Here, in bullet points, are what I see as the article's main takeaway messages.
- The US economy is in relative decline as other countries (notably China) have grown market share.
- Trump represents a segment of the ruling class that wants to reverse that decline.
- Trump also represents union bureaucrats who want to bring back old-fashioned, blue-collar jobs.
- Globalization leads to a "declining rate of profit" for capitalists, which is the ultimate source of all their difficulties.
- Capitalists respond to the "declining rate of profits" by taking out of their workers' hides.
- Or alternatively, capitalists try to restrain profit rates from declining by rolling back globalization, which is where Trump comes in.
The errors SA makes are common to all Marxists, so it is worth considering them in detail. There are fundamentally two things wrong with their argument.
1) "Declining rate of profit," in SA's usage, is just wrong, if not completely meaningless.
2) They completely ignore the consumer in their analysis. Since most consumers are workers, the major benefit to workers from globalization is entirely unrecognized.
There are two ways to measure profits. The most common way (used in the stock market) is Return on Investment (ROI--often expressed as the price/earnings ratio). Investors want to make a risk-adjusted return on their investment, and won't put money into a project where that's unlikely to pan out. There is no evidence that "profit" in this sense is declining at all. Indeed, the recently famous economist, Thomas Piketty, maintains that inflation-adjusted ROI has remained roughly constant at about 5% over the past couple centuries.
Indeed, there can't be any secular decline in ROI. If profits go down, then the stock price goes down, which lowers the total capital invested thereby raising the ROI. By this measure, a steadily "declining rate of profit" implies continuously declining stock prices, which has obviously not been the case.
The alternative definition of "profit", which is the definition I think SA actually intends, is as a fraction of operating cost, also known as profit margin. Margins vary widely from industry to industry and from company to company. Some companies--e.g., Walmart--have very low margins, but then make it up on volume. Indeed, since its very founding Walmart has set its margins at 3%. which is only pennies on the dollar. But multiplied over $500 billion in revenue it adds up to a lot--about $15 billion. Walmart's margins are fixed--they have been neither growing nor declining since the company was founded. It's one of their core business principles.
Other industries--like pharmaceuticals and technology companies--have very high margins. In the case of pharmaceuticals it is because research costs are very high and also unpredictable--the high margins compensate for risk. Apple, on the other hand, charges $1000 for an iPhone because they can get away with it.
There is no long term decline in profit margins. There can't be. If the margin gets too small then capitalists won't invest any more money in that industry. American television manufacturing is an example where the margins shrank to zero--and televisions are no longer manufactured in the US.
So I don't know what SA means by "declining rate of profit." I think they take a phrase from Marx completely out of context and then repeat it endlessly as though it actually meant something. But it's just a rhetorical flourish--nothing more.
More substantively, SA describes the alleged demerits of capitalism in great detail, while completely ignoring any of the benefits.
In their desperate struggle to fight the falling rate of profit, capitalists try to reduce costs by attacking trade unions and workers’ rights, by attacking pay and benefit levels, by attacking general social benefits such as education, medical, and pension benefits, by refusing to accept any responsibility for the massive environmental damage caused by cutthroat capitalist competition, and by transferring production to low-wage, unregulated areas both within and outside their own countries.This paragraph is approximately correct as far as it goes. (I'd take issue with the "massive environmental damage" phrase, but that's another topic.) It is true that capitalists are in "cutthroat competition," and will do what they can to gain an edge on their competitors by lowering costs, specifically the cost of labor.
But what SA doesn't tell us is what all those capitalists are competing for. They're competing for market share--i.e., they want to sell as many goods to as many people as possible. Every time the cash register rings at Walmart, shareholders pocket 3%. Of course they want that cash register to ring as often as possible.
The very definition of capitalism is a system that wants to maximize consumption--that's how capitalists earn money.
So take Walmart as an example. By sourcing their products in China they were able to lower their costs. Since margins are fixed at 3%, that means the savings are passed directly on to the customer in the form of lower prices. Here are the consequences--all of them good:
- Chinese manufacturing workers earn much more than they would back at the farm.
- Walmart employees--despite generally being low-skilled labor--earn higher wages and enjoy better working conditions than they would if they worked at the Mom & Pop down the street.
- Walmart's volumes increase, yielding more money for shareholders.
- Walmart's customers get more and better products at cheaper prices.
That last item is what SA neglects to mention, and it's a really important point. Walmart has substantially raised the standard of living of most Americans, especially those at the bottom of the income distribution.
It's best expressed by Sam Walton's original mission statement: "to give common folks the chance to buy the same things as rich people." Their current motto--"Everyday Low Prices"--renews the promise to keep margins at 3% and to pass all cost savings on to the consumer. That's what Walmart does.
What's wrong with that? Only my Trotskyist friends can object, and they do so only by ignoring the huge difference that stores like Walmart make in improving people's lives.
Trump and my Trotskyist friends essentially agree about trade--they both see it as a zero-sum game. For Trump if the Chinese sell something to us, they win and we lose. For SA, if the Chinese sell something to us, capitalists win and everybody else loses. Both of you are wrong--trade is always win-win, and free trade is good thing!
That said, there is something awry when the US runs huge trade deficits for multiple decades in a row. Something is out of balance. While I think Trump is addressing it in the wrong way, he is quite right to bring the issue to the fore.
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