Recent media speculation has focused on whether 79-year-old President Donald Trump is experiencing cognitive decline, echoing similar coverage of his predecessor, Joseph Biden.
They’re the oldest men to have held the office. As people age, they become more vulnerable to the group of brain changes we call dementia. I’m not qualified to assess anyone’s health; what matters here is what these stories signal politically — confusion, factionalism, and instability at the top of the state.
At times, it seems that Trump has no coherent foreign policy. There are stories he’s pressuring Euromaidan Ukraine to settle the war with Russia on Russian terms. Then it seems that settlement talks go nowhere.
Even more than in his first term, Trump has surrounded himself with figures like his Secretary of Health, Robert F. Kennedy Jr. — a notorious anti-vaxxer and promoter of medical pseudoscience. (I can’t think of anyone less qualified for the post than RFK Jr.)
Trump’s Secretary of War (as he styles himself), Pete Hegseth, and similar wealthy misfits are typical. Perhaps among the world of the ultra-rich, if there is a person in the family that doesn’t fit into their country clubs, they are instead sent to serve in the Trump administration.
If there is any coherent tendency in Trump’s foreign policy, it’s his shifting the attention of U.S. imperialism to the Western Hemisphere. He demanded that Panama hand over the Panama Canal to U.S. control. He pressured Denmark to sell its Greenland colony to the United States and encouraged Canada to accept annexation. The latter infuriated Canadians who have no desire to become part of the United States. So far, Trump hasn’t taken any real steps to do any of this.
He has taken up another project begun by his Democrat and Republican predecessors to overthrow Venezuela’s Chavista government, a country with the largest proven oil reserves in the world. ((1)
In 2002, the George W. Bush administration supported a coup against the Venezuelan president, Hugo Chávez. Within twenty-four hours, a massive popular upsurge caused the coup to collapse. In response, the Chávez government was radicalized.
Washington didn’t give up. Following Chávez’s death in 2013, Washington continued its attempts to put a pro-imperialist regime in power in Caracas.
In 2019, during the first Trump administration, a pro-imperialist Venezuelan politician, Juan Guaidó, declared himself president, and U.S. imperialism declared him the legitimate government of Venezuela.
The first Trump presidency and then Biden waged an economic war on Venezuela that led to an economic crisis.
We should point out that if U.S. imperialism puts a gun to the head of a nation’s people and says: Unless you vote for the candidate we want, we will blockade your country, throwing you into economic crisis, and I might add, threaten to wage a shooting war against you, causing the death of tens of thousands of your people. Is this a free election? I don’t think so. An election, even in the sense of bourgeois democracy, can be considered free only if the people can make their choice without the threat of foreign aggression.
In the 2024 Venezuelan election, won by Chavista Nicolás Maduro, Washington recognized the pro-imperialist candidate Edmundo Gonzalez as the winner. How would the United States react if roles were reversed and the Venezuelan government recognized Kamala Harris as the winner of the U.S. presidential election in 2024?
In recent days, Trump has claimed that Maduro is the head of a drug cartel. The administration has bombed fishing boats off the Venezuelan coast, claiming they carry illegal drugs into the United States, similar to claims that the People’s Republic of China smuggles fentanyl through Mexico and Canada. Venezuela is more vulnerable than the nuclear-armed China that now has the largest industrial base in the world.
Still, there is little enthusiasm in the U.S. for a war against Venezuela, especially by the unpopular, scandal-ridden Trump administration that is suspected of plotting to overthrow what is left of U.S. democracy and replace it with a Trump dictatorship.
People have not forgotten the events of January 6, 2021, when, contrary to tradition, Trump refused to recognize Biden’s electoral victory in the 2020 presidential election. How can Trump lead a war to restore democracy against the Maduro “dictatorship” in Venezuela when he doesn’t even recognize the traditions and norms of U.S. democracy, as limited as it is?
People have not forgotten the results of the war against Iraq that was supposed to establish “democracy,” or the consequences of the ultimately failed twenty‑year war in Afghanistan that ended with the Taliban back in power.
Further back, there is the failed U.S. war against the people of Vietnam and other Indochinese nations that shaped an entire generation, and before that, the 1950s war against the Korean people. World War II stands out as the only war fought by the U.S. government in the last one hundred years in which a clear majority still thinks the country was right to be involved.
We should not forget that the Second World War, fought in alliance with the Soviet Union and China and backed by the Communist Party USA, was in reality a war of imperialist conquest by the United States to establish world domination. The alliance with the Soviet Union ended in 1945 and was soon replaced by the “Cold War,” aimed at destroying the first major attempt to build a socialist society.
This process eventually succeeded when a pro‑imperialist capitalist counterrevolution swept away the Communist Party of the Soviet Union between 1985 and 1991.
Imperialism also bitterly opposed the great Chinese people’s revolution, which triumphed in 1949. Hostility thawed towards the People’s Republic of China for a brief period of friendly relations from roughly 1971 to 1985 — aimed at deepening the split with the Soviet Union — but was then renewed with bitter hostility toward the PRC.
Wars of any significance waged by the U.S. since then have ended in bloody draws or outright defeat. (2)
It’s not surprising there is little enthusiasm for an all-out U.S. war against Venezuela. As Marxists, we do not blindly follow public opinion; we have our own opinions, even when they put us in the minority.
First, we support the right of all nations to self-determination as a basic principle. We support the struggle of all nations in the age of imperialism against the attempts of imperialist nations to dominate them. Even if a country is ruled by a dictator, for example, such as Iraq’s Saddam Hussein, democracy cannot be brought to it by an invading imperialist country. Iraq was better off under Saddam Hussein — even though he was a dictator — than under the “democracy” brought by U.S. invaders. The same was true of China under Chiang Kai-shek when it was invaded by imperialist Japan between 1931 and 1945. As bad as Chiang Kai-shek and the Chinese warlords that ruled during the 1930s, Japanese imperialism would have been worse.
The defeat of the Japanese imperialists was the necessary precondition for China’s real liberation in 1949. The achievements of today’s People’s Republic of China would have been unthinkable had it still been a Japanese colony. Even under the rule of the Taliban, Afghanistan is better off than under the rule of U.S. puppets. Similarly, in the 1930s, the rule of Ethiopia’s Emperor Hallie Selassie was better than that of Italy. Though in the 1930s Italy was a fascist dictatorship, the same would have been true if it had been a liberal parliamentary democratic republic.
