Contents

• Appendix 1: FINANCIAL REPRESSION
• Appendix 2: The Dialectical Contradiction of the Capitalist System
• Appendix 3: The Economic Content of the Struggle Between Factions of the US Bourgeoisie

INTERNATIONAL REVIEW: APRIL 2026

The ruling bourgeoisie and its official economic ideologues are once again indulging in illusions. Having weathered the inflationary shocks of the early part of the decade and adapted to the reconfiguration of global logistical arteries, the world of capital hastens to proclaim the advent of a new era of stabilisation. Yet behind the glittering façade of record-breaking stock market indices there lies a profound intensification of all the internal contradictions of the capitalist mode of production. The present world situation is determined neither by diplomatic manoeuvres in Geneva nor by the supposed struggle of “democracies against autocracies”, as the “philistines” of the liberal press would have us believe. The world is inexorably driven by the uneven material development of the productive forces, which have outgrown the narrow bounds of private property relations.

The astronomical global debt, which in 2024 surpassed the $315 trillion mark (more than 330% of global GDP)¹, can no longer be serviced without a continuous depreciation of currencies.² Enormous debt bubbles are bursting one after another, laying bare the true nature of fictitious capital. If yesterday we witnessed the collapse of the Chinese giant Evergrande, today the epicentre of the debt earthquake has shifted to the very heart of Western capitalism. The crisis in US commercial real estate (CRE), where trillions of dollars are locked up in vacant office towers, has already triggered a wave of regional bank failures (from Silicon Valley Bank to the troubles at New York Community Bancorp). This is not merely a “market correction” – it is a classic moment when fictitious capital (credit extended on the expectation of future, but never realised, surplus value) collides with the harsh reality of material production.

Stagflation³ is rampant in the old centres of capital accumulation, such as Germany. In a country that for decades served as Europe’s “industrial locomotive”, GDP contracted by 0.3% in 2023; in 2024, the decline ranged from 0.2% to 0.5% according to various estimates, while last year recorded a negligible growth rate of 0.2%.

Germany’s economic model has for decades rested on a combination of cheap energy (primarily from Russia) and high-tech exports. The loss of access to cheap energy sources has undermined the profitability of entire branches of heavy industry. The chemical giant BASF, a pillar of German industry, is shutting down energy-intensive facilities in Ludwigshafen and redirecting billions in investment to China and the US, where energy is cheaper. In 2023–2024, BASF halted the production of ammonia, caprolactam, and several fertiliser products. However, the dismantling of equipment, site restructuring, and the phased redundancy of thousands of workers are stretched out over time and remain ongoing. This constitutes a “bleeding wound” in the German economy that has yet to heal.

At the same time, in Zhanjiang, BASF is constructing a vast integrated chemical complex (Verbund) worth €10 billion – its largest investment to date. Full completion of the megaproject is scheduled for 2030. Simultaneously, investments are being made to expand US facilities (in Geismar and other locations), a process further stimulated by subsidies from the US government under the Inflation Reduction Act (IRA).

Production of steel, glass, paper, and fertilisers in Germany has fallen by 15–20 % compared with 2021 – the last year before the invasion of Ukraine by Russian imperialism. The emblem of German capitalism – the automotive industry – is undergoing a historic crisis of overproduction and a falling rate of profit amid a technological shift. In autumn 2024, the Volkswagen Group announced its intention, for the first time in its 87-year history, to close plants within Germany itself and lay off tens of thousands of workers. German capital is losing the competitive struggle to Chinese electric vehicle producers (such as BYD), which operate with lower costs, and is attempting to counteract the falling rate of profit through the direct destruction of jobs and the dismantling of collective agreements with trade unions, as well as by redirecting part of its productive capacity towards military production.

The German bourgeoisie is refusing to invest domestically. Under conditions of high costs within Germany and aggressive American protectionism, German capital is “voting with its feet”. There is a massive outflow of direct investment abroad, while domestic production stagnates.

Although the peaks of energy inflation in 2022 have passed⁴, price increases have become entrenched and have assumed a “core” form. Prices for food, services, and, most acutely, housing rents continue to rise. Inflation acts as a hidden tax on the working class. Over the past few years, the real (inflation-adjusted) wages of German workers have declined markedly. Capital is shifting the costs of the structural crisis onto the shoulders of the proletariat. Stagflation in Germany represents a structural crisis of overaccumulation of capital. German capital can no longer extract sufficient surplus value under these conditions.

