The Economic Realities We Face at the End of 2022 By: Richard D. WolffRead Now
Economies around the world were shocked and damaged over the course of 2022. Global capitalism had been brewing conflicts among the major powers (the United States, China, and the EU) for some time as their relative strengths and vulnerabilities shifted. U.S. capitalism and its empire are widely perceived as waning. Europe’s role as a U.S. ally and indeed its economic future became correspondingly riskier as a result. China’s economic growth encountered problems but continued to be remarkably positive and often crucially supportive of world economic conditions in ways that were once more closely associated with the role of the United States. China’s deepening alliance with Russia as well as its burgeoning global economic reach frightened many in the United States. Years of increasingly aggressive competition, tariff and trade wars, and bans and subsidies, mostly initiated by the United States, culminated this past year in global economic warfare.
The key fact is not the military war between Russia and Ukraine, so far a limited, secondary affair except for the massive on-the-ground suffering of the Ukrainian people and the soldiers on both sides of the conflict. The year’s key reality is rather the economic warfare between the United States and the EU versus Russia and China: sanctions and countersanctions. Their ramifications (energy price spikes, supply chain disruptions, and massive market shifts) worsened the inflation already troubling many countries. These, in turn, provoked central bank interest rate increases that added more disruptive and costly shocks to an already problematic 2022 global economy.
For decades, wealth and income have been redistributed upward—with minimal protest by the working classes who were harmed by that redistribution. During 2022, working classes in many countries were no longer willing to defer their needs in the wake of that redistribution. Labor militancy, unionization, and strikes have all been renewed with remarkable energy and enthusiasm. Increasing numbers of workers are unwilling to wait and see whether or not long sluggish center-left and center-right governments and parties would do anything adequate to change the deepening inequalities, instabilities, and injustices of contemporary capitalism.
Capitalism’s victims increasingly rediscovered and resumed alliances with its critics. Thus, they know that stagflation, not recovery, may well be the result of inflation plus interest rate hikes. The emergence of the Global South as an important player in great power politics and its current realignments took further steps during 2022. Widespread feelings that an old capitalist world is falling apart are not fading.
Those feelings emerge into public view during a period of massive contradictions—for example, the resurgence of both white supremacy and anti-fascism, or the blows against abortion access in the U.S. following the Supreme Court’s decision to overturn Roe v. Wade in contrast with France’s enshrining of abortion access in its constitution. Chinese workers demand better wages and working conditions while the dishonesty of global capitalist polluters gets increasingly exposed.
Meanwhile, global changes in great power alignments risk being misunderstood or undervalued because clashing capitalisms disguise themselves, yet again, in great principles. Russia versus Ukraine gets rewritten as anti-Russian North Atlantic Treaty Organization (NATO) expansion versus Ukrainian self-determination. U.S. capitalism’s shift from neoliberal globalization to government-led economic nationalism to counter China’s rise in the global economy gets rewritten as required by “national security.” The further fracturing of Europe’s unity gets rewritten, in truly upside-down fashion, as a rebuilt U.S.-EU-NATO alliance. Proliferating delusions need deciphering.
Global capitalism has already stumbled badly three times in this new century: the dot-com crisis in 2000, the subprime mortgage crisis in 2008, and the COVID-19 crisis in 2020. Calling each crisis by a different, conjunctural name thinly disguises a cyclic instability intrinsic to and as old as capitalism. The capitalist system that dominates globally today organizes 99 percent of its workplaces/enterprises with a small minority of employers who direct the large majority of employees. It forces today’s great powers (the United States, the EU, and China) to mobilize their allies and compete to shape the decisions of the Global South. The post-World War II years of U.S. hegemony governed and held together a particular global arrangement of economies. The culmination of short-term instabilities and long-term trends inside and outside the great powers has undermined U.S. hegemony. A struggle to shape the emerging “new world order” is underway. That struggle is the economic reality as 2022 ends.
