We are living in crazy times and there’s absolutely no doubt about it, but the worst thing you can ever do is bury your head in the sand.
Whether we like it or not, Marxism, Communism, and Socialism are becoming more and more popular in the US. It’s unimaginable that the US would ever become a Communistic or Socialistic country, meaning the private sector doesn’t own the means of production, but this is exactly where we're headed to.
I’m not saying the US will outwardly abandon Capitalism, but that it'll only remain in the name. I think the means of production won’t be controlled by individuals or private institutions anymore. The probability is the means of production will be controlled by THE MOB and profits will be socialized through ever-increasing taxes.
In this article, I explain the Marxist principles, their view, the root of our today's problems and a possible endgame.
This entire article is also based on my good buddies Jeff Snider and Emil Kalinowski‘s recent podcast episode (want to give them all credit). They go into much more detail and it's an incredible show. So I'd encourage everyone to check it out when you have time here.
Marxism is taking over the United States, but…
Will it succeed?
To begin with, we have to understand the Marxist view and to do so, let's go back in history to 1820.
During the 1820s, there was a massive boom. The banks in Britain and France were investing heavily in Latin America in emerging markets, but it became a financial bubble, just like we see today.
So much so they started investing in countries that didn't even exist. That's right.
They had economic and financial shysters back then, just like we have today where people were selling bonds for countries that they just made up out of thin air.
As a result, the banking system had a crash, and this created a depression in the 1830s.
People back then had no idea how the financial system worked, they didn't even understand the banking system, but as human beings, we always try to make sense of the world around us.
Unfortunately, we often try to make sense of the world around us with a lack of information and a limited understanding of what really happened.
The 1820s was a perfect example of this. The people in the depression didn't blame it on the banking system or in investing in Latin American countries that didn't exist.
They blamed it on the King, on the Jesuits, on all of the entities and people that really had nothing to do with the real core problem.
Again, because people try to make sense of the world around them, but again, in doing so, they make huge errors.
Another example of this is the Aztecs or the Mayans, a group in central America that literally used to sacrifice human beings. I am not sure why they did this, but let's just say it was to make it rain.
They thought in their minds when they were making sense of the world around them, that if they needed it to rain after a five months drought, they literally needed to kill someone to appease the gods.
Another great example in modern-day times would be CNBC. Whenever you see the stock market down by even 50 points, CNBC will have some explanation as to why.
“Stock market down 50 points on Coronavirus fears”
Are you sure that's why the market is down by only 50 points?
Maybe, maybe not.
But again, it goes back to this point that you need to remember for the entire rest of the article to make sense. Lastly, remember that what you read today is what was taught in universities 10 and 15 years ago.
What we can see being taught right now in the universities is what we can most likely expect over the next 10 years to 15 years.
Professors and people coming out of the universities, regardless of their belief systems, have a massive reliance on cognitive dissonance.
In case you don't know, this is forming a strong belief system and anything that you see just enhances the particular belief system.
It's a self-defense mechanism we have as human beings to try to alleviate the feeling of pain.
We do this to the degree that even if we see facts that completely contradict our belief system, we'll totally ignore them or spin them in order to prove the original things that we believe.
Let's get into the three Marxist principles:
1.Production Of Goods And Services: This is at the core of their belief system, which is a good thing. You'd think the Keynesians would take the same approach.
2. The Marxists believe people are compartmentalized into specific groups: Meaning you don't have one person moving from group A over to group B.
If you're born in group B, you're there for the entirety of your life. If you're born in group A, you're there for the rest of your life and it doesn't really work that way.
But again, this article isn't about debunking Marxism. It's about explaining it and trying to answer the crucially important question.
3. They see people as chess pieces that behave the exact same way every single time. If you're in group B, then you always do this or that thing. Each group’s actions, they think, are completely predictable.
Also, they see transitions from one system to the next system, for example, Feudalism to Capitalism as a good thing. They think the next system is superior because theoretically, it can produce more goods and services more efficiently.
If you read Marx, he was very complimentary to capitalism from the standpoint that it was far superior to feudalism and that it made society advance forward.
