Since its inception, capitalism has been a system wracked by crises. As Trotsky observed, it passes through cycles of boom and bust as naturally as the human body inhales and exhales. But what is the true nature of capitalism’s crisis? This question has long been debated within Marxist circles and has often given rise to factional disputes and splits. Yet, the issue is not an unsolvable mystery.
Marx and Engels were the first to scientifically refute the so-called “Say’s Law” of classical economics—which claimed that the production of goods automatically generates its own demand—and to demonstrate the inevitability of overproduction under capitalism. This tendency arises from the fundamental contradiction between social production and private appropriation, or, in other words, between the forces of production and the relations of production. On closer inspection, it is rooted in the contradictory nature of the commodity itself.
Marx harshly criticized the bourgeois economists who denied the possibility of overproduction on the grounds that every seller must necessarily have a buyer. As Marx pointed out, that “every sale implies a purchase” is a tautology, a mere definition of exchange. Certainly, “no one can sell unless someone else buys. But no one is immediately compelled to buy just because he has sold.” Money obtained from a sale can be hoarded rather than spent, and this alone makes overproduction and crisis possible.
But Marx went further. He explained that whether capitalists reinvest their money in new plants, machinery, or labor power depends entirely on profitability.
If the problem were as simple as overproduction, Marx and Engels would not have spent their entire lives analyzing capitalism in thousands of pages. After all, they had already identified capitalism’s tendency toward overproduction in The Communist Manifesto. Marx, however, continued working on Capital until his final days. Volumes II and III were published by Engels after Marx’s death, while Theories of Surplus Value—considered Volume IV—was only published in incomplete form after Engels passed away.
The tendency toward overproduction is inherent to capitalism. Yet it represents only one aspect of its deeper, long-term crisis. To reduce the problem to a mere “crisis of overproduction” is a serious oversimplification. It not only gives a one-sided view but also fails to explain many political and economic phenomena. Ultimately, such an interpretation leads toward Keynesian reformism, i.e. to pump money into the economy to boost demand in order to sell the overproduced goods and services.
In this regard, the third volume of Capital is crucial. Its central concern is the driving force of capitalism—profit—and the decisive measure underlying countless economic indicators—the rate of profit. In simple terms, Marx’s analysis of profit-making in all its dimensions led him to formulate a comprehensive theory of crisis: the “law of the tendency of the rate of profit to fall.” Classical economists had already observed that profitability tends to decline over the long term, but they lacked the means to fully understand it.
Marx demonstrated that the profitability of capitalist production is not stable. It is subject to inevitable downward pressure. The dynamics of market competition eventually compels capitalists to over-invest (or over-accumulate) relative to the profits they are able to extract from the working class. At a certain point, over-accumulation relative to profit—that is, a falling rate of profit—causes the total mass of profit to stop rising. When this happens, capitalists cease investing and producing, leading to overproduction, or a capitalist crisis. However, a declining rate of profit does not by itself trigger a crisis so long as the mass of profit continues to grow.
Of course, it cannot be denied that excessive production can occur in particular sectors, creating partial crises from disproportionate production. These can sometimes cause serious systemic disruptions. Yet when it comes to the general, historic crisis of capitalism, the decisive limit to production is the capitalist’s profit. Accumulation, therefore, is determined not directly by the rate of surplus value, but by the relation of surplus value to the total capital outlay—that is, the rate of profit—and even more decisively by the total mass of profit. A falling rate of profit essentially reflects an overproduction of fixed capital.
It is true that the rate of profit can decline while the mass of profit continues to rise. In fact, the rate of profit can fall so gradually that the economy expands for years despite this tendency. But such conditions cannot endure indefinitely.
