Tackling a topic as big as the current state of the economy is not easy. One could write volumes about it and still only scratch the surface, and indeed many have done just that.
In order to avoid trying to boil the ocean, we will instead focus on a few specific trends which we as organized Marxists should watch out for in the economy as we go forward. These trends are:
- A potential financial crisis brewing
- The increasing concentration of wealth and economic growth within the technology sector
- The crisis of social reproduction
Furthermore, I will make a case that we should dedicate efforts towards teaching all of our comrades, current and future, the ins and outs of Marxist economics.
The aftermath of the Global Financial Crisis
To begin with, let’s discuss the recent economic events which have led to the current moment. As many are aware, US capitalism suffered a historic economic crash in 2008 as a result of the so-called “subprime mortgage crisis,” which led to the global financial crisis (GFC). What followed was over a decade of sluggish growth, lackluster employment, and generally low inflation.
This situation was upended in 2020 with the recession triggered by COVID, which was the sharpest fall in economic activity ever recorded in US history. The pandemic led to major supply-chain snags, shipping delays, and many more crises that together drove inflation. The ruling class responded with the same zero interest-rate policy (ZIRP), bailouts, and economic stimulus that were tried in 2008, though at a much larger scale.
A combination of relatively high interest rates, persistent inflation, and diminished bargaining power for labor has meant that most workers have seen their standard of living decline. Despite the media’s insistence that the economy is great, workers know otherwise.
This time, the effects of the stimulus were quite different. Rather than having the minimal effect the stimulus did in 2008, it led to an economic “sugar rush” and the “Great Resignation,” wherein large numbers of workers were able to trade up for better jobs. Many new unionization efforts began, and workers who hadn’t been on strike in years finally got the chance. This was followed by the Federal Reserve raising interest rates. Officially, the Fed was “fighting inflation,” but in reality this policy was intended to reduce workers’ bargaining power. Recently, the Fed has reversed slightly and lowered its interest rates after seeing weakness in the economy, but its policy rate remains high compared to the period following the 2008 crisis.
This leads us to where we are today. A combination of relatively high interest rates, persistent inflation, and diminished bargaining power for labor has meant that most workers have seen their standard of living decline. Despite the media’s insistence that the economy is great, workers know otherwise.
Brewing financial turmoil
The first cracks in the economy began to show in March of 2023. Silicon Valley Bank (SVB), the tech startup world’s bank, went under. SVB had invested a significant sum in US treasury bonds, which ended up losing value due to the rise in interest rates. The high interest rates affected their clientele in particular, making it impossible for most tech startups to get additional capital from investors. This led most startups to withdraw from their accounts simultaneously. SVB was then forced to sell its bonds at a loss, causing panic and leading to a bank run and subsequent collapse. Its clientele were then swiftly bailed out by the FDIC.
The fates of Signature Bank and New York Community Bank were similar, and many others remain at risk. Indeed, a paper published by Stanford researchers last year estimated that 186 banks could not cover the full amount of their deposits. Put simply, in the event of a bank run, many depositors would lose their shirts.
The system has built up a significant amount of “deadwood” — overvalued office buildings, zombie companies, worthless startups, and so on. Clearing out that deadwood could create the basis for a new round of economic growth.
A related issue is the problem of commercial real estate, especially office buildings, which have seen their value decline precipitously over the past few years. Discounts of 60–70% are common. The most obvious reason behind this is the increased prevalence of remote work since COVID, which has reduced demand for office space. Aside from this, higher interest rates also cause property values to decline, since a larger portion of the rent must cover interest rather than principal. Many regional banks are invested in commercial real estate, leading to potential knock-on effects if the losses are realized.
Finally, there are the “zombies” — companies whose incomes only barely cover the cost of servicing their debts. These are particularly sensitive to interest rate hikes. In 2024, the Associated Press estimated that there were about 2,000 such companies in the US; in 2022, the Bank for International Settlements estimated that about 20 percent of US companies were zombies. Unsurprisingly, bankruptcies have risen to a 14-year high.
It is unclear at this point what will become of this financial crisis. Obviously, US capital is not thrilled to be losing money on investments, so it is possible we may see more bailouts. On the other hand, the system has built up a significant amount of “deadwood” — overvalued office buildings, zombie companies, worthless startups, and so on. Clearing out that deadwood could create the basis for a new round of economic growth.
The concentration of wealth in the tech sector
The ruling class’s narrative has been that the economy is growing just as it should. Indeed, the aggregate economic statistics bear this out. Yet, for the majority of workers, their wages purchase far less than they did just a few years ago, jobs are harder to come by, and the jobs that remain available are less stable and more demanding. In short, for regular people, it seems like the economy is in recession. So what gives?
Growth has been overwhelmingly concentrated within the big tech companies. Depending on how you count membership to the club of big tech, the major tech companies (such as Amazon, Microsoft, and Meta) account for 20–30% of the S&P 500’s value. Over the past decade, they have outperformed the market for growth. Workers in almost every other industry face much worse job prospects, in part because the profits in their industries are anemic in comparison to the tech industry.
The current round of excitement is around generative AI technology. Evangelists for AI claim that it could replace labor in a whole host of creative professions — illustration, animation, writing, even programming itself. However, there are signs that the hype may be wearing off, and a backlash forming.
Increasingly, the only “good” jobs are available in the tech sector, and the US economy is dependent on a handful of tech companies for most of its economic growth.
