One hundred years ago (November, 1909), the famous American author Jack London, wrote a short story called “A Piece of Steak.” In it, an aging prize fighter climbs into the ring one last time. In his prime, this fighter was able to overwhelm his opponents with his strength and speed. Over the years, he has acquired a much greater knowledge, which he seeks to apply in the ring. But this is also a sign of weakness, as age has sapped his speed, strength and stamina; he must use strategy since he lacks the ability to simply physically overwhelm his opponents.

Strategy a Sign of Weakness

During the Bush years, the administration considered any inclination to raise questions of strategy, any tendency to consider long-range complications, as a sign of weakness. And so it was, since following the collapse of the Soviet Union US capitalism was the single dominating power on the planet. There was not a problem that force, or the threat of force, could not resolve. Their strategy could best be described by their own phrase: “full spectrum domination.”

In just a few years, that domination has collapsed; in its place stands a fighter still powerful, but beleaguered by a series of problems. The morass the US finds itself in, in both Iraq and Afghanistan, is receiving increasing press attention. While this is certainly important, the financial morass is equally dangerous to US capitalism.

Decline of US Economic Domination

Just as London’s prize fighter was able to overwhelm in his youth, US capitalism’s overwhelming productive capacity and massive market dominated the capitalist world in the decades after WW II. This was reflected in the role of the US dollar as the world’s currency – a role which US capitalism exploited by forcing increased dollars, and dollar-denominated debt (US Treasury Notes and other such securities) on its partners and rivals. Now, that situation is starting to come unwound.

Chinese capitalism is starting to surpass the US in terms of production. Take the most central commodity for production – steel. Of the 66 nations that report steel production to the World Steel Association, China produces almost half. In western United States, everything from steel shackles bought in a hardware store to the steel parts manufactured for the new (San Francisco) Bay Bridge are made in China. Now, Chinese capitalism is developing both an auto and an airplane industry to further challenge its rivals, including US capitalism.

The massive decline of US production has not been matched by an equivalent decline of US living standards, nor of US military power. US capitalism has used a massive increase in foreign debt to postpone this day of reckoning, an increase made possible by the exploitation of the role of the dollar. Through August of this year, US government debt stands at $11.8 trillion or $100,000 for every household in the United States. To this will be added the $9 trillion in additional federal debt that will develop over the next ten years, the $2 trillion in Federal Reserve debt and the $104 trillion in unfunded future liabilities for federal programs such as Medicare. Together, all this adds up to about $1 million per US household.

As is well known, China is a main holder of US debt – to the tune of about $2 trillion. Terrified of the consequences – both to themselves and to the world financial system – of a collapse of the dollar, the Chinese rulers are not going to simply dump dollars. However, they are starting to ease their way out, as are other capitalist countries. The result has been that since March, the value of the dollar relative to a basket of other major currencies has fallen by 15%.

Clearly, US capitalism is nearing its limits as far as forcing its rivals and allies to help in propping up the US economy and preventing a free-fall in living standards here.

Military Domination Weakening

The collapse of US economic domination is reflected in the weakening of US military and diplomatic domination. (Note the real meaning of “diplomacy”, which amounts to little more than the polite threat of economic sanctions or military action.) As Chinese capitalism makes inroads into the US’s back yard – Latin America – and as the Latin American workers and peasants move to resist the attacks on their living standards, a whole series of Latin American capitalist nations are openly flouting the will of US capitalism. The situation there is really unprecedented.

In the Mid East, the US thought it had crushed its number-one challenge in the region – Iraq under Saddam Hussein. And what happened? No sooner than Hussein was ousted than another and even more threatening (to US capitalism’s interests) rival arose – Iran. Up until this time, the only country with any military power that amounted to much in the region was Israel – the most stable of US allies there. Now Iran is arising as a counter force, and they are backed to a degree by both Russian and Chinese capitalism. Just recently, Russia blocked the imposition of new economic sanctions on Iran.

It also appears that Iranian capitalism is making inroads into the Horn of Africa, where they apparently are assisting rebels in northern Yemen. This is seen as a threat by the regime in Saudi Arabia, amongst others. Thus we see the previous stability in much of the Arab world now under threat.

A major reason why US capitalism installed Obama in the White House was that they were terrified of the consequences of a US military attack on Iran. They preferred to try diplomacy before considering such an attack. However, a military attack is by no means ruled out, and if it comes, it will only hasten the decline in US dominance. However, refusing to carry out such an attack only means standing passively by, watching its domination decline.

Opponents to US Capitalism

Meanwhile, US capitalism is stuck in two wars which it cannot win. Even as it withdraws from Iraq, its control over the situation there weakens, as it does in Afghanistan while it increases its troop levels there. Especially in Afghanistan, however, acceptance of defeat would mean a massive blow to US “prestige”, meaning its ability to intimidate its opponents. At present, the main opponents to US capitalism fall into two camps: Its capitalist rivals including China and Russia; and the terrorist groups including al Qaeda and the Taliban. Both would receive a huge boost if the US military is forced to accept military defeat in Afghanistan.

Thus it is that Obama faces a quandary in Afghanistan – a quandary that is reflected in his indecision over whether to send more troops there, and if so how many. On the one hand, he is receiving pressure to send up to 60,000 from his top general there, Stanley McChrystal. On the other hand, as reported here on this web site, he is receiving pressure to send no more troops there. The point is that deepen the military involvement or pull out altogether, US capitalism is faced with a no-win situation. The more likely decision will be a compromise between these two factions – in other words, delaying a more decisive step until later.

Conclusion

When major sectors of the US capitalist class (especially finance capital) financed and organized the election of Barack Obama as president, they did so because they realized that the old way was not viable. This was the way of shoot first and ask questions later. Having received a bloody nose in Iraq and lacking a way forward there, undergoing an economic crisis that was shaking world capitalism to its foundations, they realized that they needed a leader who would consider some of the more long range implications of his or her decisions. A secondary factor in picking Obama in particular was that they knew they needed a president who would have greater appeal to youth in the US as he would be more able to co-opt any future youth rebellion.

However, Obama’s failure to make a decision so far on sending additional troops to Afghanistan shows the downside to having a more thoughtful president; he realizes that really no decision will succeed. This is the quandary of US capitalism in general.

Add troops or withdraw entirely (or something in between); add to the US debt or let major financial institutions fail one after another – the only difference will be the form that the crisis takes. That the crisis itself will deepen, and that US capitalism’s power in the world will continue to wane – this they cannot prevent.

The only remaining question is whether the workers of the world will be able to replace capitalism with a democratic, socialist alternative, or whether capitalism will crush all in its ruins.

Of course, you will never read this in either the corporate-controlled media or its radical or reactionary alternatives.