[The economic consequences of capitalism’s profit-driven
movement out of its old centers (Western Europe, North America, and
Japan) brought capitalism there to its current crisis. ]
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WHY CAPITALISM IS LEAVING THE US IN SEARCH OF PROFIT  
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Richard D. Wolff
July 21, 2023
CounterPunch
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_ The economic consequences of capitalism’s profit-driven movement
out of its old centers (Western Europe, North America, and Japan)
brought capitalism there to its current crisis. _

Container ship on the lower Columbia River, heading toward the
Pacific. , Jeffrey St. Clair

 

Early U.S. capitalism was centered in New England. After some time,
the pursuit of profit led many capitalists to leave that area and move
production to New York and the mid-Atlantic states. Much of New
England was left with abandoned factory buildings and depressed towns
evident to this day. Eventually employers moved again, abandoning New
York and the mid-Atlantic for the Midwest. The same story kept
repeating as capitalism’s center relocated to the Far West, the
South, and the Southwest. Descriptive terms like “Rust Belt,”
“deindustrialization,” and “manufacturing desert” increasingly
applied to ever more portions of U.S. capitalism.

So long as capitalism’s movements stayed mostly within the U.S., the
alarms raised by its abandoned victims remained regional, not becoming
a national issue yet. Over recent decades, however, many capitalists
have moved production facilities and investments outside the U.S.,
relocating them to other countries, especially to China. Ongoing
controversies and alarms surround this capitalist exodus. Even the
celebrated hi-tech sectors, arguably U.S. capitalism’s only
remaining robust center, have invested heavily elsewhere.

Since the 1970s, wages were far lower abroad and markets were growing
faster there too. Ever more U.S. capitalists had to leave or risk
losing their competitive edge over those capitalists (European and
Japanese, as well as U.S.) who had left earlier for China and were
showing stunningly improved profit rates. Beyond China, other Asian,
South American, and African countries also provided incentives of low
wages and growing markets, which eventually drew U.S. capitalists and
others to move investments there.

Profits from those capitalists’ movements stimulated more movements.
Rising profits flowed back to rally U.S. stock markets and produced
great gains in income and wealth. That chiefly benefited the already
rich corporate shareholders and top corporate executives. They in turn
promoted and funded ideological claims that capitalism’s abandonment
of the U.S. was actually a great gain for U.S. society as a whole.
Those claims, categorized under the headings of “neoliberalism”
and “globalization” served neatly to hide or obscure one key fact:
higher profits mainly for the richest few was the chief goal and the
result of capitalists abandoning the U.S.

Neoliberalism was a new version of an old economic theory that
justified capitalists’ “free choices” as the necessary means to
achieve optimal efficiency for entire economies. According to the
neoliberal view, governments should minimize any regulation or other
interference in capitalists’ profit-driven decisions. Neoliberalism
celebrated “globalization,” its preferred name for capitalists’
choosing to specifically move production overseas. That “free
choice” was said to enable “more efficient” production of goods
and services because capitalists could tap globally sourced resources.
The point and punchline flowing from exaltations of neoliberalism,
capitalists’ free choices, and globalization were that _all
citizens benefited when capitalism moved on_. Excepting a few
dissenters (including some unions), politicians, mass media, and
academicians largely joined the intense cheerleading for
capitalism’s neoliberal globalization.

The economic consequences of capitalism’s profit-driven movement out
of its old centers (Western Europe, North America, and Japan) brought
capitalism there to its current crisis. First, real wages stagnated in
the old centers. Employers who could export jobs (especially in
manufacturing) did so. Employers who could not (especially in service
sectors) automated them. As U.S. job opportunities stopped rising, so
did wages. Since globalization and automation boosted corporate
profits and stock markets while wages stagnated, capitalism’s old
centers exhibited extreme widening of income and wealth gaps.
Deepening social divisions followed and culminated in capitalism’s
crisis now.

Second, unlike many other poor countries, China possessed the ideology
and organization to make sure that investments made by capitalists
served China’s own development plan and economic strategy. China
required the sharing of incoming capitalists’ advanced technologies
(in exchange for those capitalists’ access to low-wage Chinese labor
and rapidly expanding Chinese markets). The capitalists entering the
Beijing markets were also required to facilitate partnerships between
Chinese producers and distribution channels in their home countries.
China’s strategy to prioritize exports meant that it needed to
secure access to distribution systems (and thus distribution networks
controlled by capitalists) in its targeted markets. Mutually
profitable partnerships developed between China and global
distributors such as Walmart.

