When the economy in a democratic but capitalist country fails, there are two alternatives. You can modify the economic system. Or, you can modify the political system.
When you modify the economic system (capitalism) but retain the political system (democracy), you have the arrangement the U.S. has lived under since capitalism failed in the 1930s, in the Great Depression.
The other alternative is where the economic system (capitalism) is retained but the political system (democracy) is discarded and replaced with authoritarianism. This is fascism and is what happened in Germany, also in the 1930s.
The battle between capitalism and democracy is the conflict that is being fought out in the U.S. right now. The epic thrash we’re witnessing is because the forces of capitalism, seeing a terminal economic crash approaching, are attempting to preemptively replace democracy with authoritarianism—fascism—so that they can control the outcome. A quick look at history shows us the pattern.
In the 1930s, the U.S. experienced the greatest economic collapse in its history, the Great Depression. GDP fell by 25%. Bread lines became an iconic feature of the urban American landscape. Franklin D. Roosevelt put in place economic policies to mitigate the damage and prevent future collapses.
He put tens of millions of people to work through “alphabetical agencies” such as the Civilian Conservation Corps, the National Industrial Recovery Act, and the Works Progress Administration. He imposed FDIC requirements on banks and insured investor’ deposits. He separated commercial banking from investment banking and created unemployment insurance and Social Security.
The sum of Roosevelt’s policies saved capitalism from its own inadvertently attempted suicide. But not everybody was happy with Roosevelt’s reforms. A cabal of disgruntled bankers attempted a fascist coup d’ etat. It failed, because the man they had recruited to lead the coup, retired Marine General Smedley Butler, ratted them out to Congress. But the very fact of the attempted coup showed just how far capitalists will go to avoid constraints put on them by democracy.
Clearly, Roosevelt’s reforms worked. He modified the economy from a purely capitalistic orientation, giving it “guard rails” that would prevent another collapse. But he kept the country’s small-d democratic political institutions intact. The result was one of the most buoyant periods of both economic and political progress the world has ever seen.
The other model of what happens when a capitalist economy fails is Weimar Germany, also in the 1930s. Germany had suffered three economic debacles in just over a decade. Those were the loss in World War I, the Great Inflation of the 1920s, and the Great Depression, the same Great Depression Roosevelt confronted. But the German response could not have been more different than Roosevelt’s.
Where Roosevelt had kept the political system intact but modified the economic system, Germany did the opposite. In January 1933, just 32 days before FDR was inaugurated, German president Paul von Hindenburg appointed Adolph Hitler Chancellor. Hitler had promised German elites that he would crush the civil unrest that had been borne of economic collapse. He kept his promise.
Hitler kept the capitalist system intact, funneling tens of billions of dollars to weapons makers, financiers, and industrialists. But he dismantled German democracy. He banned competing political parties, suspended civil liberties, outlawed trade unions, had thousands of political opponents murdered, and imposed martial law. This was fascism—the operation of government for the benefit of corporations and the wealthy. We all know what happened next.
What can these two polar responses to capitalist economic collapse tell us about the situation in the U.S. today?
A 2020 study by the RAND Corporation shows that between 1975 and 2018, $50 TRILLION of combined income was transferred from the lowest 90% of income earners to the top 1%. It’s the greatest episode of internal looting from one class to another within the same society, ever recorded.
The U.S. economy has been in a four-decades long engineered decline, which is now accelerating. The owners of capital have intentionally de-industrialized the economy in order to get their money out. This has put tens of millions of formerly high paid workers out of work. At the same time, they engineered a massive transfer of wealth from the working and middle classes to the very wealthiest. This was Reagan’s supply-side economics. The data tell the story.
A 2020 study by the RAND Corporation shows that between 1975 and 2018, $50 TRILLION of combined income was transferred from the lowest 90% of income earners to the top 1%. It’s the greatest episode of internal looting from one class to another within the same society, ever recorded. This is the root cause of the widespread, blistering rage that manifests today as Trumpism.
The immediate problem with this scheme was that it didn’t leave enough income and purchasing power in the hands of people to clear the markets. Unless something was done to restore the lost liquidity, the economy would fall into prolonged recession, or depression. The work-around was that the government began borrowing money at a prodigious rate to plug the holes in aggregate demand that its income transfers had created. Again, the data tell the story.
In 1981, when Ronald Reagan took power, the national debt stood at $1 trillion. In its first 204 years, that was the total amount the country had needed to borrow. Twelve years later, when Reagan’s Vice President, George H.W. Bush left office, the debt had quadrupled to $4 trillion. This is the amount that was needed to offset the transfers and the loss of tax payments to the government that resulted from Reagan’s upward redistributive policies. But that was only the beginning.
By 2001, when George W. Bush took office, the debt had reached $5.7 trillion, a large but still manageable sum. Like Reagan, Bush cut taxes on the wealthy, not once but twice. The result was that when he left office, the debt had essentially doubled, reaching $11 trillion. Since then, it has more than doubled again, to more than $27 trillion today.
It’s unfathomable, but it is the measure of the degree of damage that Reagan’s policies inflicted and continue to inflict on the economy. This year alone, the government has had to borrow more than $4 trillion just to keep the ship of the economy afloat. That is four times what the country had had to borrow in its first 204 years, combined. It’s almost $11 billion every day.
To put that into perspective, a few years ago, the Chinese government made a one-time investment of $10 billion to build a national quantum computing research center. It has produced a computer that appears to be a trillion times more powerful than any existing supercomputer in the world. If successful, it will be game over for all other countries using conventional computers to run their economies, or militaries. Again, the amount invested to accomplish this was less than one day’s borrowing by the U.S. government today.