What he believes is capitalism gets to a certain point where it can't grow any further and it starts to feed and destroy on itself.
He thinks, going back to the production of goods and services, that feudalism did a poor job, capitalism did a much better job, but at a certain point, capitalism won't go any further, it'll start to destroy itself.
That's the point where communism needs to come in and take efficiency to the next level, and when I mean efficiency, I mean the production of goods and services making the entire society that much richer.
The point where capitalism can't take it any further is referred to by a lot of Marxists as late-stage capitalism or late capitalism.
If you've never heard this term, I challenge you to go to Twitter type in #lateCapitalist and you will be amazed at how popular this term has become over the last few years.
But now, let's go back to understanding how the Marxist sees this transition from one system to the next one based on the production of goods and services. To do that here is an easier illustration.
It starts with the productive capacity, the black circle on top, which is how much goods and services that system is capable of creating, whether it's feudalism or capitalism.
Let's say we start with feudalism and then capitalism comes in. This makes the economy, grows even further, but at a certain point, it hits its limit. It cannot continue to grow because the productive capacity has been reached.
This is when Karl Marx, the little guy on the whiteboard holding a sign saying, “I love communism” Says “Listen guys, the system can't grow anymore and in order for society, at large, to become richer, we need to abandon the current system and move to something superior.”
To reiterate, even Marx himself admits you can't go from feudalism to communism. That doesn't work. You have to go from feudalism to capitalism, and then to communism, a lot of people don't understand that.
Let's look at it illustrated another way, just to make sure we're all on the same page.
The Marxist sees it as this timeline moving forward, we start with a certain system and this system runs into a brick wall where it cannot grow any further.
That's when you need “revolution”, two groups that battle it out and the winning system, the superior system takes over.
When they went from feudalism to capitalism, it was the aristocracy battling the capitalist. The capitalist needed to win, but the peasants really didn't have a say in it or the proletariat.
But, when you go from capitalism to communism is another battle of the classes, of two groups of people, but they're just two different groups.
Now, we have the capital battling it out with the workers. The workers need to win this battle, the revolution that brings in communism and takes society as a whole, to the next level of wealth and social justice.
You may be saying to yourself, “Yeah, George, I get it. But isn't it obvious? If you go back and look at Russia, can't the Marxists or the communist see that it was a complete failure?”
Maybe you and I would see that, but again, you need to look at it from their vantage point to be able to answer the question of this article: Will Marxism succeed in the US?
In their view, Russia didn't fail because of communism, it failed because they didn't allow capitalism to take hold for long enough.
It wasn't that communism was a failure, It's just the timeline they got wrong. That is very important and I'll address that again later on the article.
Before we move any further, I want to give a huge hat tip to Jeff Snider and Emil Kalinowski. I'm basing this entire article on their podcasts.
If you haven't seen their show, Making Sense Euro Dollar University, make sure you check it out on iTunes or on YouTube.
Now let's dive into the details of how this last stage of capitalism plays out in the mind of the Marxist.
They see prices dropping first. Ironically enough because the capitalists are so darn efficient and they'll admit that. The prices drop, then businesses start to go bust because their margins get squeezed.
Businesses that are left form monopolies, once they form the monopolies, jack prices up and start to lower wages. This increases the wealth gap dramatically, which means the capitalists have fewer buyers. If they have fewer buyers, they have fewer profits.
At a certain point, their profits shrink so much they look for other areas to expand their wealth.
Then, the only other option is to speculate in financial assets, creating giant booms and busts, hopefully, this sounds pretty familiar to you.
To understand this better, look at the following transcription and explanation of the late stage of capitalism. I want to point out this explanation was done excellently, but it was done by an actual Marxist.
It wasn't some Austrian trying to translate what Marxism is saying. Kind of like I'm doing right now. So let's cut right to it:
“Just as the forces of production were hampered by the feudal relations of production once before, now the productive forces in a capitalist society have developed to a point where they are constricted by the capitalist relations of production.
The productive power of society is now being held back by the capitalist order. Under capitalism, production is carried out for private profit.
