The ‘Volcker Shock’ and Start of the Neoliberal Era

As we saw in the previous chapter, the devaluation of the U.S. dollar in terms of gold had temporarily halted by the end of 1974. After peaking at $195.25 an ounce on December 30, 1974, the dollar price of gold fell to $104.00 on August 31, 1976.

As a result, during 1975, the rate of U.S. inflation, as measured by the government producer price index, was “only” about 4.4 percent. Still, the index rose more in the recession-depression year of 1975 than in the inflationary boom year of 1965. This was despite a slump that was considerably worse than that of 1957-58.

The Industrial Cycle and the Collapse of the Gold Pool in March 1968

Industrial cycles normally last about ten years — give or take a year or two. The second industrial cycle after World War II began with the 1957-58 global recession. Given that the industrial cycle lasts about ten years, we normally expect the next global downturn to occur around 1967. Indeed, 1966-67 saw a credit crunch and a “mini-recession” in the United States, as well as a recession in West Germany from 1966 to 1967.

Marxism versus Individual Terror

On September 10, far-right youth group Turning Point USA leader Charlie Kirk was assassinated by a sniper at Utah Valley University in Orem, Utah. The FBI arrested 22-year-old Tyler Robinson, who turned himself in at the urging of his family. Turning Point USA specializes in organizing far-right youth to support the Republican Party and Donald Trump. Kirk was a thorough-going bigot who specialized in baiting African Americans, Muslims, women’s rights activists, gays, trans people, leftists, progressives and liberals. He also made anti-Semitic remarks that in no way excluded his strong support for Zionism.

Boom of the 1960s: The Flood Tide of Keynesianism

Thanks to the economic crisis of 1957-61, the U.S. economy entered the decade of the 1960s with high levels of unemployment and excess capacity. The millions of unemployed workers and idle plants and machines meant that industrial production could rapidly increase in response to rising demand.

Historical Trends in Industrial Cycles

Almost every economic textbook states that post-World War II business cycles were much milder than pre-World War II business cycles. It is claimed that periods of “expansion” have become much longer, while periods of contraction or recession have become much shorter.

From Depression to New Expansion of Capitalism

By the end of the 1930s, many people, including non-Marxist progressives and Marxists alike, had come to consider the Depression as the permanent state of capitalism. The idea that the Depression represented the “new normal” even received a name. It was called the theory of “secular stagnation.”

Artificial Intelligence

On August 15, 2025, U.S. President Donald Trump met with Russian President Vladimir Putin in Alaska. Alaska was once a Russian colony that was purchased by the U.S. in 1867 and became a state in 1959.

The anti-imperialist YouTuber Brian Berletic expressed concern that the Trump administration might attempt to kidnap Putin. This did not seem so far-fetched in light of the Israeli-U.S. attack on Iran aimed at decapitating Iran’s political and military leadership. This occurred as they were supposed to engage in negotiations to normalize relations. Unlike Iran, Russia has nuclear weapons and the ability to deliver them to the U.S. mainland, making any kidnap attempt unlikely, and Putin returned home safely.

Trump has refused to walk away from the Russo-Ukrainian war, and there were no breakthroughs in ending it. The war started with the 2014 U.S.-organized right-wing coup to overthrow the popularly elected Ukrainian government of Viktor Yanukovych. Coup leaders, called the Euromaidan movement, were supported by a coalition of pro-U.S. imperialist liberals and Ukrainian fascists who provided the muscle power.

The Super-Crisis and the Rise of the U.S. World Empire

The severity of the 1929-32/33 super-crisis in a particular country can be measured by the decline in the country’s index of industrial production from peak to trough.

Figures compiled by the League of Nations — the forerunner of the United Nations — for the super-crisis years divide countries into seven groups according to each country’s decline in industrial production. The countries in group one experienced the least decline — less than 10 percent — equivalent to an “ordinary” recession. Those in group seven experienced between 60 and 70 percent declines from peak to trough — economic disaster.

Among the major imperialist countries, rising Japan, then rapidly expanding its share of the world market, was in group one, along with Greece and New Zealand. Britain was in group two, which experienced a 10 to 20 percent decline in industrial production. Germany was in the sixth group, which experienced 50 to 60 percent declines, a position it shared with Canada and Czechoslovakia, then the most industrialized country in Eastern Europe. The United States was in group seven—declines in industrial production from peak to trough of 60 to 70 percent, an “honor” shared only with Poland.

The extreme severity of the crisis in Germany is not surprising. Germany was the biggest loser in the war, stripped of all its colonies and a significant part of its European territories. In addition, due in part to the disastrous hyperinflation of 1923, the German credit system was highly dependent on money market conditions in the United States. When credit froze up, first because of the industrial and stock market boom of 1928-29, then the Smoot-Hawley tariff of 1930, and finally the massive U.S. banking and credit collapse of 1931-32, it is not surprising that effective demand, industrial production, and employment contracted with extreme violence in Germany.

But what about the United States? After all, the United States was the big winner — perhaps the only winner — in World War I. It had the largest gold reserves in the world. Yet its economy collapsed more than that of any other major imperialist power.

Indeed, the U.S. economic collapse didn’t have the disastrous political consequences that Germany’s slightly lesser economic collapse had. Germany had suffered the terrible effects of the blockade of 1914-1918, the shock of the lost war, the abortive revolution of 1918, and the hyperinflation of 1923. The super-crisis of 1929-32 was only the final blow that pushed Germany into the fascist nightmare of the Third Reich.

But this doesn’t change the fact that in a purely economic sense, the super-crisis of 1929-33 was more extreme in the United States than in any other large capitalist country in the world. Why was this? The reason lies in the extraordinary growth of the U.S. economy in the decades preceding the super-crisis.

History of Gold Production from the ‘Gold Rush’ to 1914

The World Gold Council estimates that in the years 1840 to 1844, some 146 metric tons of gold were produced worldwide. Between 1855 and 1859, estimated gold production rose to 1,011 metric tons. This is an increase of 590 percent in 15 years. In terms of percentages, this is by far the greatest increase in gold production for which reasonable data on world gold production is available.

The reason for this amazing increase was the discovery of gold in California in 1848 and Australia in 1851. It was this mass of newly mined and refined gold that fueled the expansion of the world market — what Marx called a new 16th century — that, among other things, drowned the hopes of Marx and Engels for a revolution that would bring the working class to power in Europe during the 1850s. Instead, the massive expansion of the market caused by the gold discoveries led to a powerful surge in the development of industry on a capitalist basis.

The Place of the Great Depression in History

The Great Depression, which began in 1929 and lasted until World War II, holds a unique place in world economic history. “The Great Depression,” wrote bourgeois economist J. Bradford DeLong, “has a central place in 20th century economic history.”