The basic point can be summarized as follows: under capitalism, there is a built-in tendency for the proportion of constant capital—machinery, computers, robots, tools, and today, artificial intelligence—to grow relative to variable capital, i.e. human labor power, in the production process. This generates what Marx called an “overproduction of capital,” more precisely an “over-accumulation,” or what he also described as an “abundance of capital.” Beyond a certain point, capitalists cannot employ this accumulated capital profitably. In other words, the surplus value produced becomes insufficient in relation to the total investment, and the rate of profit falls. During such periods, the rate of profit may decline while total profits still rise. But eventually, the mass of profit itself begins to fall. That is the stage at which crisis erupts: investment halts, production collapses, the economy contracts, jobs disappear, and wages are cut. This reduces “effective demand” in the market. Inventories are overflowing, goods and productive capacity exist, but buyers do not—hence, overproduction.
Inevitably, this process expresses itself in the financial sector, real estate, and the stock market, where speculative bubbles that have inflated over long periods burst. We saw this dynamic unfold in the 2008 financial crash.
Thus, the overproduction of goods is inseparable from the overproduction of capital. As Marx put it, “The overproduction of capital always includes the overproduction of goods…”
How does capitalism emerge from such crises? Paradoxically, the conditions of crisis themselves create the possibility of recovery. Bankruptcies wipe out or devalue vast amounts of “excess” capital in a process of so-called “creative destruction.” The prices of the means of production (constant capital) fall. Unemployment drives down wages. In this way, investment once again becomes profitable and the cycle of accumulation resumes.
Major wars can also provide a path to “recovery,” though in a far more destructive and bloody manner, through the same mechanisms.
Even under relatively peaceful conditions, countervailing forces temporarily offset the tendency of the rate of profit to fall. These include intensifying the exploitation of workers—through union-busting, layoffs, and wage suppression. Technological innovation reduces the cost of constant capital, helping sustain profitability. Moreover, capitalist states are compelled to adopt policies that bolster profit margins, thereby artificially counteracting the tendency of the rate of profit to fall. Privatization transforms public services into arenas of profit, while new industries emerge from technological breakthroughs. Environmental destruction, imperialist expansion, and the conquest of markets, resources, and cheap labor also serve this purpose. Deregulation and tax breaks for capitalists are imposed at the expense of workers, often through austerity—shifting the tax burden downward, slashing welfare programs, or selling them off to private capital.
Neoliberalism has essentially been a large-scale project to reinforce these counteracting tendencies, in order to restore profitability.
Nevertheless, in the long run, the tendency of the rate of profit to fall reasserts itself. The room for recovery narrows, and crises grow more severe. History has confirmed the prediction made in The Communist Manifesto, decades before Capital was written.
In light of the above discussion, it is not difficult to see that the core socio-economic problems of capitalism stem from the crisis of profitability. Low profitability inevitably translates into low investment, sluggish growth, meager job creation, and a decline in living standards. It also weakens the state’s capacity to tax the capitalist class, leading to shrinking revenues, widening deficits, mounting debt and austerity cuts. In fact, all these processes are dialectically intertwined, each reinforcing the other, and thereby deepening the overall crisis.
Below, we will see how contemporary capitalism, particularly in its advanced forms, finds itself caught in processes stemming from its organic crisis.
Growth: From Boom to Stagnation
World War II gave capitalism a new lease on life through vast war economies and unprecedented destruction, but the system’s fundamental contradictions persisted. Examining post-war growth rates makes this clear.
There is an extensive debate among Marxist economists on the empirical evidence concerning the TRPF. We find the figures from Michal Roberts Blog quite useful especially the figure based on the Basu Wasner database which gives summary of the trends and turning points of the deflated profit rate development of the G20 economies, being an essential base for a periodisation of the post-war era and discussion of the current economic prospects.
It is quite obvious that there are ups and downs in the curve: (1) the exceptional growth of the profit rate in the immediate post-war period until the mid-60ies, (2) a sharp decline until the beginning of the 80ies, (3) a restoring of an upward turn of the profit rate in the 80ies and 90ies, (4) a decline again since the beginning of the 2000er-years, while starting at a much lower level therefore also not as sharp as around 1970.