As products are produced more and more efficiently, their cost walls can be sold cheaper to steal buyers from other competing capitalists.
Unfortunately, as competing capitals catch up and manage to sell their products at a cheaper price, the profit rate has fallen and there was a scramble to lower costs again.
Innovation now becomes the enemy of the capitalist in the long run.
To fight back against this tendency of the rate of profit to fall, capitalists can monopolize markets, artificially restricting supply and hike prices well above their cost, completely putting to waste the productivity of society.
They can also monopolize intellectual rights-holding back the general adoption of innovative technology.
But none of this really matters when the vast majority of workers don't have the money to buy the products. Every capitalist seeks to lower labor costs as much as possible, but still wants buyers.
Debt and the hyper-exploitation of the global south can help bridge this contradiction, but it's not particularly stable.
As productive industries become less of an attractive investment due to their slim return rights, capitalists increasingly swarm to invest in unproductive financial markets and speculative bubbles.
Resources wasted in these financial schemes and bubbles are resources that could have been invested to further technological development.”
When the speculative bubbles periodically pop and capitalists no longer see a profit to be made, capital society falls into an economic crisis.
(End of transcript)
As I said, it was a very well done explanation, but think this through.
If you were a person with limited understanding of how the economy really works, the financial systems, and central banks, and you were trying to make sense of the world around you, you would see that last explanation and you'd say:
“Yeah, that's exactly how it works. That's what I see playing out today right in front of my eyes.”
Especially, if you look at the following chart of the wealth discrepancy in the United States.
This chart goes back to 1989 all the way to 2015, and, on the left, it goes from 20% up to 45%. The bottom 90% of the population back in 1989 had almost 35% of the wealth. Today, in 2020 it's almost 20%.
It has gone down dramatically where the top 10% of their wealth has increased over the exact same timeframe.
So people look at what Marx was saying and say, “Aha, everything I learned in university was spot on. since that time, the belief system that I've grown by being this echo chamber of social media, is obviously correct as well.”
It goes right back to what Marx was saying. The wealth gap would increase when we get to the late-stage capitalism, and we're seeing it play out in the data and the charts.
Also, let's not forget the capitalists get to a point where they can't squeeze the worker anymore.
What do they do?
They start speculating and creating booms and busts. Look at this chart.
This is obviously where late-stage capitalism started to set in. At the point of the late gap, between de 1950-2000, the capitalists couldn't squeeze any more margin out of their workers. So they started to speculate.
This created the booms and then the Fed stepped in, saved capitalism, printed money, which took the stock market to an all-time highs before crashing, before COVID 19.
Of course, the only reason the economy and the market has crashed is that capitalism is unstable. This is the view of the Marxist.
It's crucial we see the world through their eyes to understand the probabilities of Marxism taking over the United States.
Marxist Reality Check
I know most of you throughout the beginning of the article were saying, “George, that's not because of capitalism. That's because of the Fed.”
Of course, you nailed it! Spot on.
What the Marxists see as late capitalism is really early fed Fiat currency, manipulation of interest rates and inflation.
I really want to focus on inflation for a moment for those readers who might be new to my content.
Since the Fed was set up in 1913, inflation has increased by over 2000%.
If we only had a healthy type of deflation instead of inflation, notice I said a healthy deflation, this is what we would have with a free market capitalist system.
But if we only add a healthy type of deflation, the middle class and the poor would get richer but that is for a separate article.
Now, going back to the wealth gap and the boom and bust created by the fed and the central banks: They even admitted it.
To dive into this further here is a transcript of a video the Bank of England published to explain the purpose of quantitative easing.
The aim is to be spending, to keep inflation on track, to meet the 2% target, alongside its decisions on asset purchases, the monetary policy committee continues to set bank rates each month.
The bank purchases assets from private sector businesses.
- Insurance companies
- Pension funds
- High street banks
- Nonfinancial firms
Most of the assets purchased are government bonds. There's a large market available so the bank combines substantial quantities of assets fairly quickly.
