. China’s strategy to prioritize exports meant that it needed to secure access to distribution systems (and thus distribution networks controlled by capitalists) in its targeted markets. Mutually profitable partnerships developed between China and global distributors such as Walmart.
Beijing’s “socialism with Chinese characteristics” included a powerful development-focused political party and state. Conjointly they supervised and controlled an economy that mixed private with state capitalism. In that model private employers and state employers each direct masses of employees in their respective enterprises. Both sets of employers function subject to the strategic interventions of a party and government determined to achieve its economic goals. As a result of how it defined and operated its socialism, China’s economy gained more (especially in GDP growth) from neoliberal globalization than Western Europe, North America, and Japan did. China grew fast enough to compete now with capitalism’s old centers. The decline of the U.S. within a changing world economy has contributed to the crisis of U.S. capitalism. For the U.S. empire that arose out of World War II, China and its BRICS allies represent its first serious, sustained economic challenge. The official U.S. reaction to these changes so far has been a mix of resentment, provocation, and denial. Those are neither solutions to the crisis nor successful adjustments to a changed reality.
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