The post-war period was made possible by terrible defeats of the working class movement (fascism, the reactionary solution of the post-war revolutionary period, integration of trade unions, social-democracy and Stalinism into the capitalist post-war order), the massive destruction of capital (not only physically because of the war but also because of the effects of the economic crisis connected to it until the late 1940ies) and resolving the struggle for the re-division of the world between the imperialist powers decisively with the US becoming the global hegemon and guarantee of the world market and the dollar assuming the role of world money.
While the rate of profit began to fall already in the 1960ies, while this had already effects seen in turbulences of the capital markets, the limits of growth of the absolute mass of profit were felt in the major imperialist countries first in recessionary tendencies in the early 1970ies. It was obvious that the “long boom” came to an end, and with it the illusions of “social partnership” and an increasing welfare-state. Most of the governments of the time tried to counter the downturn cycles with increased state spending, financed by extension of state debt. This period is marked by a structural crisis of profitability, the oil price shock and the breakdown of the Bretton-Woods-System are symbols of this crisis.
Around 1980 the core of the western imperialist bourgeoisie, especially in the US and Britain decided a fundamental change of their crisis management, which later became to be known as turn towards “Neo-Liberalism”. This did not only comprise the massive attacks on working class gains and organisations of the type of the Reagan- and Thatcher-governments, the beginning of endless cycles of austerity politics. At the core of the turn was the so called “Volcker shock”, which is a symbol for the massive increase of the prime lending rate and a resulting debt crisis.
Two recessions followed immediately in the 1980s, pushing up the unemployment rate, but also ending the era of inflation. The following default of company debts, breakdown of saving banks, insolvency of big corporations, etc. led to the destruction of capital in billions of dollars dimension (it is estimated that around a fifth of the capital stock was put out of function in the early 80ies). Additionally, most of the countries holding high amount of Dollar-debt necessarily (due to higher interest rates and the strong Dollar) went into a severe debt-crisis.
The new growth model started by the neoliberal turn of the early 1980s was labelled the “period of globalization”. The leverage of debt-restructuring, the global neoliberal turn and the breakdown of the block of degenerated workers’ states allowed a further opening of the markets for global investment capital. This allowed the ever more sophisticated construction of global chains of production, based on favourable access to raw materials, cheap and skilled labour worldwide. Another feature of the globalisation upswing was the new dimension of finance, especially the global capital markets. Based on liberalization of international finance flow and investment regulations, hoarding financial capital from all over the world and investing it globally could mobilize investment capital at an unpreceded magnitude. The restauration of capital in Eastern Europe, the Soviet Union and China around 1990 onwards was indeed an important factor in the new growth model.
The globalization boom ran up against the fundamental limits of capital accumulation. Even on a higher global level, the growing mass of capital confronted a limited surplus value, causing profit rates to fall again around the turn of the century. Rising transport and logistics costs, expanding service sectors, and the increasing weight of financial market expectations reinforced this trend. Early crises in Russia/Asia and the dot-com crash signaled problems in the engine of globalization.
Although the China boom and financial expansion prolonged growth, declining profitability made a crisis inevitable—this time erupting in the financial sector. Falling real estate prices triggered a massive debt and asset-value collapse. The breakdown of financial institutions in 2007 led to a credit crunch and a slump in investment financing, culminating in the deep global recession of 2008–2009, later termed the “Great Recession”. This near-breakdown of capitalism shaped the period until the next major crisis, the pandemic-driven global recession.
Japan’s record is even starker: from 8–10% annual growth until 1973, the economy has barely managed to remain above zero since 2008.
The slowdown becomes clearer if we compare the 15 years before and after the 2008 crisis. Average annual growth rates for key economies fell as follows (1993–2007 vs. 2009–2023):
- Germany: 1.4% → 0.9%
- France: 2.0% → 0.9%
- UK: 2.7% → 1.2%
- Eurozone overall: 2.0% → 0.9%
- Japan: 1.0% → 0.4%
- US: 3.0% → 2.0%
- Arab World: 4.4% → 2.5%
According to the World Bank, global GDP growth is projected to average just 2.5% in the 2020s—the slowest pace since the 1960s. Similarly, the OECD warns that the world economy is entering its weakest growth spell since the COVID slump: “Weakened economic prospects will be felt around the world, with almost no exception.”