The colossal expansion of credit in global capitalism no longer stimulates real growth; it is a classic, textbook symptom of the overproduction of capital. The most striking manifestation of this gangrene today is the astronomical scale of share buybacks. Capital is no longer invested in the expansion of real production on its previous scale, since this no longer promises a sufficient rate of profit. Instead, it circulates within a speculative casino, artificially inflating stock market capitalisation and enriching the financial oligarchy.

By the end of 2024, companies in the S&P 500 alone had spent a record $942.5 billion on share buybacks. By 2025, this speculative frenzy had shattered all previous records: over a 12-month period (up to and including September 2025), the volume of buybacks in the US exceeded $1.02 trillion. This disease is devouring not only American imperialism, but also other old centres of capital accumulation:

– the European bourgeoisie, which historically preferred dividend payments, has entered the same race. By the end of 2024, the volume of share buybacks by European corporations had reached a record €182 billion, while the proportion of companies dissipating capital in this way reached an all-time high of 43%.

– Japanese capital, which for decades had been sitting on vast hoards of idle cash owing to the stagnation of the domestic market, spent approximately ¥18.7 trillion on share buybacks in the 2024 financial year; in 2025, this figure surged to an extraordinary ¥24.9 trillion (around $200 billion).

To grasp the scale of this acceleration, it suffices to consider the historical dynamics. In the 1990s, buyback volumes in the US amounted to only tens of billions of dollars per year. In the early 2000s, they barely reached $200–300 billion. Today, however, the US technology sector (Information Technology) alone has expended more than $2.1 trillion on buybacks over the course of a single decade. This exponential acceleration is not a sign of economic health, but a mathematical demonstration of decay. Enormous masses of surplus value are being withdrawn from the real sector.

Karl Marx brilliantly anticipated this stage in the development of capitalism, in which surplus capital is channelled into financial speculation:

«Over-production of capital is never anything more than over-production of means of production – of means of labour and necessities of life – which may serve as capital, i.e., may serve to exploit labour at a given degree of exploitation; a fall in the intensity of exploitation below a certain point, however, calls forth disturbances, and stoppages in the capitalist production process, crises, and destruction of capital. It is no contradiction that this over-production of capital is accompanied by more or less considerable relative over-population. The circumstances which increased the productiveness of labour, augmented the mass of produced commodities, expanded markets, accelerated accumulation of capital both in terms of its mass and its value, and lowered the rate of profit – these same circumstances have also created, and continuously create, a relative overpopulation, an over-population of labourers not employed by the surplus-capital owing to the low degree of exploitation at which alone they could be employed, or at least owing to the low rate of profit which they would yield at the given degree of exploitation.

If capital is sent abroad, this is not done because it absolutely could not be applied at home, but because it can be employed at a higher rate of profit in a foreign country» (Capital, Vol. III, Ch. 15).⁵

Furthermore, in his analysis of fictitious capital and the credit system, Karl Marx emphasises the inevitability of this process developing into pure speculation against the backdrop of a falling rate of profit:

«The credit system appears as the main lever of over-production and over-speculation in commerce solely because the reproduction process, which is elastic by nature, is here forced to its extreme limits, and is so forced because a large part of the social capital is employed by people who do not own it and who consequently tackle things quite differently than the owner, who anxiously weighs the limitations of his private capital in so far as he handles it himself. This simply demonstrates the fact that the self-expansion of capital based on the contradictory nature of capitalist production permits an actual free development only up to a certain point, so that in fact it constitutes an immanent fetter and barrier to production, which are continually broken through by the credit system. Hence, the credit system accelerates the material development of the productive forces and the establishment of the world-market. It is the historical mission of the capitalist system of production to raise these material foundations of the new mode of production to a certain degree of perfection. At the same time credit accelerates the violent eruptions of this contradiction – crises – and thereby the elements of disintegration of the old mode of production.

The two characteristics immanent in the credit system are, on the one hand, to develop the incentive of capitalist production, enrichment through exploitation of the labour of others, to the purest and most colossal form of gambling and swindling, and to reduce more and more the number of the few who exploit the social wealth; on the other hand, to constitute the form of transition to a new mode of production» (Capital, Vol. III, Ch. 27)⁶.

