Are We Seeing a Political Realignment?
These are confusing times. Familiar divisions between left and right fail to map onto today’s political landscape. The culture war has absorbed all aspects of media. Elon Musk is setting world records in Diablo IV (completing Pit level 150 in 1 minute, 56 seconds!) and soon he promises to speed clear the United States discretionary budget with DoGE (the Department of Government Efficiency).
We’re living through an important social transformation. In the 2024 election, we saw historic margins of the working class vote for a party that has traditionally represented the interests of capital. To understand the process that is now taking place, we need to look back and learn exactly how we got here. Today’s newsletter is going to be more theoretical than memetic, but if you complete this quest you will get a permanent +2 to intelligence rolls (this is definitely worth it).
During the 1970’s, advanced economies in the western world experienced a period of stagflation. Stagflation is an economic phenomena where stagnant wages occur alongside inflation. Amidst this crisis, the capitalist class seized an opportunity to remake political common sense among elites.
Under the post-war Keynesian consensus, the predominant economic theory of the era, originating from the British economist and philosopher John Maynard Keynes, an anomaly like stagflation was considered to be impossible. The observable reality of the 1970’s lent credibility to a previously minority opinion among economists; a political theory called neoliberalism. Emanating from the Chicago school, elites of the era concluded that the Keynesian model must be theoretically flawed. Neoliberals presented a bold and compelling vision to restore growth and set the economy back on track.
The late 1970’s marked a break in the post-war compact between labor and capital, the tacit arrangement following World War II where businesses compromised with labor unions in exchange for stability and economic growth. In 1980, we saw the overwhelmingly popular elections of Ronald Reagan in the US and Margaret Thatcher in the UK. At home, Paul Volker, chairman of the Federal Reserve, increased interest rates to a unprecedented 20%. Volker chose to tighten the money supply to fit within the theoretical models proposed by neoliberal ideologue Frederich Hayek (as far back as the 1930’s). For a brief period, profitability was restored and capitalism could continue.
Importantly, the dawn of neoliberalism represented a period of unity and solidarity among the capitalist class. In this moment, the economic interests of the ruling class aligned. In the words of David Harvey, author of A Brief History of Neoliberalism (2007), this was “class war from above”.
Today, politics appears strange because the interests of the capitalist class have become fractured. Republicans and Democrats now represent different aspects of the ruling class. Broadly, Republicans represent the interests of manufacturing, while Democrats represent the interests of finance. Certain economic activities, like selling physical goods and speculating on markets, will often have divergent goals and conflict with one another.
This intense competition for profits, between finance-capital and productive-capital, represents the basic structure of today’s political opposition. Blue-aligned interests seek to globalize investment in order to extract greater profits from developing markets. Red-aligned interests fight to keep capital investments at home where they can access a slice of the shrinking pie. Both groups compete for legislation and preferential treatment from the state. Neither group represents the interests of workers and we now find ourselves in an historically significant split.
The results of the 2024 election are not just a product of today’s culture war. The economic interests of some, admittedly few, workers now align more closely with the Republican party. This fracturing of the interests of the capitalist class is currently transforming our social values and political landscape. These developments help to explain the rise of cultural and economic nationalism across the advanced world. How might this crisis resolve?
Thomas Pikkety, author of Capital in the Twenty-First Century (2013), notes that the rate of return on capital, i.e. lending and financial speculation, now exceeds the rate of economic growth, i.e. the value of goods produced. While these economic sectors are always in competition, there is an inherent instability to financial speculation.
As far back as 1894, in chapter 25: “Credit and Fictitious Capital” of Capital: Volume III (yes, we are really about to do this), Marx explores the divergent interests of manufacturing and finance:
The easier it is to obtain advances on unsold commodities, the more such advances are taken, and the greater the temptation to… dump already manufactured commodities in distant markets, just to obtain advances of money on them. To what extent the entire business world of a country may be seized by such swindling, and what it finally comes to, is amply illustrated by the history of English business during 1845-47.
At the close of 1842… foreign demand for English manufactured goods increased still more; 1845 and 1846 marked a period of greatest prosperity.
The enticingly high profits had led to far more extensive operations than justified by the available liquid resources. Yet there was credit-easy to obtain and cheap.
Thus arose the system of mass consignments to India and China against advance payments, and this soon developed into a system of consignments purely for the sake of getting advances, as described in greater detail in the following notes, which led inevitably to over-flooding the markets and a crash.
In the 21st century, we should anticipate that the slow and steady interests of industry will win out over the volatility and instability of finance. On what side of the two party system these interest will align is yet to be seen. In Damage Magazine, Dustin Guastella makes the compelling argument that the institutions of labor are much more integrated with the Democratic party and a full realignment seems unlikely. In either case, we should expect to see a retreat from economic globalization and a rise of trade protectionism at the national level, particularly in the renewable energy sector.
Further compounding this crisis is the on-going macro-economic phenomena of declining rates of profit (this is actually what was responsible for the stagflation of the 1970’s), which has forced competition to become increasing cutthroat and deregulated. The “tendency of the rate of profit” to fall was first observed by Marx in Chapter 13 of Capital: Volume III. Liberalism has yet to find a viable solution to this crisis. After decades of stagnation and slow growth, there seems to be little hope for jump-starting a capitalist economy back into profitability.
The great irony of the forty year arc of neoliberalism, is that we once again find ourselves in an economic environment of stagflation. It turns out that the foolproof political theories that underpinned our entire adult lives were just an excuse for the ruling class to take even more than what they needed. (Wow, totally didn’t see that coming.)
Post-election, much of the news-media commentary has emphasized how wokeness and its academic rhetoric has helped to alienate working people. While this is of course correct, it can also serve to mask the deeper divisions that have emerged within our global liberal democratic society. Today, the interests of labor have become economically and politically de-aligned from their traditional forms of representation.
This is important to reflect upon now as we redraw the lines of political division. In the past few years, I’ve tried to explore some of these miscategorized topics to envision what a robust social democratic platform might look like in the 21st century. Below I’ve listed a few of the public conversations that have been most impactful on my thinking:
I’ve been saying we’re back in the 70s for a while. The neoliberal free love era (2010s Obama poptimism) papered over a huge crack in the neoliberal coalition in the same way the 60s counterculture dominated the discourse while hiding growing weakness in the New Deal setup. The 70s was that crackup coming to the surface, in the same way that 2016 was the start of the same for the neoliberals.
Elon got boosted in POE2 and without a doubt paid someone to get that time in Diablo for him. 🤓☝️