Beijing’s “socialism with Chinese characteristics” included a
powerful development-focused political party and state. Conjointly
they supervised and controlled an economy that mixed private with
state capitalism. In that model private employers and state employers
each direct masses of employees in their respective enterprises. Both
sets of employers function subject to the strategic interventions of a
party and government determined to achieve its economic goals. As a
result of how it defined and operated its socialism, China’s economy
gained more (especially in GDP growth) from neoliberal globalization
than Western Europe, North America, and Japan did. China grew fast
enough to compete now with capitalism’s old centers. The decline of
the U.S. within a changing world economy has contributed to the crisis
of U.S. capitalism. For the U.S. empire that arose out of World War
II, China and its BRICS allies represent its first serious, sustained
economic challenge. The official U.S. reaction to these changes so far
has been a mix of resentment, provocation, and denial. Those are
neither solutions to the crisis nor successful adjustments to a
changed reality.

Third, the Ukraine war has exposed key effects of capitalism’s
geographic movements and the accelerated economic decline of the U.S.
relative to the economic rise of China. Thus the U.S.-led sanctions
war against Russia has failed to crush the ruble or collapse the
Russian economy. That failure has followed in good part because Russia
obtained crucial support from the alliances (BRICS) already built
around China. Those alliances, enriched by both foreign and domestic
capitalists’ investments, especially in China and India, provided
alternative markets when sanctions closed off Western markets to
Russian exports.

Earlier income and wealth gaps in the U.S., worsened by the export and
automation of high-paying jobs, undermined the economic basis of that
“vast middle class” that so many employees believed themselves to
be part of. Over recent decades, workers who expected to enjoy “the
American dream” found that increased costs of goods and services led
to the dream being beyond their reach. Their children, especially
those forced to borrow for college, found themselves in a similar
situation or in a worse one. Resistances of all sorts arose
(unionization drives, strikes, left and right “populisms”) as
working-class living conditions kept deteriorating. Making matters
worse, mass media celebrated the stupefying wealth of those few who
profited most from neoliberal globalization. In the U.S., phenomena
like former President Donald Trump, Vermont’s independent Senator
Bernie Sanders, white supremacy, unionization, strikes, explicit
anti-capitalism, “culture” wars, and frequently bizarre political
extremism reflect deepening social divisions. Many in the U.S. feel
betrayed after being abandoned by capitalism. Their differing
explanations for the betrayal exacerbate the widely held sense of
crisis in the nation.

Capitalism’s global relocation helped raise
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total GDP of the BRICS nations (China + allies) well above that of the
G7 (U.S. + allies). For all the countries of the Global South, their
appeals for development assistance can now be directed to two possible
respondents (China and the U.S.), not just the one in the West. When
Chinese entities invest in Africa, of course their investments are
structured to help both donors and recipients. Whether the
relationship between them is imperialist or not depends on the
specifics of the relationship, and its balance of net gains. Those
gains for the BRICS will likely be substantial. Russia’s adjustment
to Ukraine-related sanctions against it not only led it to lean more
on BRICS but likewise intensified the economic interactions among
BRICS members. Existing economic links and conjoint projects among
them grew. New ones are fast emerging. Unsurprisingly, additional
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in the Global South have recently requested BRICS membership.

Capitalism has moved on, abandoning its old centers and thereby
pushing its problems and divisions to crisis levels. Because profits
still flow back to the old centers, those there gathering the profits
delude their countries and themselves into thinking all is well in and
for global capitalism. Because those profits sharply aggravate
economic inequalities, social crises there deepen. For example, the
wave of labor militancy sweeping across nearly all U.S. industries
reflects anger and resentment against those inequalities. The
hysterical scapegoating of various minorities by right-wing demagogues
and movements is another reflection of the worsening difficulties. Yet
another is the growing realization that the problem, at its root, is
the capitalist system. All of these are components of today’s
crisis.

Even in capitalism’s new dynamic centers, a critical socialist
question returns to agitate people’s minds. Is the new centers’
organization of workplaces—retaining the old capitalist model of
employers vs. employees in both private and state
enterprises—desirable or sustainable? Is it acceptable for a small
group, employers, exclusively and unaccountably to make most key
workplace decisions (what, where, and how to produce and what to do
with the profits)? That is clearly undemocratic. Employees in
capitalism’s new centers already question the system; some have
begun to challenge and move against it. Where those new centers
celebrate some variety of socialism, employees will more likely (and
sooner) resist subordination to the residues of capitalism in their
workplaces.

_RICHARD WOLFF is an American Marxian economist known for his work
on economic methodology and class analysis. He is a professor
emeritus of economics at the University of Massachusetts
Amherst and a visiting professor in the graduate program in
international affairs of the New School. Wolff has also taught
economics at Yale University, City University of New
York, University of Utah, University of Paris I (Sorbonne), and The
Brecht Forum in New York City. He is the author of Capitalism Hits
the Fan
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Crisis Deepens
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He is founder of Democracy at Work
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* capitalism
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* U.S. history
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* profits
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* Neoliberalism
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* China
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* BRICS
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* socialism
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