We have to oppose Trump’s attempt to establish a government that he, and more importantly, U.S. imperialism that his government serves, wants to establish in Venezuela.
Marxists worthy of the name must support the Venezuelan people to fight by any means necessary (to quote Malcolm X), whether through peaceful or, if necessary, violent means, a war of national liberation. Only the Venezuelan people have the right to decide who will govern them and what form of government they will have. Without this right, there can be no democracy, let alone socialism.
On December 10, it became known that the U.S. seized a ship carrying Venezuelan oil to Cuba, an assault aimed at both countries. If the U.S. can cut off Cuban oil imports, its chances of continuing to resist imperialism will be reduced. After the destruction of the Soviet Union during the 1985-1991 counterrevolution, Chavista Venezuela’s willingness to sell oil to Cuba on favorable terms was crucial to Cuba’s survival as an independent country. The same is true of Nicaragua. The road to defend Cuba and Nicaragua passes through Venezuela.
The dollar, gold, and the limits of policy
In addition to the current cyclical weakness of the dollar, long-term structural factors threaten its dominant role in the international monetary system. Relative to other capitalist countries, the U.S. economy peaked at the end of World War II, when about half of the world’s commodity production came from the United States. The seller of any commodity produced in the United States, whether a raw material, agricultural commodity, or finished product, would accept the dollar as a means of payment or purchase.
Since the U.S. produced so much, other countries accepted dollars for their own commodities because they would, in turn, use them to buy from the United States. Starting with World War I, the U.S. dollar began to replace the British pound as the world’s chief currency, and its role as the world’s reserve currency was formalized at Bretton Woods in 1944. The gradual erosion of U.S. capitalists’ share of total world commodity production, down to roughly the mid-teens today from around 50% in 1945, has undermined the dollar’s role. On a historical scale, the U.S.-NATO world empire is in decline.
The decline of an empire is not the same thing as its downfall. Whether under a Biden, a Trump, a Newsom, a Harris, or yes, even an AOC or whoever the Democrats nominate in 2028, the empire will put up a fight to prevent its collapse.
The empire is currently far from dead and remains dangerous, in many ways more so than when it was at the peak of its power. This struggle against U.S. imperialism remains central to the global class struggle.
In dealing with the economic situation, we must distinguish between long-term trends and changes in the global industrial cycle. Sometimes these changes reinforce the trends, and sometimes they cross each other. In the real world, the trend and evolution of the industrial cycle are intertwined.
On December 9 and 10, the Federal Reserve’s Open Market Committee held its regular every-six-weeks meeting. As expected, it cut its target for the federal funds rate to 3.5%-3.75%. To simplify, it sets a target for the interest rate that commercial banks charge on overnight loans they make to each other.
Government regulators set a minimum level of cash that commercial banks must keep on hand to back their deposit liabilities. At the end of each business day, some will have more cash than needed to comply with government regulations, while others will have less than required. Those with extra cash make overnight loans to banks that are short. The reason for the loans is that, as a capitalist enterprise, they cannot leave any capital idle when it can be at “work” collecting profit — surplus value realized in money form — interest.
When money is “tight,” demand for overnight loans is greater than the cash surpluses available to make them, putting upward pressure on the federal funds rate. When money is abundant, demand is low compared to supply, putting downward pressure on the federal funds rate. When money is in short supply, like other interest rates, overnight rates are high.
When the Federal Reserve wants to lower interest rates, the committee lowers the target for the federal funds rate. The Federal Reserve steps up its purchases of Treasury notes, which creates additional dollars. If it wants to increase the federal funds rate, it sells Treasury notes.
The crucial question is: Where does the money come from to buy them?
Economics textbooks explain that the Federal Reserve “creates” this money out of “thin air.” In reality, nobody can do this.
In the days of the international gold standard, central banks had to redeem banknotes in gold to their bearers on demand. Since the end of the gold standard, it seems, at first glance, that the central banks can create as many dollars, euros, etc., as they like. The textbooks say that if the banks create too much, the monetary effective demand will exceed the supply of commodities at existing prices, forcing prices to rise.
If the banks don’t create enough, the monetary effective demand will be less than the supply of commodities at existing prices, and there will be downward pressure on prices. This implies a recession or stagnation, along with high unemployment.
The textbooks imply that the job of the central banks is to juggle these two evils: inflation on one side and recession, stagnation, and unemployment on the other. The banks are supposed to keep a steady inflation rate of about 2% and unemployment high enough to hold down wages but below the level that provokes a social crisis, somewhere between 3% to 4% unemployment as calculated by the U.S. Labor Department.
If inflation rises above 2%, the Federal Reserve’s Open Market Committee is supposed to raise its target, and if unemployment is above 4%, it’s supposed to lower its interest rates.
Stagflation
What happens when inflation is above the 2% target and unemployment is above 4%? This situation has been dubbed stagflation.
The 1970s were marked by unemployment rates well above 4% and inflation well above 2%. [link to posts on the 1970s]. In 2007-08, stagflation threatened, but the crisis ended with the Great Recession, not stagflation.
Right after the 2020 COVID shutdowns, there were claims of another stagflation. While there was an inflation driven by a shortage of commodities in the wake of the shutdowns, the “stag” part of stagflation was absent as industry rebuilt depleted inventories.
Now, in contrast to the immediate post-shutdown period, signs of another 1970s-type stagflation are appearing. Inflation is around 3%, but the dollar price of gold is holding above $4,000 per ounce, clearly threatening to go higher as the dollar price of other commodities, with the curious exception of oil, surges. Labor Department unemployment figures are north of 4%. Unlike after the shutdown, when unemployment fell rapidly, unemployment is rising now. According to the U.S. Labor Department, the unemployment rate now stands at 4.6%.
If we define stagflation as inflation above 2% and unemployment above 4%, we are already in stagflation. So far, the stagnation is mild compared to the 1970s, but this could change if the dollar price of gold continues to climb.
The Federal Reserve can stop the incipient stagflation by reversing recent cuts to the federal funds rate. This would trigger a recession, raising the unemployment rate and accelerating the already rapid decline in Trump’s popularity. After all, prices fell between 1929 and 1933, not doing much for Herbert Hoover’s popularity.