The bank of England's injection of money into the economy works through different channels and it has a variety of potential effects. When the bank buys assets, this increases their price and so reduces their yield.
That means the return on those assets falls. This encourages the sellers of assets to use the money they receive from the bank to switch into other financial assets like company shares and bonds.
As purchases of these other assets start to increase, their prices rise which pushes down on yields generally. Lower yields reduce the cost of borrowing for businesses and households.
This in turn leads to higher consumer spending and more investment.
Of course, higher asset prices also make some people better off, which provides an extra boost to spending on goods and services.
(End of transcript)
Let's go over the basics. The Fed goes to all the primary dealer banks, buys their treasuries and It prints up new bank reserves.
It's not really money, but for the sake of this example, to keep it simple, we'll assume it's typical dollars circulating in the system.
The primary dealer banks take that additional money, they go into the stock market and buy risk assets.
At the same time, this expands the balance sheet capacity, meaning they can give more loans to hedge funds in financial institutions that can take additional purchasing power.
They can go into the stock market as well, raising it to all-time highs. It increases the wealth gap and it exacerbates the boom and bust of the business cycle.
The Marxist's sees this whole process as an extension of capitalism. When you, and I know it's the complete opposite of free market capitalism.
Look at the following list.
Everything on it, whether it's businesses going bust from monopolies, lower wages for the workers, or speculation, it's not because of capitalism It's because we have a reduced amount of capitalism and free markets.
But the main takeaway is:
All the tools the Fed has at their disposal like money printing, artificially low-interest rates, and quantitative easing create wealth inequality, financial bubbles, like the dot com bust, the real estate bubble, and the everything bubble.
In the eyes of the Marxist, they see this as more and further proof of late-stage capitalism.
The End Game
Let me summarize the first topic we touched on. As human beings we need to make sense of the world around us. Often we do it with very limited understanding, limited information.
What was taught 10 to 15 years ago is what we see in society today. What's being taught in the universities currently is what we should expect in the future. This breeds a lot of cognitive dissonance and entrenched beliefs.
Finally, a lot of people, especially Marxists, believe that you are born into a specific group.
So, if you're a worker you're going to stay there your entire life. You never have the flexibility, the mobility, the opportunity to go from being a worker to maybe being an employer or a business owner.
Even if you are a worker, you never have the opportunity to make more income.
Because “we're in late-stage capitalism and the only way capitalists can continue making more and more profit is if they pay you less and less money.”
This statement, which is what Marxists think, takes away people's hope for a better future for themselves and their children.
If you take away people's hope, they start to take drastic measures, and that on itself is very, very powerful.
We also need to realize this is a global phenomenon. It's happening in different countries and in different ways.
It is crucial that you get your mind around this so you can understand the gravity of the problem we're dealing with.
To dive into this further, let's go to the genesis of this entire whiteboard article, which is the last podcast from Jeff Snider and Emil Kalinowski.
Here's a transcript of it:
Jeff Snider: When the Soviet Union fell in on itself in the early 1990s, the Chinese sent teams of researchers into the former Soviet Union to try to identify what went wrong in communist Russia.
This in order to not become the next communist Russia to fall, remember at that time there was a whole bunch of dominoes across Eastern Europe.
They decided exactly what we're talking about, Emil. They said, “Marx was right in that you can't impose communism on society before it reaches terminal wealth.”
That's the big mistake the Soviets made. They thought they had to achieve that kind of apply a plateau. It turned it against themselves. Therefore, the Chinese weren't going to make the same mistake.
Communist China, in the early 1990s went on a limited capitalist spree, which reinvented the Chinese economy in the same exact way.
It turned a largely agrarian backward economic system into a modern industrial powerhouse.
Again, the idea is you use capitalism and then, once it reaches its final stages and gets to the point where it can no longer move the ball toward the goal line, true communism kicks in, revolutionary show up and start confiscating everything all in the name of the greater good.
(End of transcript)
This goes right back to what we were saying at the beginning of this article where the Chinese looked at the Russian failed experiment with communism and didn't come to the conclusion that communism didn't work.