The hegemonic war of maneuver is our context now; it will last until or unless a new global arrangement arrives. The French think tank École de Guerre Économique (EGE) has for 25 years been studying the shadow wars for dominance over the global economy with interesting, provocative results. In October 2022, EGE released a book, Guerre Économique: Qui Est l’Ennemi? (Economic War: Who Is the Enemy?), which presented the findings of a survey of French business experts that was conducted by EGE’s Centre de Recherche 451 (CR451) in July 2022. Respondents were asked to name five foreign powers that most threaten France’s interests. They answered that the United States was France’s greatest threat, with China, Germany, Russia, and the UK following, in descending order.
It would be wishful thinking to mistake this result as peculiar to the French. Many leaders and influencers around the world criticize and resent the last 75 years of economic hegemony wielded by the United States. That perspective on current events has only strengthened in recent years as the U.S. global empire has lost power, the United States lost wars in Asia, and China emerged as the first serious economic competitor against the United States since at least 1945. The Ukraine war has so far served mainly to validate and thus harden that perspective.
The U.S.-China conflict has provoked ongoing changes and shifts among all players in the global economy. After more than two decades of doing poorly in competition with China, the United States has shifted from a policy of neoliberal globalization to one of economic nationalism. The presidencies of Barack Obama, Donald Trump, and now Joe Biden illustrate the shift (even as orthodox economics finds it awkward having celebrated laissez-faire for so long). Objections from European, Canadian, and other corners flood into Washington against new U.S. subsidies for automobiles produced inside the United States. Those self-serving U.S. policies are said to threaten deindustrialization elsewhere. Europe’s traditional subordination to and alliance with the United States since 1945 is fraying, notwithstanding the loud claims to the contrary coming from the United States and the EU. The deep economic and political decline of the UK before and especially after Brexit has the United States considering reliable, alternative agents for its European interests. Germany is the likeliest candidate if it could play that role without jeopardizing its dependence on exports to China. Maneuvers inside Europe force the UK and each EU member to strategize how best to respond to them as well as to the United States and China. Oil and gas price inflation resulting from the U.S.-EU sanctions against Russia intensified all these conflicts because they disadvantage Europe relatively more compared to the other players in the world economy and also European nations vis-à-vis one another.
Secondary themes distract many from grasping the global reorganization now underway. Among these are principles like “national self-determination,” “freedom of the seas,” and “rules-based international order.” They serve mostly to hide the global reorganization as if, suddenly, such principles were the dominant reality requiring protection. The principles, rather, provide convenient veneers for another period of great power realignments like those witnessed in capitalism before.
Before 1914, contesting capitalisms fought over their respective colonial possessions amid those capitalisms’ shifting relative strengths. A declining British empire struggled with the major aspiring contestants to replace that empire (the United States and Germany) and the minor aspirants (France, Russia, and Japan). Caught up in their global power struggles were a disintegrating China and a Global South that was prioritizing decolonization above all else. Within each nation, class struggles—especially a rising socialism challenging capitalism—further complicated their external power maneuvers. Those conflicts culminated in World War I. That war also changed everything: the global power configuration and, likewise, the internal class struggles.
The U.S. empire replaced the British empire. The USSR replaced Russia. Germany’s empire was erased. Japan tried to build an Asian empire and splinter China. Anti-imperialism gained strength everywhere. But so did the capitalist economic system—the structure of production that positions a tiny minority of owners/directors—the employers—over a vast majority of workers—the employees. True, the USSR led global movements against capitalism, but they mostly focused on displacing private employers with state officials as employers. For most in that generation, capitalism meant private employers, whereas socialism meant state employers. Capitalism’s basic workplace structure—employers versus employees—persisted in both its state and private forms. Capitalism’s two forms contested and worked their profound influences everywhere, culminating in World War II.
Britain, Germany, Japan, and Russia were all deeply damaged and weakened, leaving the United States to expand and solidify its empire for the next 75 years. The USSR was strong enough to provide some counterweight to U.S. military power, chiefly by creating space for the emergence of replicas of its socialism (state employers rather than private employers, in conjunction with state-planned distributions rather than free markets). China took advantage of that space but soon diverged into its own version of socialism, a hybrid of Soviet-style state enterprises and private capitalist enterprises, both with similar employer-employee structures.