The Federal Reserve can push back the immediate threat of a recession by not raising the federal funds rate but instead further cutting it, allowing prices to soar. But soaring inflation did not do much for Jimmy Carter’s popularity. Both Hoover and Carter were one-term presidents.
Contrary to what economists imagine, there is no fixed relationship between dollar (and other currency) prices and the rate of unemployment. New money isn’t created out of thin air but out of the sweat and labor of the workers in gold mining and those who produce the machinery and auxiliary materials used in that industry.
When there is a large amount of gold in the world relative to the total sum of prices of non-gold commodities measured in terms of their prices defined in gold money, there is an abundant supply of money on the money market relative to the demand for money.
In those circumstances, the Federal Reserve can set low targets for the federal funds rate without driving up the demand for gold. Interest rates would have to fall to low levels before the dollar price of gold would rise. If demand happened to be depressed, the multiplier and accelerator effects would work toward recovery. As long as there is enough money — gold — available, the government can run large deficits before interest rates are driven up.
If the Federal Reserve has to create additional dollars to hold interest rates down, it can do so without the dollar price of gold rising too much. As long as gold is plentiful, Keynesian policies work well. (3)
When gold is scarce — that’s a different story.
If the Federal Reserve tries to lower the federal funds rate when gold is scarce, gold’s dollar price will soar. To hold it down, the central bank must keep the federal funds rate up and increase it more if needed. The subsequent money market tightening makes it impossible for the Treasury to run deficits without driving up interest rates.
As Keynes himself was aware, if this happens, the stimulation effects of budget deficits are neutralized. While the state can still borrow, it is at the cost of crowding out the private sector. For Keynesian policies to work, the state must be able to borrow without driving up interest rates. (4)
If the Federal Reserve allows dollar gold prices to rise, the dollar prices of most other commodities will rise. The rise accelerates the velocity rate of the currency circulation as people buy commodities before their dollar prices rise even more, driving up interest rates.
If the Federal Reserve allows gold’s dollar price to continue rising, it must keep raising the rate at which it creates dollars, leading to still higher dollar gold prices and the rise in the dollar prices of other commodities, falling into an inflation trap.
This cycle continues until the currency is completely destroyed, or the Federal Reserve abandons its efforts to hold down interest rates. At that point, the interest rate spikes, halting rising gold dollar prices and the velocity of circulation of the dollar (and the other currencies tied to it under the dollar system) falls.
It also leads to steep recession and massive unemployment. This describes the Volcker shock of 1979-82. Once global overproduction leads to stagflation, Keynesian policies lose effectiveness, and economic crisis cannot be postponed.
Faced with the conflicting dangers of accelerating inflation and deep recession, and politically destabilizing mass unemployment on one side and the pressure of the Trump administration and the Open Market Committee to reduce the fed funds target even more, the Committee showed an uncharacteristic division in its December 2025 meeting. Essentially, it is hoping against hope that gold’s dollar price stabilizes or falls without a new Volcker shock. But the longer the dollar gold price rises, the less likely this seems. Only a massive supply of gold hitting the market could achieve this. Where will this gold come from?
The U.S. Treasury, the world’s biggest single holder of gold, could dump some on the market. This might work momentarily, but as it runs out, demand will recover, making it far more difficult and costly to hold down the dollar gold price since the implicit threat that the U.S. Treasury might suddenly dump large quantities of gold on the market would be gone. If the price continues to soar (with occasional corrections) and kicks off broader inflation, the already politically weakened Trump administration will face a major financial and political crisis.
There are both cyclical and long-term forces for the dollar’s decline. Looking at cyclical forces, the dollar faces a crisis at the peak of the industrial cycle. We saw this in the late 1950s, again in the late 1960s, that didn’t end until the early 1980s, and in 2007-08, which ended with the financial crash and collapse of Lehman Brothers in September 2008. According to all indications, we’re experiencing another such crisis now.
In the late 1950s, elements of the Bretton Woods system’s gold standard were still in effect. In the latter part of 1957, the U.S. was hit by its first major cyclical recession since the Depression. The Fed cut its interest rate targets out of fear that the recession would deepen.
The recession ended in the Spring of 1958. But the crisis was not over. The U.S. experienced its first gold outflow, the first since 1931. Because it was selling gold to foreign banks at the fixed rate of $35 per ounce, gold’s dollar price didn’t rise much, though there was the danger that if the outflow continued, the Treasury would have to suspend the gold sales.
To halt the outflow, the Federal Reserve was forced to push up interest rates. This renewed rise in interest rates put the U.S. economy back into recession in 1960, causing unemployment to rise again. The period of the late 1950s and early 1960s was a depressed one of high unemployment and economic stagnation, though not on the scale of the 1930s. (5)
Democrat John F. Kennedy won the presidency in the 1960 presidential election on the slogan: “Get America moving again.”
What was a mere threat of dollar devaluation during the first big cyclical crisis after World War II became reality in 1968 when the Treasury dropped its attempt to keep gold’s price from rising above $35 an ounce. In August 1971, it suspended the exchange of gold for every dollar presented by foreign central banks at $35 per ounce, ending the last vestige of the international gold standard.
What was a threat in 1958 became reality in 1968-1971. The willingness of the Treasury and Federal Reserve to allow the gold dollar price to rise above $35 marked the beginning of the 1970s stagflation crisis that reached a climax with the Volcker shock crisis of 1979-82, when the Volcker Fed allowed interest rates to rise to whatever was needed to break the dumping of dollars for gold.
In January 1980, the dollar price of gold briefly hit $875 in intraday trading. After the Volcker shock, gold’s dollar price entered a 20-year decline that brought it close to $250 in 1999. This prolonged decline marked the end of the 1970s stagflation crisis.
The price rose again, reaching $1,000 during spring 2008 just before the financial crash in the fourth quarter of 2008. Continuing “quantitative easing aimed at accelerating sluggish economic growth and reducing lingering mass unemployment in the wake of the crisis prevented the dollar from seeing the kind of partial recovery that occurred for the first two decades following the 1970s stagflation crisis.
Since 2023, gold’s dollar price has risen steadily again, indicating another gold crisis. It’s not surprising, as we’re due for another downturn in the global industrial cycle, considering the last major cyclical downturn was in 2007-2009. In addition to cyclical crises, there is downward pressure on the dollar for longer-term structural reasons as well.
The massive shift of industrial production from the United States and Western Europe toward East Asia, especially but not only China, progressively undermined the world order that dominated the world since 1945.
