On Friday, December 1, the Senate passed its version of the Republican tax bill. The same day the Mueller investigation into alleged Russian influence in the election indicted former director, General Michael Flynn on one single count of illegally operating as an agent of a foreign power. What’s the significance, if any, between this coincidence of events?
For Donald Trump, the tax bill was his first legislative success in a year where he has demonstrated startlingly incompetency in the governing process. Even though the Republicans control all three branches of government, the tax bill was the first piece of legislation they succeeded in passing. The blocking of his three attempts to eliminate Obama Care is a significant demonstration of political force. It also demonstrates that the economic crisis is passing over into incipient political crisis.
On the other hand, Trump has been very effective in ruling by decree, using Executive Orders to dismantle thousands of regulations on corporations that have been put in place to prevent everything from poisoning our water to controlling fraud to paying for oil spills and fracking.
Trump has been the point person on a massive attack on the legal and institutional superstructure of society. Capitalism’s enthusiasm for deregulation is demonstrated in the Trump surge in the stock market, with the Dow jumping from 18,500 to 23,500 in one year. This is an unheard of 27% increase.
Mueller’s indictment demonstrates that the US State apparatus supports deregulation, destruction and dispossession, and yet is maintaining its hand on the leash. The message is that nothing will be allowed to block the free flow of capital. Despite all the tweets and the madness, the US State is signaling to the rest of the transnational capitalist class that their global interests will not be compromised. As it did in the first phase of globalization, the United States is once again declaring that it intends to establish and dominate the next stage of Globalization.
Certain factors play a role in Trump’s move.
1) The tax bill is the furthest development of the trend that was set in place by Ronald Reagan. In the 1950s the vast bulk of taxes were paid by private corporations, not individuals. The goal of capitalism has been to shift the tax burden off private property and onto labor. This has been accomplished by massive tax breaks for corporations and the rich, while increasing taxes on the working class through regressive measures such as sales tax and other tricks. The concept behind progressive taxation is that the rich pay more, since the yearly expenses of life are a small part of their income. Regressive taxation makes the poor pay a greater percent of their income to secure the necessities of Life.
2) Even before Trump – and well engineered by past administrations, including Obama’s – the US had organized the most oppressive form of capitalism of any major capitalist country. The country has the lowest percent of unions; it spends the least on health care. It has historically had the lowest real rate of taxation on corporations, provided by zillions of carefully crafted loopholes. It has the lowest real wages and the greatest polarization of wealth. The US government spends the least on its people and the most on corporations. It has historically been the strongest country financially and was the largest industrial country until the rise of China. The US also offers transnational global capitalist the third largest working class in the world.
Donald Trump has always been a representative of transnational capital. His properties succeed only due to global investments.
Now with the tax bill, US capital is demonstrating to capitalism around the globe that the US is introducing a new model global order. The attack on regulations is the end of the old social contract of the Industrial era that was crafted to mediate the effects of extreme poverty on the working class. Compared to Europe, conditions for the working class in the US are far more severe. This of course makes the country far more attractive for global investment.
The Supreme Court will soon decide the Janus case against public worker unions, including teachers. This decision will, at the very least, prevent unions from collecting dues automatically with check deductions. The parallel rise of new Right-to-Work states (now more than half) and other anti-labor legislation further dooms organized labor. In this context, Emergency Financial Managers have been deployed around the country to seize control. The governing board of devastated Puerto Rico is made up of 4 EMFs.
Compared to Europe, where government-paid vacations are standard for all workers, where unions have organized a much larger section of the working class, the US now touts itself as the new financial Disneyland of capitalism. Everything is for sale! National Parks coming soon to market!
Since global capital is fundamentally based in finance and financial speculation, the moves by US capital are opening up the country for global investment and therefore global privatization. The largest private water corporations, like Nestle, are European. A large number of investors in the pipelines that are poised to rape America are also European. This trend will expand rapidly as Trump compels the “creative destruction” that frees corporations to dominate and dissolves governmental in havoc.
3) For years, the largest corporations in the US, especially the tech companies like Apple,
Google, Facebook, Microsoft, etc, have stashed away approximately $3 trillion in profits in off-shore tax havens like Ireland and the Virgin Islands. The Republican tax bill allows these firms “bring this money back” to the US, to be taxed as little as 7.5%.
This enormous corporate windfall tells a lot about global capitalism today. Let’s examine this issue a bit. What is really going on when corporations are not using their free and clear private profit to seize greater control and make more private profit? We are talking about capitalism here. Capitalism will never, never not use vast amounts of capital, already accrued and in the bank – if it needs it.
So why isn’t capitalism using this money? This question reveals the fragility and the instability of capitalism today. In fact, during the Obama years corporations received trillions of dollars in free money under the “Quantitative Easing” Plan. They have hoarded this money as well. Corporations have never ever been this full of cash in history of capitalism. What’s going on?