The case of Devin, the so-called “AI software engineer” is instructive. In March, the AI startup Cognition released a demo purporting to show Devin performing a real, paid, software engineering task in about 30 minutes with no human intervention. A month later, the demo was debunked: the code it wrote was nonsense, the task it was given wasn’t real, and it actually took at least six hours to complete. The demos for the “AI PIN assistant” tools (Humane and Rabbit) similarly mixed exaggeration with bald-faced lies. As AI has come down from its lofty perch, the reality has set in that human labor is not going to be replaced anytime soon.
One of the most offensive aspects of AI technology is that its creators steal the works of thousands of visual artists, writers, programmers, and more to train their models. For the most part, no compensation has ever been given to the laborers (for that is what creatives are) who actually provided the training data to make these models possible. We are in the early stages of the backlash, but increasingly the training data which AI companies used to scrape for free now cost money. This will significantly increase the costs for building AI models.
Another problem is AI’s high energy usage. Some estimate that AI could use a staggering 3.5 percent of the world’s electricity. Apart from being mostly a magnificent waste, AI’s energy usage has a major impact on emissions and thus the climate. New technological developments may reduce AI’s power consumption temporarily, but the nature of capitalism guarantees that it will increase over time.
As the tech sector has taken greater and greater portions of economic growth, other companies have been forced to rebrand themselves as technology companies to attract investment. Domino’s famously declared itself a “tech company that sells pizzas” to its investors, for example. Other companies have tried to adopt AI, often to the chagrin of their customers.
The effects of this concentration are twofold: increasingly, the only “good” jobs are available in the tech sector, and the US economy is dependent on a handful of companies for most of its economic growth. The practical significance of this is that the divide between tech workers and everyone else is deepening. It will be necessary for Marxists to continue to assert that tech workers are indeed workers — both to those in the tech industry and outside of it. Furthermore, if a recession does primarily hit the tech industry, it will be disastrous for the whole economy.
Social reproduction in crisis
One of the enduring legacies of COVID has been that nearly every sector in the reproductive sphere, including education, healthcare, childcare, and eldercare, has been torn to shreds. Emergency rooms are constantly understaffed and overworked. Teachers report that the needs of their students have dramatically risen since COVID, while more and more teachers leave the profession. Childcare in particular has become incredibly expensive; it is not unusual at all to pay $1,000 or more per month for a single child’s daycare.
Aside from this, the price of housing has skyrocketed recently. It is impossible to overstate how dramatic this change has been. The average purchase price of a home in the US increased nearly 50 percent since the start of 2020. Rental prices, especially in the major cities, have become exorbitant and have resulted in a major increase in homelessness. Indeed, in 2024 alone, homelessness increased 18.1%!
All of these factors have led to a worsening overall labor supply. The labor-force participation rate in 2019 was 63.3 percent; it fell during the COVID recession to 60.1 percent and has recovered somewhat to 62.7 percent. The total number of workers in the US has increased only thanks to immigration.
While the US economy has shown some resilience and growth recently, it is likely to stagnate and even decline in the future. This is because it is fundamentally labor which creates value.
Meanwhile, the birthrate is at 1.6, below replacement rates, and has been for some time. Indeed, in 30 states, high school seniors outnumber elementary school children. Birthrates are likely to continue to decline.
The predictable effect of this is a decline in economic vigor. Not only will there be fewer workers available in the future, but thanks to the aging population, a greater portion of workers will need to drop paid work to care for their aging relatives. Immigration may be a temporary solution to this problem, but it is a global issue which affects nearly the entire world. The US and other wealthy imperialist nations will find themselves in competition for a shrinking pool of migrants from the dominated countries. We can expect further attacks on reproductive rights (such as the Dobbs decision) to try to boost birthrates. This may be successful in the short run, but in the long run it is unlikely to reverse the trend.
While the US economy has shown some resilience and growth recently, it is likely to stagnate and even decline in the future, as has happened in Japan. This is because it is fundamentally labor which creates value. If the labor pool is stagnant or declining in size, so too must the GDP. This stagnation will sharpen the contradictions already present in our society, and open up new ones. We need to continue to analyze this long term trend towards stagnation and decline, explain it, and argue against the solutions proposed by the capitalists, which are likely to be further imperialist wars and attacks on our rights.
Conclusion
The overall takeaway of this economic period is that workers are increasingly screwed under US capitalism. We can see that in the beginnings of a new labor movement and an increase in strikes. Exploding living costs combined with stagnant wages means an increase in militancy among US workers.
Financial turmoil has been brewing for a few years now, but it is unclear how exactly this will be resolved. There is no feasible way out of this situation in the short term, as almost every economic trend points towards economic stagnation or decline. Bailouts offer a short-term fix, but in the long run the unprofitable businesses must be cleared to allow for new growth.
As these economic problems persist and deepen, reformist economic thought has resurfaced. We need to be clear, with others and especially within our own ranks, that reformist policies cannot resolve the contradictions of capitalism. We will never be able to tweak the system or incrementally reform our way out of this crisis.
We also need to prioritize educating developing Marxists about Marxist economics. As a science, economics is of fundamental importance to Marxism, though it can be intimidating to approach at first. Additionally, of all sciences, economics is the one in which bourgeois academics have very little serious theoretical work to offer.
The period in front of us will be difficult for the foreseeable future. But it will also be a period of increased militancy. If we position ourselves properly, we can take advantage of this and change the world for the better.