Supporters of this order variously call it the “free world” or the “rules-based order,” but it is better called the U.S. world empire, or the U.S.-NATO world empire, with NATO as its military wing. Like all empires, this one is based on a series of institutions. These include a U.S.-controlled military “alliance” called the North Atlantic Treaty Organization, a series of financial organizations called the World Bank and the International Monetary Fund, a global currency called the U.S. dollar, and an organization that sets the rules for world trade — the World Trade Organization.
The dollar’s dominant role is the financial bedrock of this empire. If it loses this role in the international monetary system, the U.S. empire will likely cease to exist. To continue, world capitalism would have to crystallize around some other arrangement.
The coin of last result
The dollar is also under pressure for political reasons.
When the Russo-Ukrainian War broke out in 2022, the U.S.-NATO world empire seized Russia’s dollar reserves. Any country at all independent of it, most obviously China and Russia, has been moving its reserves out of the dollar.
What is the alternative? It’s what Marx called “the coin of last resort” — gold, the money commodity. In the 1970s, the U.S. government pressured the world’s central banks to reduce gold holdings in favor of dollars to reduce gold’s role in the international monetary system, hoping to drop it to zero, in effect demonetizing gold.
As we have explained before, the laws of economics don’t allow this. Under the capitalist system, money must remain a commodity, and it will always be at the center of the capitalist global monetary system. Today, the central banks of countries not completely controlled by the U.S.-NATO empire have reduced the percentage of dollars and built up gold reserves instead. Nobody in serious capitalist circles is talking about the demonetization of gold anymore.
The crisis of the Trump administration
In the last few months, we’ve seen more than seven million people in the streets protesting the arch-reactionary Trump administration, followed by big setbacks for Republican candidates in the 2025 off-year elections. In November 2025, a left-wing Muslim and avowed democratic socialist Democrat won the New York City mayoral election.
Then there is the ever-growing Epstein scandal that has exposed the depravity of the ruling circles of the empire, including Trump personally. And we have a growing split in the Republican party over the Palestinian genocide and the reemergence of open anti-Semitism among some far-right Republicans seeking to blame “the Jews” rather than imperialism for the genocide. I’ll say a few more words on this subject.
It’s a basic truth that Zionists, whatever their intentions, cannot fight anti-Semitism. As an ideology, Zionism was never about it in the first place. From the 1890s onward, when modern Jewish Zionism emerged (before that, we had only Christian Zionism), Jewish Zionists believed that the battle against anti-semitism could not be won and was not worth fighting. They instead turned to the imperialist anti-Semites who held power in Europe to beg that a piece of land somewhere outside Europe be allotted for settlement by European Jews. They argued that this would remove Jews from Europe, thereby satisfying a key aim of European anti-Semites and supporting the colonization of European Jews somewhere outside of Europe.
The dawn of the 20th century was a time of European colonization of the world. Settlers recruited from the European surplus population were settled into non-European regions where they served the interests of the colonizing powers.
Settlers were expected to fight and repress or even exterminate the natives, depending on the local conditions. Zionism was no different from any other colonizing movement in this respect. The traditional role of Jews in Europe, beginning in the ancient world and continuing through the Middle Ages, was to act as a commercial caste that represented commodity production within European pre-capitalist society.
There, ancient and then feudal society, unlike capitalism, was based largely on the natural economy, where most products did not take the form of commodities. This age-old role of Jews was undermined when Western and then Eastern Europe transitioned to capitalism, where most products became commodities. As society became capitalist, there was less room for a specific Jewish commercial caste.
As capitalist commodity production replaced feudal production in Western Europe, Jews were able to move to regions where capitalism had not yet taken root, in the Muslim world or in still feudal Eastern Europe. By the early 20th century, capitalist production was taking over Eastern Europe.
Traditional Jewish communities were running out of regions where they could retreat. In Eastern Europe, as feudal economies gave way to capitalism, traditional Jewish communities began to split up into those who became modern capitalists and the far greater number who became workers who sold their labor power to live.
At this stage, Europe’s capitalist rulers became concerned about the large number of Jews, especially the youth who were becoming attracted to Marxist ideas. With the 1917 Balfour Declaration, Britain announced support for the Zionists. One of their motives was to lure Jewish workers and intellectuals away from socialist ideas toward the reactionary idea of colonizing Palestine for the benefit of British imperialism at the expense of the native Arab Palestinians. (See Winston Churchill, “Zionism versus Bolshevism.”)
Why Zionists cannot fight anti-Semitism
Despite Trump’s statement to the contrary, the Palestinian-Jewish conflict did not originate thousands of years ago. It began when British imperialism threw its weight behind the Zionist movement with the aim of using Jews to colonize Arab Palestine for British imperialism.
When Hitler came to power in January 1933, Zionists were overjoyed. During the 1930s, the new German dictator’s program of expelling all Jews from Germany, and later from all of Europe, coincided with Zionist aims. Shocking though it might seem, during that time, Zionism and Nazism were natural allies.
Today, even if individual Jewish Zionists are horrified by the resurgence of real right-wing anti-semitism in U.S. politics (unlike the phony claims of antisemitism on “the left” that they have been spouting for decades), they cannot fight real anti-Semitism; they can only make things worse, far worse.
You cannot fight against anti-semitism while supporting the genocide of Palestinian Arabs, or in any way apologize for it. Any fight against anti-semitism based on support of what is essentially the genocidal U.S. Zionist colony in Palestine is doomed from the start.
In the U.S. today, the battle against anti-Semitism has to start with stopping the Gaza genocide, and beyond that, the threat that the Zionist entity, backed by U.S. imperialism, will expand the carnage from Gaza to the West Bank, then Lebanon and Syria and elsewhere in North Africa and West Asia. There is no solution to the Zionist-Palestinian conflict that does not recognize the right of the Palestinian Arabs for full self-determination and all that implies. Only then will Palestine be free from the river to the sea.
All this is happening against Trump’s political weakening, shown in part by his retreat on the tariff war and continuing Russian victories in the Russo-Ukrainian war, and is further fueled by the deteriorating economic situation. As Trump weakens, figures further to the right are emerging who attack Zionists not because Zionists are servants of U.S. imperialism but because they supposedly represent a threat to Christianity.
The Return of Outright Colonialism
Today, there is a growing U.S. military assault on Venezuela, and a Security Council resolution (unfortunately not vetoed by Russia or China) has effectively made Trump the imperialist proconsul of Gaza.