Corporations and the banks – the FIRE Sector (Finance, Insurance, Real Estate) – haven’t needed to use their profits because investing it just isn’t going to pay off like they want. Why is this so?
This is a complex question, however there are certainly some factors that can be clarified.
The fundamental objective factor is that machines do not create value, yet capitalism is compelled to fuse them to production. Marx showed that only human labor creates value because people can be compelled to work longer hours to produce surplus value they don’t get paid for, surplus value that capitalists appropriate as private profit.
For a machine, the value inherent in it is transferred to the products it makes, minus wear and tear. It’s initial cost is amortized across the products it makes. Say a machine that costs $100,000 will make 100,000 products. The value of each is $1.
If machines could produce value, then smart phones, computers, et al – almost completely made by machines – would be increasing in value. But the absolute historical pattern is the opposite. The price of electronic devices historically is always falling, not rising.
The conclusion then is that laborless production – robot labor, machine labor, computer-driven labor – means that capitalism is unable to exploit human labor, since it is replacing it with automated machines. But human labor is the only source of profits. Competition forces corporations to reduce labor costs by employing laborless production; at the same time the robots undercut the ability to make profits.
So where can corporations invest their profits in order to make more profit? The simple fact is that it is becoming increasingly harder to find a decent rate of return on investments. Deloitte is one of global capitalism’s largest firms for accounting, auditing and financial information. The Deloitte Shift Index 2009 measures ROA, or Returns of Assets. This is one way capitalists measure private profit: the financial returns compared to the cost of all the assets invested in an enterprise. By this measure of profits, Deloitte notes that ROA has dropped almost 75% since 1965:
“Remarkably, the return on assets (ROA) for US firms has steadily fallen to almost one-quarter of 1965 levels at the same time we have seen continued, albeit much more modest, improvements in labor productivity.” Deloitte Shift Index 2009, p 2
Since manufacturing, the mainstay of capitalism in its Industrial period, produces declining profits, where can capitalists invest their loot to make a higher rate of profit? Increasingly, over the last four decades, capitalists are turning to financial speculation, investing in things like water privatization, charter schools or exotic financial instruments that promise a greater payoff. Financial speculation is the use of money to make money. This is becoming the only game in town, but it is mostly on paper.
Simply investing in mortgage futures, for example, may return millions of dollars to the speculator, but no new profit has been created. No labor was exploited. Speculation increases private capitalist riches by grabbing more capital away from other investors, by centralizing profit and concentrating it in fewer hands. For this reason, the hedge fund speculative market is over a quadrillion dollars – on paper. This is exponentially more than the real products that the world produces every year. It’s harder for corporations to make a profit in the electronic era.
Laborless production has allowed humanity to cross the historic barrier of scarcity by producing real material abundance. Can corporations make a profit from this?
The global productive apparatus has produced actual material abundance since at least the mid-1990s.
From United Nations Human Development Report 1998
http://hdr.undp.org/en/reports/global/hdr1998/chapters/
Chapter 1, p 22:
“Facing the Challenge
“The world has more than enough resources to accelerate progress in human development for all and to eradicate the worst forms of poverty from the planet. Advancing human development is not an exhorbitant undertaking. For example, it has been estimated that the total additional yearly investment required to achieve universal access to basic social services would be roughly $40 billion, 0.1% of world income, barely more than a rounding error. That covers the bill for basic education, health, nutrition, reproductive health, family planning and safe water and sanitation for all.”
“To see that ample resources are available but not used for human development compare the additional cost of universal access to basic social services with consumer spending (table 1.12) The comparisons here are, of course, illustrative, but they a striking view of how we use the world’s resources.
“Accelerating progress in human development and eradicating the worst forms of human poverty are within our reach, despite deep challenges and setbacks. We know what to do. And the world has the resources to do it.”
TABLE 1.12
The world’ s priorities?
(annual expenditure)
Basic Education for all – $6 billion
Cosmetics in the USA – $8 billion
Water and Sanitation for all – $9 billion
Ice Cream in Europe – $11 billion
Reproductive Health for all women – $12 billion
Perfumes in Europe and the USA – $12 billion
Basic Health and Nutrition – $13 billion
Pet Foods in Europe and the USA – $17 billion
Business Entertainment in Japan – $35 billion
Cigarettes in Europe – $50 billion
The US military budget in 1998 was around $400 billion dollars. Therefore only 1/10th of this would have lifted humanity out of the worst depths of poverty. Of course, today in 2017 the US military budget is almost $1 billion a year.
The problem for capitalism: How can you make a profit when things are abundant? You can’t… unless you use legal powers and the force of the State to create artificial scarcity and enclose commons behind walls of private property to create markets. The State, of course, actively intervenes to support these markets. Privatizing water is an honorable and organized activity of entrepreneurs. The point, however, is that capitalism today in the Electronics Era cannot make much profit in producing the necessities of Life.