But even $11 billion of borrowing a day is not enough to keep the economy aright. More than 30 million Americans are out of work today. Last week, an additional 1.4 million filed for unemployment insurance. More than 8 million have been added to the poverty roles since the COVID crisis began. As many as 15 million households with 40 million people face potential eviction when January rent comes due. Almost half of all small businesses—48%—fear they may have to shut down permanently. Miles-long bread lines (now in cars) have returned as an iconic scar on the American urban landscape.
When the whole thing finally collapses nobody can precisely say, but it cannot be far off. The U.S. is actuarially bankrupt, meaning that there is no plausible scenario under which these debts can possibly be paid. At some point, lenders will stop lending. When that happens, the government will be unable to deliver essential services and will have to impose martial law to contain the resulting disorder. The COVID lockdowns we’re now living under are a dry run for that time.
Remember, Donald Trump knew in great detail in January just how deadly the virus was, and just how easily transmissible it is. He intentionally kept this information from the public while relentlessly undermining any competent public health response. To put this into perspective, Japan has had a total of 2,462 COVID deaths since the pandemic started. The U.S. is having more than that number EVERY DAY and the rate is increasing. This is not an accident. It is not even simply incompetence. It is intentional.
The wealthy know all of this. That’s why they’ve taken their money out of the U.S. economy and stashed it in Swiss bank accounts, in tax havens in the Cayman islands, in new factories and shopping malls and tilt-up cities in east Asia, and in hedge funds investing in anything except the rehabilitation of the U.S. economy and its workforce. Anywhere where their money is out of reach of the U.S. government and its ability to tax.
It’s why they have sponsored Donald Trump and his swelling legions of brownshirts and traitorous Republican congressmen to try to overturn the 2020 presidential election. For decades, they were able to carry out their suppression of democracy through such pedestrian means as gerrymandering, purging of voter rolls, closing polling places in minority neighborhoods, voter intimidation, and more. But even those devices are no longer sufficient.
They can see the awakening consciousness of the masses and know that as long as democracy is still functioning there remains the possibility that their decades-long heist could be reversed. They are intent that that will not happen. They will happily destroy the country—meaning democracy—in favor of fascism rather than have to surrender their ill-gotten gains.
The truly insidious goal is to destroy the public’s faith in democracy itself, so that that selfsame public will not defend the core institution on which the very country is premised.
And we should be clear, this is not simply a 2020 phenomenon. They are playing a long game where, even if they don’t win this year, they will continue their assault until their end is achieved: democracy is destroyed. They will be back in 2022 and 2024 more savvy than ever. They’ve learned the weak points of our system and will attack at the level of county registrars of voters, state Secretaries of State, state legislatures, and any other weak points they can manipulate or intimidate to destroy functioning democracy.
The truly insidious goal is to destroy the public’s faith in democracy itself, so that that selfsame public will not defend the core institution on which the very country is premised. They have been remarkably successful at this, with some 70 million people believing that the election was rigged and that Donald Trump should be installed as an effective dictator, despite the fact that he conspicuously lost the popular vote by over 7 million votes, and the electoral college by 74 votes, a “landslide” as he called the exact same tally in 2016.
The mainstream media have been the central actors selling this decades-long campaign of dispossession, deceit, and destruction. Every day for 40+ years, while $50 trillion was being covertly, systematically sluiced from the 90% to the 1%, they’ve served as cultural pacifiers, agents of diversion, happy chatterers, cooing to the populace that everything was fine, just as it was supposed to be, that America is the Exceptional country, and any doubt about that reflected not political or economic insight, certainly not moral courage, but moral failing, perhaps even treason, on the part of the doubter.
The media remains the primary agent of deception and deflection still today. They locate all of the impetus for the democratic overthrow now underway in the person of Donald Trump himself. This is an easy sale because Trump is so palpably repellent, so pathetically insecure and in need of constant attention, and so psychotically disturbed in his vehement insistence that he won the election and that democracy must be overturned so that that “fact” can be actualized. Trump is the political roadside wreck that we can’t stop rubbernecking and the media milk this for all it’s worth.
In truth, however, the impetus to overturn the democracy is decades old, is very deeply rooted, is vastly more sophisticated than Trump, and is only now coming to its apotheosis. It originates in the owners of great wealth, just as it did in the Great Depression, whether in the U.S. or in Germany. They are the ones who own the media and hire buffoons like Trump for their ability to deflect rage from the failed economic system, and redirect it onto manufactured targets like the “deep state,” race, “socialist liberals” and other imaginary but useful boogie men.
The 126 quisling congressmen who have pushed Trump’s failed Texas lawsuit are not mainly afraid of Trump, as the media would have us believe. Trump will soon (we can only hope) be in jail where he will be deprived of his Twitter megaphone. The bootlickers are afraid of losing the campaign contributions of these “malefactors of great wealth,” as Roosevelt called them. They have been called to do what they have been bought to do and they must comply. They are cowards, traitors, truly moral midgets, but they can count.
The coup d’ etat to replace democracy with fascism is undeniably underway and will not relent until it has succeeded. It will be decided by which side can turn out more people onto the streets once the announcement is made. Right now, it looks like the right, the fascists, with their stormtrooper thugs and gun-toting goons, armed with rage over reason and resentment over reality, have the momentum. They certainly have the agitation, don’t they. We’ll soon find out how much the rest of the country really loves it when we see whether they will fight to save it.