Now, yet again, capitalism’s contradictions are driving toward another war that would, likely, once again change everything. But now we can discern a certain pattern that would likely be repeated, more or less. An old empire (the United States) is now clearly in decline, and a new one (China) is emerging. The only other potential major power is the EU, but the disunity among its members greatly weakens its competitiveness relative to the United States and China. Secondary global powers are Japan and Russia, which are aligned with the United States and China, respectively. Lagging behind the major and secondary powers by varying degrees, there are other countries, including many in the Global South, that have become economically stronger but whose economic power remains relatively limited given their own divisions and divisiveness, as some play the major powers against one another (or try to).
The collapse and disappearance of Eastern European socialism after 1989 and China’s major opening to both Chinese and foreign private capitalist investments in recent decades have combined to produce a broad crisis in socialism. European social democracy has steadily lost support across the continent. Neoliberalism had undermined social democracy ideologically even as economic realities provoked socially divisive immigration, automation, and job exports. Much the same had happened in the United States to the center-left represented by the Democratic Party, thereby paving the way for Trump. China’s rise has challenged the declining U.S. empire and provoked it to adopt increasingly desperate economic nationalism in response. BRICS (Brazil, Russia, India, China, and South Africa) and other related international blocs reflect and advance the rising strength and voice of many in the Global South who are moving toward alliances with China and Russia (accelerated by the Ukraine war and sanctions regime).
Propaganda, trials, and errors characterize efforts by all sides to navigate a dangerous, tension-filled time of change. One side’s “freedom fighters” are characterized by the opposing side as agents of domination by major powers. One side’s expansion of its international trade and capital is branded “aggressiveness” by another side rattling its swords. Shifts from neoliberal globalization to assertive economic nationalism are all rationalized as requirements of “national security.” Decades earlier, devotees of neoliberalism celebrated its contributions to “peace” by merely existing as a passive contrast to economic nationalism and its characteristic propensity for wars. The less fantastic propaganda has its traces of truth, but they are faint. Repression of internal dissent occurs in all powers, more or less. Efforts by socialists and other working-class advocates are repressed or barely tolerated if carefully disconnected from global power politics.
Socialists were split by World War I. On one side were those (Rosa Luxemburg, Eugene Debs, and Vladimir Lenin) who upheld the primacy of the anti-capitalist class struggle and transition to a post-capitalist economic and social system. On the other side were those who took sides in the global power struggles of capitalist powers and found convenient socialist-sounding rationales for doing so. World War I split socialists even as it strengthened a broadly defined socialism. World War II did the same. It not only hardened the splits within socialism (such as social democracy and Soviet socialism) but also extended the social reach of socialist variants of anti-capitalism, especially to the former colonies and China.
Capitalism has been the context and ultimate cause of world history’s two worst wars. Many had thought, hoped, and worked so that those horrific wars might enable and empower first the League of Nations and later the United Nations. The goals of these organizations were to secure peace in place of global power politics moving toward war. They tried to achieve that goal without fundamentally challenging capitalism, the organization of an economy whose production entails a powerful minority (private or state) owning and operating enterprises. These organizations seem to have failed, but their failure left a lesson we can learn and build on.
A truly internationalist socialism would not tolerate the inequalities within and among the nations of the world. Drastically reducing those would be the top priority. Providing full guarantees of food, clothing, and housing for all—across each individual’s lifetime—would be the second-highest priority. Democratizing not only political life (one person, one vote for all major community decisions) but also economic life (ensuring each employee has one vote on all major workplace decisions) would be the third key priority. A world committed to these goals—the concrete meaning of “going beyond capitalism” or “socialism”—could overcome causes of capitalist wars and hopefully also of wars in general.
Richard D. Wolff is professor of economics emeritus at the University of Massachusetts, Amherst, and a visiting professor in the Graduate Program in International Affairs of the New School University, in New York. Wolff’s weekly show, “Economic Update,” is syndicated by more than 100 radio stations and goes to 55 million TV receivers via Free Speech TV. His three recent books with Democracy at Work are The Sickness Is the System: When Capitalism Fails to Save Us From Pandemics or Itself, Understanding Marxism, and Understanding Socialism.
This article was produced by Economy for All, a project of the Independent Media Institute.
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