It is precisely this necessity to “destroy”, or devalue, a portion of accumulated capital in order to preserve the remainder that constitutes the economic basis of wars. The historical parallels are unmistakable. Just as on the eve of the world wars of 1914 and 1939, the foundation of the present crisis lies in the exhaustion of markets and the objective necessity of their forcible redivision. Once again, monopolies are baring their teeth in the struggle for raw materials, while the bourgeoisie fans the flames of chauvinism and sets the machinery of militarisation in motion. The unprecedented level of globalisation renders the localisation of conflicts impossible, while the fear of nuclear annihilation compels the imperialists to wage war through protracted proxy conflicts, economic coercion, and cyberattacks.

Apologists of “political realism” indulge in the illusion that the doctrine of “mutually assured destruction” (MAD) will indefinitely restrain imperialist predators from direct confrontation. However, Marxist analysis demonstrates that the existence of nuclear weapons alters only the form of imperialist slaughter, without abolishing its underlying economic causes. The fear of nuclear catastrophe is utilised by capital to legitimise hybrid conflicts, yet the deepening crisis inexorably erodes these “red lines”. No weapon in itself can abolish the laws of motion of capital.

At the core of this spiral of contradictions lies a colossal technological shift: the development of artificial intelligence (AI) and “green” energy. Here, the fundamental law of capitalism identified by Karl Marx – the tendency of the rate of profit to fall – asserts itself in full. Its essence is that, in the pursuit of competitive advantage, the capitalist is compelled to increase the proportion of machinery, equipment, and servers (constant capital) relative to the living labour of workers (variable capital). Yet since new value is created only by living labour, as production becomes increasingly mechanised, automated, and robotised, the rate of profit on the total capital advanced declines inexorably.

Today, we observe this process in its most grotesque form in the technology sector. The “AI bubble” demands colossal capital expenditure from monopolies: hundreds of billions of dollars are being poured into the construction of data centres. At the same time, in an attempt to arrest the fall in the rate of profit, corporations are carrying out sweeping mass redundancies.⁷ By replacing living labour with algorithms, capital undermines the very basis of its own exploitation. The production of electric vehicles (EVs) reveals the same tendency: vast investments in robotics are giving rise to price wars and negative profitability. The bourgeoisie of any given state is not a unified whole. The struggle over new technologies is also an intense internal conflict – for example, between established industrial capital and new digital monopolies over the distribution of state subsidies.

This constitutes the highest and most destructive contradiction of capital, anticipated by Karl Marx in the Economic Manuscripts of 1857–1859:

«Capital itself is the moving contradiction, [in] that it presses to reduce labour time to a minimum, while it posits labour time, on the other side, as sole measure and source of wealth. Hence it diminishes labour time in the necessary form so as to increase it in the superfluous form; hence posits the superfluous in growing measure as a condition – question of life or death – for the necessary. On the one side, then, it calls to life all the powers of science and of nature, as of social combination and of social intercourse, in order to make the creation of wealth independent (relatively) of the labour time employed on it. On the other side, it wants to use labour time as the measuring rod for the giant social forces thereby created, and to confine them within the limits required to maintain the already created value as value. Forces of production and social relations – two different sides of the development of the social individual – appear to capital as mere means, and are merely means for it to produce on its limited foundation. In fact, however, they are the material conditions to blow this foundation sky-high.

“Truly wealthy a nation, when the working day is 6 rather than 12 hours. Wealth is not command over surplus labour time” (real wealth), “but rather, disposable time outside that needed in direct production, for every individual and the whole society.” (The Source and Remedy etc. 1821, p. 6.)» (Grundrisse, Notebook VII: “Chapter on Capital”)⁸.

Artificial intelligence objectively creates the material basis for a society of absolute abundance. Yet in order to survive, capitalism artificially manufactures scarcity: it monopolises algorithms through patents and unleashes trade wars. Moreover, the transition to a “green” economy in no way diminishes the role of traditional energy. Established oil and gas monopolies exploit global instability to extract new subsidies from states under the pretext of “energy security”. At the same time, “green” capital lobbies for environmental quotas that drive competitors into ruin. This internecine struggle between factions of the bourgeoisie is ultimately paid for by the proletariat through rising tariffs.