This is not an example of neocolonialism but of outright colonialism. We are living in a volatile political and economic atmosphere unlike anything seen in the post-1945 world.
Against this turbulent economic background, the last two years of genocide in Gaza mark a turning point in world politics. There seems to be no return to the pre-October 2023 situation. Both forces of resistance to the U.S.-NATO world empire, represented by the mass movement against the U.S.-Israeli genocide in Gaza and the forces of extreme reaction to the right of a weakened but still dangerous Trump, are advancing.
Though this has not been grasped by middle-class podcasters, behind the turmoil is the approaching clash between the two main socio-economic classes dominating capitalist society: the capitalist class that owns the means of production and appropriates the surplus value produced, and the working class that actually operates the means of production.
The question arises whether these events foreshadow a prolonged period of social and economic crises like that which wracked the capitalist world between 1914 and 1945. Do they foreshadow something of greater significance — the end of the capitalist system? There is reason to believe the latter might be the case in the not-too-distant future.
Does capitalism have a future?
This brings us to the question of what the capitalist system is and what the historical limits to its mode of production and exchange are. To understand this, we have to understand what capitalism is and, equally important, what it is not.
This matters because mainstream economics treats capitalism as timeless, obscuring the fact that it rests on a specific social relation that makes profit possible — and that this relation, like others before it, arose under definite historical conditions and can also pass away.
As far as economists are concerned, capitalism is merely the process of the accumulation of the means of production. According to them, capital is just another name for the means of production. The cutting edge produced by a still ape-brained but human-handed australopithecine ancestor of humanity that lived more than three million years ago, and the most advanced chip-making fab are both examples of “capital.”
Economists say the accumulation of the means of production and creation of humanity itself is capitalism. At first, the accumulation of capital proceeded at a slow pace, then began to speed up, reaching breakneck speed over the last several centuries.
To follow this logic, if we go back three million years, our ape-brained human-handed ancestor had two choices on how to spend their day: gathering food, or acting as a capitalist and spending part of the day producing tools that would enable them to enjoy more food in the future.
Using its human-type hands, our capitalist great, great … grandparents could spend part of the day chipping stones with cutting edges (that could not directly be consumed). Our ancestors were engaged in saving rather than consuming, saving by accumulating capital and then using it in the form of stones with cutting edges to produce more food.
By postponing their consumption, our esteemed great … grandparents, our pre-human ancestors could consume more than if they had consumed it immediately. It seems doubtful that they had a word for “interest” (they probably were not yet capable of speech), but that’s what they were doing (in the terms of modern capitalist political economy) because they were postponing consumption in the moment to consume more (interest according to the economists) in the future.
Since its beginning, according to bourgeois economists, production is capitalist production and remains so until the expanding sun brings the living world to an end in about half a billion years from now — assuming our distant descendants have not long since escaped to the stars (allowing capitalism to continue for eons to come).
Marxists take a radically different view. We realize that production is the most important human activity that differentiates us from other animal species. While we now know that other animals, including our closest ape relatives, engage in occasional acts of production (these animals would also be considered capitalists by our economists), none of them became dependent on tools in order to keep living in the way our ancestors did. This most important of all human activities itself has a history and can be divided into definite periods in production history.
Our ancestors, who through the process of natural selection gradually transformed into actual humans, slowly at first, then at an accelerating pace, mastered the art of tool making and using tools for production.
It is a tenet of historical materialism that the prevailing mode of production in a given epoch broadly determines the nature of the ideology, artistic, religious and scientific life of society.
Even before the time of the australopithecines, our ancestors probably stripped off leaves of a branch to get termites out of their nest. While we have no direct evidence for this, we know that some wild chimpanzees do it today, and it’s likely that our common ancestors with them engaged in similar activity.
In time, our common ancestors divided into two species. The ancestors of today’s chimpanzees and bonobos developed hands adapted for life in the trees. Such hands make it difficult to engage in the kind of activities that eventually led to the modification of stone. There was, as the biologists put it, no selective pressure for larger brains, as large brains require large amounts of energy to maintain, so natural selection saw to it that the brains of chimpanzees and bonobos remained small.
Our ancestors left or were forced to leave the trees and walk erect, freeing up their hands. The use of the hands to modify objects (tool-making) continued to play an incidental role among the ancestors of chimpanzees and bonobos. Among our ancestors, as the evolutionary biologists put it, their hands were pre-adapted for the modification of natural objects. Their hands were not quite as good as ours are today when it comes to manual labor, but they were far better than those of other apes for this purpose.
It took a few million years for this process to fully unfold, and our ancestors gradually became more dependent on tool-making. As the generations came and went, the tools produced became more sophisticated.
Australopithecines over many generations evolved into what we now call Homo habilis (it means “handy man”), then Homo erectus, and through some transitional forms, to the modern human form we call (perhaps with undeserved arrogance) Homo sapiens, meaning “wise man.”
The pace of change accelerated. Tools, made of stone and other materials less likely to be preserved, became more powerful. Eventually, machines were developed, and they too became more powerful. Humans could now produce more wealth by expending a given amount of labor measured in a given period of time, called the productivity of labor. As we have seen, labor was key to transforming a species of apes into human beings. Changes in the tools and then machines used in production led to different societies with very different class and political structures that succeeded one another as labor productivity grew.
With the rise of what Marx and Engels called “modern industry” beginning in the late 1700s, by which they meant steam-driven industry, the capitalists consolidated their position as the ruling class that was previously occupied by feudal lords.
From that time through to the time of Marx and Engels, steam was industry’s chief motive power, and it led to the mechanization of production. From the late 18th through the 19th centuries, industrial capitalists pitted steam-driven machines against workers. Industrial capitalists told the workers: If you insist on higher wages, we will replace you with our machines. This was the industrial capitalism that Marx and Engels described.
Even then, Marx could see that steam power would sooner or later be replaced by electrical power. Strictly speaking, even today, steam power forms industry’s foundation. Instead of using it directly, since the 20th century, steam power has been transformed through turbines into electrical power. This is the chief difference between the 1800s and the industrial production we have today. We use steam to generate electricity that’s then used as motive power, which allows the displacement of human labor to go much further than was possible in the 19th century.