The OECD forecasts U.S. growth slowing sharply from 2.8% in 2024 to 1.6% in 2025 and 1.5% in 2026, while inflation rises toward 4%—remaining above the Fed’s target and preventing interest rate cuts to ease the debt burden on households and small firms.
The World Bank emphasizes that this slowdown is not a recent phenomenon. Growth in developing economies has declined for three straight decades: from 5.9% in the 2000s to 5.1% in the 2010s to 3.7% so far in the 2020s. This mirrors the downward trajectory of global trade growth (5.1% → 4.6% → 2.6%). Investment has also weakened, while debt has piled up.
The IMF, in its July update, raised global growth forecasts slightly to 3.0% in 2025 and 3.1% in 2026, citing front-loading ahead of tariffs, fiscal expansion, and improved financial conditions. Still, it warns of persistent risks: higher tariffs, geopolitical tensions, and ongoing uncertainty.
Forecasts for 2025–26 include:
- U.S.: 1.9% (2025), 2.0% (2026)
- Eurozone: 1.0%, 1.2%
- UK: 1.2%, 1.4%
- China: 4.8%, 4.2%
- Japan: 0.7%, 0.5%
In mid-2025, Germany and Italy’s GDPs contracted by –0.1% in Q2, while France grew by only 0.3%. Overall Eurozone growth was a mere 0.1% quarter-on-quarter, with year-on-year growth slowing from 1.5% in Q1 to 1.4%. The Eurozone’s core economies are stagnating or in recession, with only some peripheries like Spain performing relatively better.
Meanwhile, U.S. data for Q2 2025 showed a 0.7% quarterly rise (annualized at 3.0%), above forecasts. Trump celebrated the result, but the surge was largely due to a sharp 30% fall in imports as tariff increases took effect. This boosted net trade, inflating GDP. Excluding trade effects, real final sales to private domestic purchasers rose just 1.2%, down from 1.9% in Q1.
Investment also slowed sharply: total investment rose only 0.4% in Q2 compared to 7.6% in Q1. Equipment investment grew 4.8% versus 23.7% previously, while investment in new structures (factories, data centers, offices) fell by 10.3% after already declining 2.4% in Q1. Overall, the U.S. economy grew 2.0% year-on-year in Q2, the same pace as in Q1. While still performing better than the Eurozone and Japan, it is expanding at less than half China’s rate.
Japan’s economy is mired in chronic stagnation. It contracted in Q1 2025, and trade figures point to another contraction in Q2, implying a technical recession. At best, Japan will grow only 0.7% this year and 0.4% next.
The OECD notes that a long spell of weak investment has compounded the longer-term challenges facing OECD economies, and this is further sapping the growth outlook. Despite rising profits, many firms have preferred to accumulate financial assets and return funds to shareholders rather than invest in fixed capital.
The World Bank adds: “The poorest countries will suffer the most. By 2027, the per capita GDP of high-income economies will roughly return to its pre-COVID trajectory. But developing economies will remain 6% below it. Except for China, most will take two decades to recover the losses of the 2020s.” In other words, the world’s poorest nations are not catching up but falling further behind. Even by the World Bank’s already modest benchmarks, poverty is rising.
Austerity: A New Normal
Austerity, as we know it today, first emerged with the onslaught of neoliberalism in the 1980s. Over time, however, it has assumed a more persistent and harsher character. It now entails not only the internal austerity measures imposed by capitalist states but also the virtual end of concessions and grants from the Global North to the poorer regions of the world, already devastated by centuries of loot and plundered by imperialism.
For instance, in the United States, President Trump has drastically reduced funding and staff for the US development agency, USAID. Its budget is projected to shrink from $60 billion in 2024 to under $30 billion by 2026. Similar cutbacks are underway in Germany, Britain, France, and other advanced economies, as governments redirect funds toward massive increases in military spending.