This technological revolution intensifies imperialist rivalry to the utmost. American imperialism has turned to crude protectionism. Yet here too the profound split within the national bourgeoisie is clearly evident. To reduce the current division within American capital solely to the crude dichotomy of “globalist financiers” versus “patriotic industrialists” is to view reality through the prism of the late twentieth century. Today, the fault line runs not so much between sectors as within global value chains themselves, and is determined by the position a given corporation occupies within those chains. American capitalism is confronted with a fundamental contradiction: the logic of profit maximisation (requiring cheap labour and open markets, above all in Asia) has come into direct conflict with the logic of maintaining international and military hegemony (requiring control over technology and “reindustrialisation”).⁹ The “Trump Doctrine” functions as an instrument of the latter fraction for the extraction of surplus value. The rupture of trade chains with Asia is turning Latin America into a vast maquiladora. This is clearly expressed in the unprecedented political pressure exerted by Washington on Peru to limit Chinese control over the new deep-water megaport of Chancay, as well as in the diplomatic coercion applied to Brazil and Argentina aimed at forcing Huawei out of the sector of 5G network. Within the United States itself, the notorious anti-immigrant hysteria serves to create a rightless reserve army of labour.

The centre of gravity of the world economy has shifted to Asia. China, choking on a colossal surplus of accumulated capital, has entered the classical stage of imperialism – the aggressive export of capital. The Chinese bourgeoisie (torn apart by the struggle between the export-oriented capital of the coastal regions and the domestic party-state sector) is compelled to expand outward aggressively. The construction of alternative financial systems makes the confrontation between American and Chinese capital the principal axis of contemporary conflicts.

An analysis of the present conjuncture is inconceivable without taking into account new imperialist predators such as India, Turkey, Brazil, and Saudi Arabia. It would be a mistake to regard them as passive objects. Taking advantage of the crisis of the old hegemony, they have entered into active bargaining. Turkish capital is penetrating Africa, while Indian and Saudi capital are carving out their own spheres of influence. The growth of their ambitions renders the system of contradictions even more explosive.

Europe, cut off from cheap raw materials, is attempting to preserve the remnants of its industry through the expansion of the military-industrial complex. For Europe, the United States is not a guarantor of security but a competitor. These contradictions give rise to a paradox: transnational European capital and the Euro-bureaucracy call for a unified military-industrial complex, while the national bourgeoisie resists. German industrial capital is resisting a rupture with China, while European agrarian capital, driven to ruin by Brussels’ environmental quotas, finances right-wing populism.

Russian imperialism is attempting to forge ties with the Global South. In order to avoid falling into China’s suffocating embrace, the Kremlin is actively exploiting divisions within global capital by cultivating relations with India, the Arab monarchies, and African states. Within the country, the raw-materials oligarchs privately yearn for a return to Western markets, while the military-industrial complex and the security apparatus divide the super-profits derived from the war economy.

Nowhere does this bloody knot reveal itself more starkly than in the Greater Middle East. Claims of combating “terrorism” serve merely as an ideological fig leaf. In reality, this is an attempt by US–Israeli capital to reconfigure transport corridors (the IMEC project) and secure control over energy resources. For US–Israeli capital, a strike against Iran would resolve a central task – the physical destruction of an independent centre of power capable of blocking the Strait of Hormuz, and the disruption of Sino-Russian logistical networks. India seeks to safeguard its investments in the Iranian port of Port of Chabahar, while Turkey aims to weaken Tehran as its principal rival.

Moreover, external aggression is always an attempt to resolve internal class antagonisms. On the eve of the war, Israeli society was shaken by profound crises. Under the pretext of an “existential” threat, a regime of “class peace” was swiftly imposed, and the anger of the proletariat was channelled into chauvinism. Israeli capital, under the cover of war, is physically clearing the Palestinian territories, freeing land for real estate speculation and gas extraction. In Iran, the war has become a lifeline for the military-clerical bourgeoisie (the Islamic Revolutionary Guard Corps), which had been on the verge of collapse under the pressure of strikes by oil workers and teachers. The regime has imposed martial law and is exploiting the external threat to brand any striking worker a “foreign agent” and send them to the gallows.

New frontiers of capital accumulation extend even into the Arctic. Beneath the ice of Greenland lie colossal reserves of rare earth metals. However, for technology monopolies, Greenland also represents an ideal geographical “radiator”, with access to cheap geothermal energy – a critically important material basis for the deployment of vast data centres cooled by Arctic air.

Everywhere, the bourgeoisie is waging a general offensive against the proletariat. We are witnessing increases in the retirement age across the countries of advanced capitalism, the dismantling of traditional labour protections through the imposition of the “gig economy”, and the effective curtailment of the right to strike. Capital skilfully sets workers against one another, instilling in them the belief that the enemy lies abroad. Yet objective material conditions – inflation, wage stagnation, and the burden of debt – are inexorably tearing away this veil. Outbreaks of strikes in the warehouses of logistics monopolies and among “digital” workers have already begun.