Profit, the motive for production under capitalism
As we have stressed throughout this blog, under capitalism, profit is the only reason to carry out production. This isn’t because individual capitalists are “greedy” in the sense that if we could find better people to function as capitalists, we could have capitalism without greed.
Capitalists are greedy because competition gives individuals no alternative but to maximize profits. Profit is crucial because it’s used to expand the scale of production and transform the mode of production by introducing the most modern, cheapest method of production to enable the individual capitalist to undersell the competition.
Marxists properly emphasize that profit is the money form of surplus value; it represents the unpaid part of the working day. For surplus value to be transformed into profit, it must be realized in the use value of the money commodity.
This point is not understood by any Marxists who think “non-commodity” money is possible under capitalism. Non-commodity money is not possible under any form of commodity production. Money consists of a special money commodity, and surplus value must be measured in terms of the use value of the money commodity in units of the proper measure of that particular use value, for example, a unit of weight of gold.
Surplus value and surplus product
Industrial capitalists do not consume their own commodities, but sell them for money. If they did, they would not be commodities and would not represent capitalist production.
Industrial capitalists use this money to purchase commodities they consume either personally (unproductively) or to produce other commodities (productive consumption). Productive consumption means the surplus value is transformed into new productive capital, and includes the production of additional constant capital plus additional variable capital. Additional variable capital means that workers are hired not to replace other workers but to add more.
Every capitalistically produced commodity contains surplus value. After all the commodities are sold, they reach their final consumers. The use values of the commodities purchased by capitalists and their hangers-on constitute the surplus product. This is consumed by them unproductively (personal consumption) or productively through the creation of new means of production that don’t replace existing ones but rather expand the scale of production and the hiring of additional workers.
We must distinguish between surplus value, defined as the unpaid labor contained in every capitalist-produced commodity, even if a particular one is destined for consumption by a worker, and the surplus product. The monetary form of surplus value is a sum of money called profit. Finally, there is surplus product that consists of the use values of the commodities consumed by non-workers.
Let’s visit the factory floor. The labor that goes into the production of a commodity consists of two portions. One is the part of the working day when workers work for themselves. The other portion is the portion of it that workers work for nothing, for the capitalists. This is the secret of surplus value.
Capitalist competition forces every industrial capitalist not to minimize the quantity of labor contained in the commodity produced, but the quantity of paid labor contained in it. The greater portion of the day that’s unpaid, the greater the rate of surplus value, and the higher the rate and mass of profit. Capitalists are interested in expanding the unpaid portion of the workday. Every successive technological revolution, by reducing the quantity of labor necessary to reproduce the commodity labor power, allows capitalists to further increase the rate of surplus value.
While surplus value and profit are capitalist economic categories, surplus labor and surplus product are not. Until around ten thousand years ago, there was neither. Since labor productivity was low by the standards of later times, everyone from early childhood to old age had to perform labor. There was no division of society into classes, as society was too poor to support a class of non-workers.
With the rise of agriculture and animal husbandry, surplus product appeared for the first time. It became possible for a ruling class of non-workers to extract surplus labor to make surplus product. The surplus product was consumed by the ruling class of non-workers.
The emergence of a ruling class allowed progress not possible before because some of their members were able to use the freedom from the need to work to develop art, mathematics, philosophy, and early science.
This didn’t change the fact that many ruling-class members played a purely parasitic role, or developed the ideology for holding down members of the producing class (an example of the latter was the priests). The division of society into classes, though cruel, was the price society had to pay for progress during a specific epoch in the history of production.
Capitalist production
Capitalist production assumes the existence of commodities and money. Their production represents specific relations of production among people, but they don’t themselves represent capital. The simple circulation of commodities is represented by expression C-M-C. The C on the left side of the expression represents one commodity use value. The M represents money with the same value as the first C but a different use value, that of the money commodity. The right-side C has the same value as the left-side C and M, but a different use value. Here we have commodity production, the circulation of commodities and money, but no capital.
Then we have the formula for merchant capital: M – C – M’. The merchant starts out with a sum of money, buys C (a commodity) at a price somewhat below its value and then sells the commodity at its value. The difference between M’ and M represents merchant profit. Here we have money, commodities, and capital, but not yet any capitalist production. Instead, we have merchant capital exploiting non-capitalist production.
The formula M-C…P…C’-M’, where an industrial capitalist begins with a sum of M, purchases C (means of production and, most importantly, labor power), and carries out P (production), represents the bringing together of the means of production and labor power to produce a commodity C’. C’ on the right side of the expression represents commodities of a higher value than the M and C on the left side, and finally M’ represents a greater sum of money than the M on the left side. The difference between M’ and M represents the capitalist profit.
Only here do we have all the social relations of production that represent capitalism. Capital is no longer exploiting non-capitalist modes of production but has taken over production itself, creating a specific capitalist mode of production. Unlike capitalist economists, Marx saw capital not as the means of production accumulated over time but rather as a social relationship of production mediated by means of production.
During the epoch in history that’s been dominated by capital, capitalist production, there is a growth in the productivity of labor unmatched at any other time. From the capitalist viewpoint, this unprecedented growth in labor productivity is just a side effect. Each capitalist aims to make as much profit as possible. To do this, they adopt the “best practice,” the cheapest production method in the sense of the cheapest cost price, the only way they can keep up with or pull ahead in the battle of competition. When a capitalist falls behind the competition, that is the beginning of the end for them as a capitalist.
There can be no profit without surplus value. Capitalism — not necessarily every enterprise, branch of industry, or even country, but as a whole — must expand the number of workers that the whole system exploits. Since the large-scale introduction of steam power into production beginning about 250 years ago, rapid growth in labor productivity means that the production of use values has increased faster than the growth in the number of workers employed. Aside from recessions, the total number of workers employed and exploited by capital grows year after year. This is the only way the total global capital can expand.
Artificial intelligence
The term artificial intelligence was coined in the mid-1950s and was first used at the 1956 Dartmouth Conference.
In 1950, British mathematician and computer pioneer Alan Turing proposed a test to show whether or not a computer system was intelligent. Assume that we have a computer and a person in a room. In another room, we have another person who engages in a discussion with both the computer and the first person in the first room. According to Turing, if our second person is unable to distinguish between the computer and the human being, we’d say the computer system is intelligent. He believed this would happen by the end of the 20th century.
