Part X: The 21st Century

America’s self-induced role as policeman of the world and the associated orientation of research and development (R&D) spending in the service of that objective played a role in causing it to lag behind other States whose post-World War II development was oriented around the non-military, civil economy, such that R&D spending in them was used to develop their economies in a more competitive way. We have seen that during the period 1950-2000, the United States lagged behind the average productivity rates all its major rivals⁸², although it is noted that while productivity growth-rates generally declined during the period, America’s rose in the 1990s, reversing the situation.

The 20th century was undoubtedly America’s century in the sense that it became the most powerful economy in the world. The First and Second World Wars, fought in Europe, helped to bring this situation about. After World War II, America’s power was challenged by the growth of the Socialist Bloc, but that had begun to break down (i.e. the various States came into conflict) even in the 1950s. But by the mid-1960s, with all the growing productivity referred to above, America was confronted by the economic challenge of growing abundance on a worldwide scale, as the previously powerful industrialized countries started to consolidate their recovery from the War. This led to the beginning of a worldwide crisis of overproduction in the 1970s, as German, British, French, Italian and Japanese products began competing seriously against American goods everywhere, including in the United States⁸³.

If capitalist crisis is defined essentially as a breakdown in the profits system, i.e., a decline into negative (and severely volatile profits), then the system has been in crisis since the beginning of the 1970s, but has nevertheless survived.

America is still by far the world’s most powerful country -in economic and military terms. The course it has been following since 2001 is more obviously belligerent, although it is really an inflated continuation of the past. As we have seen (graph 7), the U.S. economy and U.S. profits have become less and less dependent upon its own manufacturing activities, and more and more predatory. In the 1990s it embarked on a trajectory that strongly favored the financial sector -as a result of global financial activities, a series of crises broke out (in Turkey, Brazil, Mexico, Russia, Indonesia and so on) which severely hurt or even wrecked the economies of the countries involved.

As we have seen in Part IV, profits had begun to turn down at the end of the 1990s. The following graphs focus on the late 1990s and the first 4 years of the 21st century. The first one shows inflation-adjusted profits for the main profit segments:

Graph 14

It is fairly clear that overall US profits began falling at the end of the 1990s, although this was a rather gentle movement, and looks from the above more like a temporary period of stagnation (although it must surely have been felt more sharply in nominal terms at the time). And although the fall in manufacturing profits was fairly sharp, as we have already seen, US domestic manufacturing had long since begun to contribute less and less to overall US profits. However, when we select manufacturing profits and break them down into durable and non-durable goods, we see a rather serious trend for durable goods profits:

Graph 15

The durable goods sector was very badly hit -this contains autos, machinery, electricals, computers and electronics, among other items (including weapons). Meanwhile, America’s chemicals products and petroleum and gas industries were also affected, although in different ways, given the especially monopolistic position of the petroleum industry:

Graph 16

Profits for the oil and gas industry (not extraction) collapsed between 2001 and 2002 -something that has been reversed since. Chemical products fell continuously through 1998-2001, but improved after that.

Something of the kind took place prior to the outbreak of the Second World War and the Korean War, -durable goods profits registered declines prior to the outbreak of war. This is less clear with respect to the Vietnam War -durable goods profits (among others) were growing steadily before the United States committed itself to the war. However, it is certainly the case that durable goods profits registered a significant increase after 1964, although there was a severe decline after 1968.

America appears to have found a way out of this latest crisis involving increased militarization and war, which is nothing new, as we have seen. War profits are helping to boost the rest of the economy in various ways. But we have noted that increased defense spending is not necessarily correlated with increased profits and that wars are not necessarily pursued merely to boost profits in the short term anyway. So to what extent can American prosperity rest on this?

N.B. This is a continuing project. We welcome comments, corrections, suggestions, criticisms from readers.

NOTES

⁸² Aaron E. Cobet and Gregory A. Wilson, ibid.

⁸³ See Mario Pianta’s “New technologies across the Atlantic: US Leadership or European Autonomy?”:
http://www.unu.edu/unupress/unupbooks/uu38ne/uu38ne00.htm#Contents