But to see in this the outline of imminent victorious class battles of the proletariat is to indulge in illusions. The Marxist approach demands a ruthlessly sober assessment of the present condition of the working class itself. We are confronted with a stark historical paradox: the objective material conditions for the collapse of capitalism have over-ripened, yet the subjective factor – class consciousness, the organisation of the masses, and the existence of a revolutionary party – is at its lowest level in the past century.

Strike struggle on a global scale remains fragmented and is predominantly defensive in character. The working class is permeated by social passivity and nationalism. A world communist party of the proletariat does not exist, while genuine communist organisations consist of tiny, scattered groups, isolated from the broad masses.

There are clear political-economic and historical explanations for this grim picture. The present weakness of the labour movement is neither accidental nor the result of the “stupidity” of the proletarian masses, but a necessary outcome of the development of capitalism in recent decades.

For decades, the bourgeoisie of the imperialist centres (the United States, Europe, and to some extent Japan) has utilised super-profits to create a substantial “labour aristocracy” and a system of social provision (the welfare state). This material bribery fostered the illusion that capitalism could be “improved” by peaceful means and transformed the trade unions into a bureaucratic appendage of the bourgeois state, whose principal function is to dampen, rather than intensify, the class struggle.

The transition to a platform-based “gig economy” has transformed a section of wage workers into isolated “self-employed” couriers, freelancers, or call centre operators, for whom it is objectively more difficult to develop an awareness of their common interests.

Moreover, the working class has yet to recover from the catastrophes of the twentieth century. The defeat of the revolutionary wave of 1917–1921 and the transformation of the parties of the Communist International into social-democratic mechanisms of systemic opposition – all this has discredited the very idea of the struggle for communism in the eyes of the masses. Bourgeois ideology has successfully imposed the notion that any attempt to overthrow capital inevitably leads to the Gulag.

Does this assessment of the facts provide grounds for historical pessimism and capitulation? By no means. Marxism teaches dialectics: the conditions that gave rise to the passivity of the proletariat are today being destroyed by capital itself.

Firstly, the structural crisis and the fall in the rate of profit no longer allow the bourgeoisie to sustain “class peace”. Capital is compelled to ruthlessly cut social expenditure, raise the retirement age, and reduce real wages through inflation. The economic basis of reformism and the trade union bureaucracy is being consumed in the furnace of militarisation.

Secondly, the introduction of artificial intelligence and automation is leading to the rapid proletarianisation of those strata that until recently considered themselves part of the “middle class” (engineers, programmers, office employees). They are being stripped of their privileges and cast onto the labour market on the same terms as the rest, swelling the ranks of the objective gravediggers of capital.

As the lives of millions become increasingly unbearable, spontaneous class struggle will intensify. However, spontaneous uprisings in themselves do not lead to victory. For the economic struggle to develop into a revolutionary struggle against private property and the state, it is necessary to introduce into it scientific communist consciousness.

It is precisely here that the most urgent practical tasks for the contemporary Marxist vanguard are posed. Under the present unfavourable conditions, the vanguard must resolutely demarcate itself from all forms of reformism. A relentless theoretical struggle must be waged against modern social chauvinism (those “left” forces that support “their own” imperialism and “their own” industry), against the illusions of a “multipolar world” (the support of some predators against others), and against opportunist parliamentarism.

A period of retreat in the labour movement is a time for forging a theoretical and organisational core. Marxists must study contemporary capitalism and train cadres disciplined in class struggle.

The vanguard has no right to confine itself to academic circles. Its task is to bring communist consciousness into every manifestation of the class struggle, even at its most elementary level, patiently explaining to workers the limitations of purely economic demands and directing their anger towards the capitalist system as a whole.

Since capital is more globalised than ever, an anti-capitalist revolution can only be a world revolution. Marxists in different countries must begin already now to establish links, exchange experience, and elaborate a unified tactic, thereby preparing the foundations for the creation of a new, genuinely revolutionary Communist International.

The era of illusory “peace” and stability is over. Capitalism is entering a period of immense upheavals, wars, and crises. Although the proletariat may appear fragmented and weak today, it is precisely these monstrous crises that may become the forge in which the Marxist vanguard will temper the revolutionary consciousness of the proletariat. At the same time, it must not be forgotten that a revolutionary Marxist party is not a fire brigade waiting in the depot for a “spontaneous uprising” to break out. The vanguard has no right merely to “be ready for the moment”. It must itself organise this class movement on a daily basis: through the publication and distribution of its press organ, participation in all manifestations of class struggle, and political condemnation. Between spontaneity and organisation there lie many intermediate stages; each step towards a higher level of organisation is a step towards the communist revolution.