The UN has also declared that more than enough food is produced globally every year to feed every human being a healthy diet. The problem, they recognize, is not in production, but in distribution. Distribution, of course, under capitalism is controlled by private corporations, who will facilitate it only to make a profit.
The vast scale of the yearly wealth produced by the global productive capacity is well hidden by capitalism. This real wealth is far, far greater than anyone can really imagine.
Here’s how it works. Capitalism is based in social production – production by the entire society – but legalizes individual appropriation of the social product as private property. Capitalists claim to won the social product because they own the technology, the means of production.
Imagine the entire yearly production of the Globe as that of one giant factory. Society uses wealth, labor and machines to reproduce the global product that was used up the year before. Some of this new wealth is used to replace ware and tear on machinery and infrastructure. Some is set aside to expand production, scientific research, etc. Sadly, under the control of capitalism, there should be another fund set aside to heal the planet, reverse the damage and create a sustainable economy. Capitalism however does not work that way.
Given the incredible productivity of our automating production capacity, there is a great deal of product left over from the global production of the necessities of Life. Corporations claim almost all of this vast social wealth as their own riches. Governments need money so they tax the corporations and people for the funds they need to maintain civil society. Corporations have resisted this taxation for all they are worth. What we finally squeeze out of them as taxes is a teeny, tiny part of the socially produced wealth.
And, as we have seen above, even this tiny amount is more than enough to lift every human out of poverty. Imagine what we could do with the rest!
But the rest is theirs, by laws of private property. This super production – over and above what is needed simply to reproduce society once again in another year – all winds up in capitalist hands. But what can they do with these profits? Where can they invest it? Increasingly this wealth winds up being used for speculation gambles and for seizing the global property of the public, with individual personal property also gobbled up as with evictions. It funds privatization efforts, where corporations wind up owning what the public created as public property in the 20th Century.
Such speculation drives the modern forms of Dispossession. This vast, almost incomprehensible, wealth could be used to guarantee the necessities of Life for everyone on the planet: sufficient food, housing, health care, education, culture, healing the planet and the reconstruction of society. But, under capitalism, it cannot be used so. As long as private property dominates society, the economy will be used for the extraction of private property, rather than the investment of our common wealth in our common good.
As dead labor, privately organized zombie capitalism stalks the globe. The notions of private property, of private ownership of the tools of society, of the resultant private appropriation of the social product and the corporate form of organizing society are dead. Only the new proletarian class – certainly well over 50% of humanity – can impose a social order that can move humanity forwards.
………………………
So… On-shoring $3 trillion in dollars is simply providing more money for the vultures to feed on.
The really significant story here is that Trump has done so poorly in governing for his class. Trump’s paralysis reflects the general paralysis of Global Capitalism, lead by the US since 911. The US can launch a war anywhere. It has such massive armament that it cannot lose a battle. But it simply cannot win a war.
Winning a war requires being able to create and establish a political solution. This capitalism cannot do. Invade Iraq and Afghanistan, bomb Libya and Syria, foment fascism in the Ukraine, destabilize the Middle East – in all of this, huge numbers of Dispossessed people are concentrated as a mass in wars driven by private profit. This new class of proletarians, few of whom will ever find sufficient work in automated-laborless global economic production, includes
232 million international migrants and 740 million internal migrants. Globally, in 2017, 65 million people have been forcibly displaced and/or driven from their homes by war or natural disasters. Capitalism is unable to organize a system of labor and a system of distribution that meets their basic needs. Yet these people will not go away.
Trump reflects this global process on a smaller US national scale. The untold story of the year is how huge numbers of the new proletarian class descended on the Republican Town Hall meetings across the country and demanded their health care be maintained. The actions of this new proletarian class, stepping for the first time onto the national political stage, blocked the legislative process. They would have blocked the tax bill as well if the Republicans had not rushed it through in unprecedented fashion.
This new proletarian class is objectively, though not ideologically, a communist class. They are compelled to demand the necessities of Life for free, just to survive. Inevitably, a system without labor must achieve distribution without money.
The economic crisis of 2008 never really went away. It is now being driven as well by an incipient political crisis: Trump’s ability to govern is severely restrained; three generals run the federal government; both the Democratic and the Republican Parties are disintegrating; #Metoo kicked off an escalating assault on predatory men who hold power. These are all major signs of political instability.
The political crisis kicks off national conversations that range far beyond the traditional economic forms of struggle. The Battle of Ideas has always risen as a part of social revolution. Such broad national and global debates take on modern forms. In this environment, the new proletarian class is beginning to confront the State by demanding that it guarantee the necessities of Life. When this class is conscious of these necessities as a class, nothing can stop them from Reconstructing a new world.
Steven Miller writes about privatization, science and historical materialism. He taught science for 25 years in the Oakland Flatland high schools of Fremont and Life Academy. He observed the intense privatization of public schools, out-of-control police, and the growing dispossession of three generations of families from their communities
Signed articles are the responsibility of the author.
Oakland, Ca
December 11, 2017