The most famous early version of a computer that could carry on a conversation was written by computer scientist Joseph Weizenbaum (1923-2008). In 1966, he published a comparatively simple program called ELIZA, which could chat with the user. ELIZA did not truly pass the Turing test in any rigorous sense, although it did fool some users some of the time.
The program applied pattern-matching rules to the user’s statements to generate its replies. Programs like this are now called chatbots.
Today, in the 2020s, advanced chatbots such as ChatGPT and newer systems developed in China, like DeepSeek, can, in some settings and for some users, appear to pass informal versions of the Turing test by sustaining conversations that many people find indistinguishable from those with a human. These systems can simulate a conversation with a human across a wide range of topics.
Today’s chatbots use large language models, or LLMs — computer systems trained on vast amounts of text. Although their responses can seem human, these systems do not actually understand what they produce. They work by identifying statistical patterns in language and predicting likely word sequences. How meaningful these advances are, and where their limits lie, remains a subject of ongoing debate.
Some people see today’s chatbots as closer to polished search engines than true research aids. They can be useful and often sound confident, but they sometimes make things up or repeat claims that aren’t actually supported. For serious research, it’s still important to use search engines and databases that point you to original sources, so you can see where information comes from and judge its reliability. Chatbots can help along the way, but they shouldn’t be treated as authorities or used on their own. While these tools may improve over time, their habit of inventing details and their lack of clear sourcing mean they can’t yet be trusted as final sources of information.
Others argue that perhaps as early as the coming decades, machines built on ever‑more‑powerful neural networks could surpass human intelligence, develop open‑ended goals, and make autonomous decisions about what to learn and do. Some claim these systems could become effectively conscious or agentic and might decide to displace or even exterminate humans, leading them to call for slowing or pausing work on the most powerful AI systems and warning that profit‑driven capitalist corporations may ignore such dangers, creating technological “Frankenstein” monsters that turn on their creators.
Some scientists called post‑humanists claim that it is an almost inevitable stage of “progress” that once intelligent life arises on a planet, it will eventually create machine intelligences that supersede and replace biological intelligence. In this view, intelligent biological life is only a transitional phase between purely biological evolution and a fully developed, non‑biological intelligence that has shed the limits of organic bodies and become embodied in machines.
Some post‑humanist writers extend this logic to extraterrestrial life, arguing that if intelligent civilizations exist beyond Earth, they are more likely to be machine intelligences originally created by biological species than biological organisms themselves. In this view, the original biological intelligence vanishes like scaffolding removed once a building is complete, leaving only the “higher” non‑biological intelligence in place. For many people, the prospect that humanity could become a disposable phase in such a process is an appalling idea.
A more optimistic viewpoint holds that we may eventually be able to convert our minds into something like computer programs and “download” ourselves into machines that allow our mental lives to continue with greatly enhanced abilities. In this scenario, our minds would persist not forever — that belongs to religion — but for eons, long after Earth and even the wider universe can no longer support biological life.
These science‑fiction‑like speculations are certainly fascinating, but I am hardly qualified to offer a meaningful judgment on them, and pursuing them further would take us far beyond the subject matter of this blog.
Leaving them aside, from an economic point of view, the key issue is not chatbots as such, but computer‑simulated artificial neural nets embodied in machines that can learn to perform tasks that have previously resisted mechanization. This development makes it possible for machines to carry out such tasks without assuming that the AI is acting “for its own reasons” or has somehow achieved consciousness.
The material basis of communist society
To understand what Marx saw as the limits of capital, it helps to look at a passage where he reflects directly on machinery and technology. The following excerpt comes from the Grundrisse, a set of working notes Marx wrote during the global economic crisis of 1857–58. His interest in economics was stimulated by that crisis. Although these notebooks were never published in his lifetime, they contain some of his most far-reaching ideas. Marx later developed many of them in Capital, but here he pushes further, asking whether capitalism itself is the final way society must organize production. In this passage, Marx argues that while machines are central to modern production, capitalism is not the natural or permanent system under which they must operate.
He wrote:
“Machinery does not lose its use value as soon as it ceases to be capital. While machinery is the most appropriate form of the use value of fixed capital, it does not at all follow that therefore subsumption under the social relation of capital is the most appropriate and ultimate social relation of production for the application of machinery. To the degree that labour time — the mere quantity of labour — is posited by capital as the sole determinant element, to that degree does direct labour and its quantity disappear as the determinant principle of production — of the creation of use values — and is reduced both quantitatively, to a smaller proportion, and qualitatively, as an, of course, indispensable but subordinate moment, compared to general scientific labour, technological application of natural sciences, on one side, and to the general productive force arising from social combination in total production on the other side — a combination that appears as a natural fruit of social labour (although it is a historical product). Capital thus works towards its own dissolution as the form dominating production.”
Karl Marx was a 19th-century revolutionary who devoted most of his adult life to supporting the struggle of the working class against capitalism. Elon Musk, in contrast, is the richest capitalist in the history of capitalism, and politically is as far to the right as it is possible to get, so his opinions on AI are especially interesting.
On November 20, the online pro-capitalist business magazine Fortune published an interesting article by Sasha Rogelberg, musing about the future. Rogelberg writes, “In Musk’s automated, job-voluntary future, money won’t be an issue, he said. Musk takes a page from Iain M. Banks’ Culture series of science fiction novels, in that the self-proclaimed socialist author conjures a post-scarcity world filled with superintelligent AI beings and no traditional jobs. … ‘In those books, money doesn’t exist. It’s kind of interesting,’ Musk said. ‘And my guess is, if you go out long enough — assuming there’s a continued improvement in AI and robotics, that seems likely — money will stop being relevant.’”
Rogelberg writes about Viva Technology 2024, where “Musk suggested ‘universal high income’ would sustain a world without necessary work, though he did not offer details on how this system would function. His reasoning rhymes with that of OpenAI CEO Sam Altman, who has advocated for universal basic income, or regular payments given unconditionally to individuals, usually by the government”.
A society where every person receives an income that meets their basic needs, and money plays no role. Whatever such a society is, it is not a capitalist one. “The Tesla CEO said at the U.S.- Saudi Investment Forum in Washington, D.C., on Wednesday that in the next 10 to 20 years, work will be optional, likening the decision to have a job to the more laborious upkeep of a vegetable garden.”
In other words, AI will transform the mode of production so that people will work not because they are compelled by material necessity (by the way, here Musk admits that work is not a free choice in a capitalist system of free wage labor, as bourgeois economists like Milton Friedman with their “free to choose” rhetoric claim).