They came to the conclusion that the Russians just implemented it too early, right before capitalism could grow the economy large enough to where the communists could come in, take over and take society to the next level.
This utopian communist state, where there's social justice, everyone is equal, but everyone is getting equally rich because of the increased productivity with supplying goods and services is nonsense.
This shows you that the power of cognitive dissonance and entrenched beliefs can take hold not only at the individual level but at the group and country level.
Let's take it right back to the whiteboard to answer the question:
Will Marxism take over in the United States?
I think we've gone into a communism doom vortex that starts with the economy continuing to get worse because of the Fed and a lack of capitalism.
Then, the Fed will come in, use their tools, which will exacerbate the problems of wealth inequality, the booms and bust cycles. The Marxists will see this as an increased need for revolution.
So they have to step in and take action because the capitalists will destroy everything they have built since the days of feudalism.
That's the way the system works according to Marx. This justifies using any means necessary to take from the capitalists, everything they have built, and move society forward.
This is why I think we'll see increased riots, looting, social unrest, and social pressures on individuals and corporations where they'll be forced to conform to a specific narrative.
This is going to reduce freedom of speech, information, and the understanding of what's going on in the world around them.
Because they have a reduced understanding, the making sense of the world around them is going to make them more entrenched in their belief system. It's going to increase the need of cognitive dissonance.
And because we have less and less freedom of speech and information, that means the Marxists are going to become more and more driven by Marxism in thinking that they're right.
We as individuals who understand the benefit of a free market capitalism aren't going to be able to convince them because, in my opinion, sooner or later, we're not even going to be able to talk about it.
As an example of how ridiculous things are getting, look at this Wikipedia article on Washington, D.C. becoming a state.
For most of the modern (1980 – present) statehood movement, the new state's name would have been New Columbia, although Washington, D.C. Admission Act of 2020 refers to the proposed state as Washington, Douglas Commonwealth.
What they're saying is Christopher Columbus was such a bad guy that they're just going to get rid of everything in the United States that ever referenced his image or his name.
Let me be clear. I'm not saying that Christopher Columbus was right or wrong or that you shouldn't take down his statues or not. That's a completely separate debate.
What I am saying is the best disinfectant for bad ideas is sunlight. You don't want to sweep it under the bed and pretend it doesn't exist.
This entire article is a perfect example of that.
I think Marxism is a horrible idea, but I'm not ignoring it. I'm not burning every single book that references Marxism.
I'm talking about it so you can understand just how bad of an idea it is as well.
I would suggest every single social justice warrior out there to do the exact same thing, but where does this end?
Are we going to change the name of the entire country because you believe it's rooted in things that are evil?
The insanity just continues to grow as our personal liberties and freedom of speech continue to shrink.
But, to answer our main question: Will Marxism take over the US?
I would say no. In the sense that we're not going to call it Marxism or communism, just because of the history of the United States, but in practice, I think it will.
The private ownership will always be there, but it'll be a facade.
Yes, it may have private ownership, but taxes and regulations are going to continue to increase so high that the people that own the business, aren't going to be in control at all.
They're definitely going to socialize the profits through higher taxes, but the government will really have control over the businesses.
I think it'll be a different way. It's not going to be a dictatorship like we saw in China and in Russia, I think it's going to be mob control.
The mob is going to control the government and they're going to do this through social media.
As an example, the government or a corporation will throw out a trial balloon.
Let's say the next Nike ad and depending on how the mob on social media receives the ad, that's how they're going to determine whether or not that ad is released.
The government is going to remain at the mercy of the mob because it's still going to be a democracy.
The means of production won't be in the hands of the private sector they will be in the hands of the mob.
But there are some good news!
I want to remind everyone that even the Marxists see a place in the world for capitalism, just not in the developed world.
So, if you're an investor, maybe you're someone who's looking for more personal freedom, or maybe you are a capitalist yourself.
Why don't you consider going to an emerging market, a developing country, where even the Marxist see capitalism as being beneficial?
You can go there yourself, you won't be bothered with all of this nonsense, and you can improve those societies while at the same time, the developed world continues to decline.