At the same time, Marxists must be prepared, both theoretically and organisationally, for the moment when conditions arise in which millions of workers may be set in motion. Only a party armed with advanced theory and fused with the vanguard of the working class will be capable of directing a spontaneous uprising into the course of the communist revolution, whose aim is to smash the bourgeois state apparatus and establish the dictatorship of the proletariat – a necessary condition for the expropriation of private property and the subsequent withering away of the state.

FINANCIAL REPRESSION

Appendix 1

If a country (such as Turkey or Argentina) has external debt denominated in US dollars, the depreciation (devaluation) of its national currency against the dollar does not alleviate the problem, but instead makes servicing that debt much more difficult. To meet the same dollar-denominated obligations, the state and businesses must raise far greater sums in depreciated local currency. Therefore, when economists state that global debt cannot be serviced without the “permanent depreciation of currencies”, they are not referring to the decline of “developing” countries’ currencies against the dollar. Rather, they are referring to the depreciation of the reserve currencies themselves (above all the dollar) relative to real assets through inflation. This process is known in economics as ‘financial repression’. It operates differently for two types of debtors:

1. Countries that borrow in their own currency (the US, Japan, EU countries).

For these countries (which account for two-thirds of global debt), devaluation is a lifeline.

The process: the state (via central banks) prints money or keeps interest rates below the actual rate of inflation.

Result: the purchasing power of the dollar (or euro) falls. Although nominally the US still owes the creditor a nominal $100, the real value of this money decreases. At the same time, the state’s tax revenues rise in line with inflation (goods cost more – sales and income taxes are higher).

The outcome: the state repays its old, fixed debts with “cheaper” money. The debt is devalued at the expense of a hidden tax on those who hold savings and bonds in that currency.

2. “Developing” countries that borrow in dollars.

For countries that borrow in foreign currency, a depreciation of their local currency is a path to bankruptcy. Yet paradoxically, global dollar inflation (that very “depreciation” of the dollar) may actually alleviate their position:

Many “developing” countries are exporters of raw materials. Prices for oil, metals, and food on world markets are denominated in dollars.

When the dollar depreciates as a result of inflation, the prices of real commodities rise.

The exporting country receives a greater quantity of “cheaper” dollars for the same volume of exports. With these dollars, it becomes easier to service its existing dollar-denominated debt.

The aim of the system is not to trigger a collapse of local currency exchange rates, but to sustain global inflation, which gradually erodes the real value of accumulated debt. Without this, states would be forced either to raise taxes to economically destructive levels or to declare widespread defaults.

The Dialectical Contradiction of the Capitalist System

Appendix 2

From the standpoint of Marxist theory, living labour alone is the sole source of surplus value. Consequently, by expelling workers from production and replacing them with machines or algorithms, capital undermines the basis of its own profitability in the long run.

The ongoing reduction of the workforce in the global economy is not a logical flaw in the theory, but a real, objective dialectical contradiction inherent in the system itself. To understand why corporations persist in carrying out mass redundancies with relentless determination, thereby exacerbating the long-term problem, it is necessary to distinguish between the logic of the individual capital (the micro-level) and that of the system as a whole (the macro-level), while also taking into account so-called “counter-tendencies”.

Here is a concrete explanation of how this contradiction is resolved in practice:

The tendency of the rate of profit to fall is a macroeconomic, systemic law. However, the individual capitalist (or a corporation’s board of directors) does not think in terms of the macroeconomy as a whole. They think in terms of quarterly results and competitive pressures.

When a corporation lays off 10,000 workers and introduces, for example, artificial intelligence or a new production line, it sharply reduces its individual costs of production. Over a short period, market prices for its commodities are still determined by the industry’s previous, higher average costs. As a result, this particular corporation appropriates surplus profit (extra profit). For it, the rate of profit rises, at least temporarily.

The contradiction asserts itself later: when competitors do the same (laying off workers and installing machinery), commodity prices fall, the surplus profit disappears, and the average rate of profit in the industry declines to a new, lower level. In other words, mass redundancies represent an attempt by an individual capital to preserve itself at the expense of others – an attempt that ultimately drags all down.

Mass redundancies almost never entail a proportional reduction in output. When a corporation fires 20 % of its workforce, the remaining 80 % are typically told: «You will now perform the work of your fired colleagues, or you will find yourselves on the street alongside them.»