Unlike economists, Musk is not interested in engaging in ideological talk about freedom but is looking at things with brutal reality. If AI continues to develop as Musk expects, instead of people deciding to work, they’ll follow their true desire to work, like people today who choose to plant a few vegetables in their backyards.
Unlike their ancestors, they do this not because they need to do so, but because they get pleasure from planting and later harvesting the vegetables out of sheer joy of engaging in labor.
Human societies organized in clans and tribes many thousands of years ago can be seen as forms of primitive communism, with communal ownership and little or no class hierarchy, but they rested on very low levels of material productivity and lacked the scientific and technical knowledge later civilizations would develop.
The class societies that succeeded primitive communal forms enabled a small minority to free itself from most direct labor, living instead from the surplus product produced by others, while the majority was compelled to work harder and under far worse conditions than in many earlier clan‑tribal communities. These new social orders concentrated literacy, scientific, and technical knowledge in the hands of the ruling strata, even as most people remained excluded from this growing knowledge and subjected to harsher material conditions.
Under capitalism, society has remained divided into classes, but there has been a productivity growth in human labor that, driven by competition among the capitalists, has exceeded anything seen in any previous age. Marx in the Communist Manifesto says,
“The bourgeoisie cannot exist without constantly revolutionising the instruments of production, and thereby the relations of production, and with them the whole relations of society. Conservation of the old modes of production in unaltered form, was, on the contrary, the first condition of existence for all earlier industrial classes. Constant revolutionising of production, uninterrupted disturbance of all social conditions, everlasting uncertainty and agitation distinguish the bourgeois epoch from all earlier ones. All fixed, fast-frozen relations, with their train of ancient and venerable prejudices and opinions, are swept away, all new-formed ones become antiquated before they can ossify. All that is solid melts into air, all that is holy is profaned, and man is at last compelled to face with sober senses his real conditions of life, and his relations with his kind.”
Capitalism went from deepening the division of labor to the introduction of steam, then electrical power directly into production. Now it seems we’re entering a new period in production history: the transformation of the mode of production, as machinery gains the power to learn and do tasks that have so far resisted mechanization.
Not so long ago, factory, mining, and agricultural workers driven out of production were told they should learn skills like computer programming. Now, computer programmers are being replaced by AI programs that can code, causing programming jobs to vanish like so many other jobs before. Computer programming is going the way of weaving, and other layers of white collar work are also disappearing.
Capital is only interested in the production and appropriation of surplus value (unpaid labor). The development of productive forces is merely a side effect as far as the capitalists are concerned. As this process unfolds, it becomes ever more irrational to measure the value of products by the ever-shrinking quantities of human labor necessary to produce them, while forcing the remaining workers to perform an ever greater amount of unpaid labor.
As far as the capitalists are concerned, machines that can learn create new opportunities to pit ever more powerful machinery against workers. Either produce more unpaid labor for us, or we’ll replace you with our intelligent machines that can do everything you do — except produce surplus value. Without the production of surplus value, there can be no profit and no capitalist production.
Once we reach this point in production history, the contradictions of capitalism reach absolute levels. As long as workers had to work long hours in factories, mines, and farms, there couldn’t be a communist society where the full development of the capacity of one person requires the full development of the capacities of all.
Once machines “learn” to do all the drudge work that must be done, humans, all humans, will be able to at last be free to fully develop their full capacities. Not only will capital vanish from production, but the “enslaving division of labor” will also be overcome. Then, communism, the higher stage of communism, will become not only possible but, as even Elon Musk is obliged to at least partially acknowledge, will pose the question of a different way to organize society on a higher material basis — one that capitalism cannot sustain. (6)
NOTES
(1) Venezuelan oil is considered heavy oil in contrast to the light oil of West Asia because it requires special types of refiners. It would be naive not to see the desire of U.S. imperialism to get its hands on Venezuelan oil as a factor behind the current aggression against Venezuela.
On December 17, a journalist asked Trump, “Is the goal of the blockade of Venezuela regime change?”
Trump replied: “It’s just a blockade. We’re not going to let anybody going through that shouldn’t be going through. You remember, they took all of our energy rights. They took all of our oil, from not that long ago. And we want it back.”
Another reporter then asked, “On Venezuela, sir, you mentioned getting land back from Venezuela. What land is that?”
Trump replied: “Getting land, oil rights, whatever we had. They took it away because we had a president that maybe wasn’t watching. But they’re not going to do that. We want it back.
“They took our oil rights. We had a lot of oil there. As you know, they threw our companies out, and we want it back.”
(2) The U.S. “won” (if that is the right word) the war against Manuel Noriega’s Panamanian government waged by the George H.W. Bush administration in 1989, supposedly arresting Noriega on drug charges in an operation that killed thousands. In 1983, the U.S. likewise “won” a war against the tiny island nation of Grenada when the Ronald Reagan administration invaded. Washington waited to launch this attack until a split within the ruling New Jewel Movement had led to the death of the revolution’s popular leader, Maurice Bishop, a development that no doubt weakened the resistance the Grenadian people were able to mount against the aggression.
(3) If gold (money) is plentiful, economic recovery will come even without Keynesian policies through the mechanisms of the industrial cycle. Keynesian policies will only accelerate the recovery that is coming anyway. They work best when they are least needed.
(4) The more that Keynesian policies are needed, the less well they work.
(5) The economies of the Soviet Union and Eastern Europe were growing faster than the economies of the United States and Western Europe. In October 1957, the Soviet Union launched Sputnik as the 1957-58 recession hit the United States, and the Cuban revolution was victorious in 1961. In light of these events, the capitalist class, led by U.S. imperialism, feared they’d be in serious trouble if they didn’t accelerate the growth of world capitalism.
(6) This doesn’t mean we can shift to full communism the day after the revolution. Capitalism cannot develop the productive forces to the necessary extent to make that possible because it would involve a massive contraction of the production of surplus value. Instead, it will use ever more powerful productive forces to the very end to force workers to spend an ever greater amount of the workday producing surplus value by pitting “intelligent” machines against them. When the revolution does come, the transition will be much faster and appear more natural because there will be no other way to organize society. Capitalism and communism aren’t so much alternative economic systems, as the bourgeois economists claim, but rather represent distinct epochs in the history of production.
A Critique of Crisis Theory 