In terms of Marxist theory, this signifies a sharp increase in the rate of surplus value. Although the total mass of variable capital (v, i.e., the wage fund) has declined, the remaining workers produce more surplus value (m) per unit of time as a result of intensified labour, overtime, and the fear of losing their jobs. This sharp rise in the rate of exploitation temporarily offsets the effect of the rising organic composition of capital (c/v, where c denotes constant capital) and slows the fall in the rate of profit.

Mass redundancies create a surplus of labour supply on the market – the so-called reserve army of labour (the unemployed). The existence of a vast pool of workers “waiting at the gates” enables corporations not only to refrain from raising wages, but in practice to reduce them for those still employed (or to hire new workers on worse conditions). This cheapens variable capital (v) and allows the corporation to appropriate an even greater share of the total social product.

Ultimately, shareholders do not live off interest; they live off the mass of profit.

Even if the rate of profit (the return on invested capital) inevitably falls, say, from 15 to 5 %, a corporation that captures new markets and expands its scale may still increase the total mass of profit. Five per cent of a $1 trillion capitalisation exceeds 15 % of $10 billion. In order to preserve this absolute mass of profit under conditions of contracting markets, corporations are prepared to carry out any cuts necessary.

Actions that are entirely rational and even necessary for an individual capital in the here and now (laying off workers → reducing costs → delivering profits to shareholders) are profoundly irrational from the standpoint of the global economy in the long term (reduction of the workforce → contraction of aggregate demand → decline in the mass of surplus value → crisis of overproduction and a fall in the rate of profit).

This is precisely why corporations cannot stop: competition compels them to saw off the branch on which they are sitting, for whoever ceases to saw will be the first to fall.

The Economic Content of the Struggle Between Factions of the US Bourgeoisie

Appendix 3

To better understand the situation, it is necessary to examine five key fractions of US capital, their interests, and concrete examples.

1. The transnational technology sector (Big Tech)

This is the most internally contradictory fraction. On the one hand, it produces high-technology commodities; on the other, it is entirely dependent on the global division of labour. It has a vested interest in unrestricted access to markets (including China) and global production capacities (Taiwan, assembly in the PRC).

However, the sector itself is deeply divided. Companies such as Apple (fabless – without their own fabrication facilities) are strongly opposed to trade wars. The imposition of tariffs on Chinese imports directly undermines their profit margins, since relocating vast assembly clusters from China (e.g., Foxconn) to the United States or even to India cannot be accomplished rapidly or cheaply. Companies such as Nvidia (chip design) are actively lobbying for the relaxation of export controls. Restrictions on the sale of advanced chips to China deprive them of a substantial share of the market, and they openly warn the government that this undermines US dominance in the field of artificial intelligence. Companies such as Intel (which possess fabrication facilities), by contrast, benefit from protectionism. They actively supported the CHIPS Act, receiving tens of billions of dollars in state subsidies to build domestic fabrication plants in order to compete with TSMC.

2. Import-dependent retail and the service sector

This is the sector (Walmart, Amazon, Target, Nike) that has for decades benefited from the relocation of American manufacturing to the countries of new capitalism. It has a vested interest in maintaining zero tariffs on mass consumer goods, electronics, and clothing. For this fraction of the bourgeoisie, “tariffs on Chinese goods” are not a means of protecting domestic producers (who in many cases simply no longer exist), but a direct tax on the American consumer, leading to a fall in the rate of profit and a contraction of consumer demand. This fraction stands in sharp opposition to isolationism.

3. The export-oriented agro-industrial complex

A historically conservative sector which, paradoxically, has found itself held hostage by protectionist policy. It has a vested interest in unrestricted access to Asian markets (above all China). When the heavy industrial fraction pushes through tariffs on Chinese steel, China responds symmetrically – striking at American farmers by curtailing imports of soybeans. This sector is deeply hostile to protectionism, as it undermines markets painstakingly built up over decades (indeed, Donald Trump’s administration was compelled to allocate approximately $28 billion in emergency subsidies to farmers in order to prevent their bankruptcy as a direct consequence of its own trade war).

4. Domestic heavy industry and energy

This is the so-called “old” capital – steel producers (U.S. Steel), aluminium manufacturers, and the traditional automotive industry (Ford, General Motors) – which is pushing the state towards stringent protectionism and tariff wars. It is interested in shielding the domestic market from cheaper imports (subsidised Chinese or European goods), as well as in securing state infrastructure contracts. Companies in this sector are unable to compete with Chinese electric vehicles (EVs) or steel, either in terms of price or, in many cases, in battery technology. It was this fraction that lobbied for the retention of “Trump-era” tariffs under the Biden administration and pushed through prohibitive 100 % tariffs on Chinese electric vehicles in 2024. Without state protectionism, these corporations face extinction.

5. Financial capital (Wall Street and investment funds)

This sector advocates globalisation, yet here too there is a fundamental contradiction. It is interested in the free movement of capital to wherever the rate of profit is highest. For a long time, it acted as the principal lobbyist for the integration of China into the world economy. However, today it finds itself caught between contradictory imperatives. On the one hand, financiers seek to invest in rapidly growing Chinese technology companies. On the other, the US federal state (through bodies such as the Securities and Exchange Commission and the Treasury) is compelling them to pursue “de-risking”, that is, to withdraw capital from Chinese assets under the threat of sanctions or the loss of access to US state contracts.

The fact that the US federal state has begun to act with relative autonomy from the interests of individual fractions of capital is conditioned by transformations taking place in the world economy. It is precisely this that is intensifying the struggle between these fractions.

The US political leadership (both Republicans and Democrats) has recognised that if everything is left up to the free market (in which the transnational sector that benefits from globalisation prevails), the United States will definitively lose its industrial base, along with its capacity to produce weapons, advanced semiconductors, and strategically essential materials. Without this, there is no material foundation for sustaining its status as a global hegemon or the strength of the dollar itself. For this reason, American imperialism has turned to protectionism not out of choice, but as an emergency measure to preserve its economic base. The state is now effectively compelling transnational corporations to subsidise national security (by abandoning profitable markets, rupturing cheap logistical chains, and relocating production facilities back “home”, where labour power is more expensive). Naturally, those fractions of capital that incur losses as a result of this restructuring resist fiercely, which finds expression in the political chaos and polarisation in Washington.

Footnotes

1. - Debt structure for the first quarter of 2024 (according to the Global Debt Monitor, a regular report by the Institute of International Finance): “Developed” markets (including the US, Japan, and the countries of Europe): ~$209.7 trillion (around two-thirds of total debt). Here, debt growth is driven primarily by government borrowing. “Emerging” markets (with China, India, and Mexico as the main drivers of growth): ~$105.4 trillion. Over the past decade, debt has more than doubled (increasing by $55 trillion). By sector: Non-financial corporations (the real economy): ~$94.1 trillion. The most heavily indebted segment, particularly in “emerging” economies. Governments (public debt): ~$91.4 trillion. This is the sector that has grown most rapidly in recent years, owing to the financing of support programmes during the pandemic and increased military expenditure. The financial sector (banks, funds): ~$70.4 trillion. Households (mortgages, credit cards, student loans): ~$59.1 trillion. The global economy has indeed found itself in a narrow corridor. Tight monetary policy and elevated interest rates (an attempt to curb inflation) render the servicing of this $315 trillion mathematically impossible in the long term. For this reason, there is broad agreement among economists that the inflationary depreciation of fiat money will remain a concealed instrument for managing this bubble. ↩

2. - See Appendix 1. ↩

3. - Stagflation (from “stagnation” + “inflation”) is a condition of the economy in which three destructive processes occur simultaneously: a decline in production or zero economic growth (stagnation), a continuous rise in prices (inflation), rising unemployment, and a fall in real incomes. For bourgeois economic science (in particular Keynesian economics), stagflation was long regarded as a paradox. Classical theory assumed that prices rise only when the economy is “overheating” (when people have ample money and are actively purchasing), whereas during a crisis and a contraction of production prices should fall (deflation). Stagflation disrupts this mechanism and drives state regulation into a blind alley: attempts by central banks to suppress inflation through high interest rates ultimately cripple industry, while attempts to sustain production through cheap credit lead to hyperinflation. ↩

4. - A war involving the US and Israel against Iran, and the associated situation around the Strait of Hormuz, could alter the situation. ↩

5. - K. Marx. Capital, Vol. III Part III // Marx Engels Archive. URL: https://www.marxists.org/archive/marx/works/1894-c3/ch15.htm ↩

6. - K. Marx. Capital, Vol. III Part III // Marx Engels Archive. URL: https://www.marxists.org/archive/marx/works/1894-c3/ch27.htm ↩

7. - see Appendix 2. ↩

8. - K. Marx. Grundrisse: Chapter 14. // Marx Engels Archive. https://www.marxists.org/archive/marx/works/1857/grundrisse/ch14.htm ↩

9. - see Appendix 3. ↩