The Group of Seven (G7) countries—responsible for nearly three-quarters of all official development assistance (ODA)—are preparing to slash aid spending by 28 percent between 2024 and 2026. This will mark the steepest reduction in aid since the G7’s formation in 1975, and indeed in the entire aid record dating back to 1960. By 2026, G7 aid levels could collapse by $44 billion, falling to just $112 billion. The bulk of this decline comes from the United States (down $33 billion), Germany (down $3.5 billion), the UK (down $5 billion), and France (down $3 billion).
International agencies have sounded the alarm. Oxfam warns that these cuts amount to the largest rollback of development aid since 1960. Meanwhile, the UN highlights a staggering $4 trillion gap between global sustainable development needs and actual funding. The impact on nutrition alone is devastating: global aid for nutrition is set to drop 44 percent by 2025 compared to 2022. The termination of $128 million in US-funded child nutrition programs—covering one million children—will lead to an additional 163,500 child deaths annually.
Health systems in poorer countries are also under siege. One in every five aid dollars allocated to health budgets is being reduced or placed under threat. According to the WHO, nearly three-quarters of its country offices report severe disruptions, and in about a quarter of these countries, entire health facilities have already been forced to close. US aid cuts could result in up to 3 million preventable deaths per year, with 95 million people losing access to healthcare—children dying from vaccine-preventable diseases, pregnant women left without maternal care, and rising deaths from malaria, tuberculosis, and HIV.
Domestically, Trump’s Big, Beautiful Bill proposes even deeper austerity. Over the next decade, it aims to cut nearly $1 trillion from Medicaid (the public health program for low-income households) and $500 billion each from food assistance and Medicare (health coverage for the elderly). This represents the single largest reduction in the already fragile US social safety net.
The consequences are stark. Between 12 and 17 million people stand to lose health insurance, while 3 million risk losing food assistance. Safety-net hospitals, especially in rural areas, will scale back services or shut down altogether. Cuts to Affordable Care Act subsidies will increase out-of-pocket costs, spreading the pain across all health insurance plans. At the same time, the bill makes permanent the 2017 tax cuts—overwhelmingly benefiting the rich. Estimates show that, after accounting for both tax cuts and program reductions, the poorest 20 percent of households will see their incomes fall, while the wealthiest 0.01 percent will enjoy gains averaging $301,550 annually.
Europe tells a parallel story. Austerity policies implemented across the EU since 2009 have left citizens, on average, €3,000 worse off per year, according to research by the New Economics Foundation (NEF) and Finance Watch. Public and social service spending is €1,000 less per person than it would have been without austerity. The consequences are particularly severe in countries like Ireland and Spain, where average incomes fell 29 percent and 25 percent below pre-2008 trends. Even in wealthier states such as Finland and the Netherlands, incomes remain 15–16 percent lower than expected.
The report underscores the broader cost: without austerity, the average EU citizen would now be €2,891 better off. Governments would have invested €533 billion more in infrastructure—including renewable energy and domestic supply capacity—shielding families from today’s dramatic energy price hikes. Spending on education, healthcare, and social care would also be €1,000 higher per person.
In reality, austerity has deepened downturns rather than alleviating them. It has weakened social safety nets, eroded living standards, slowed recovery, and, above all, inflicted disproportionate harm on the most vulnerable: the poor, the young, families, and populations dependent on healthcare.
Debt: The Suffocating Weight of Borrowed Time
The global economy is being crushed under a massive debt burden, reflecting how temporary measures to mitigate crises and artificial methods of addressing the system’s bottlenecks have now become permanent and normalized. Global debt now approaches 300% of world GDP, a dangerously high level. In the few years following COVID, debt has increased by 43%—an unsustainable trend.
Moreover, rising interest rates post-COVID have worsened the debt crisis in most Third World countries. Pakistan has experienced this for years, and the case of Sri Lanka is well known. According to the United Nations, 52 developing nations face debt crises, 40% of which are at risk of default. These countries are spending more on interest payments than on health or education.
If global trade wars intensify, both inflation and interest rates will increase, potentially causing Sri Lanka- or Bangladesh-like crises in many more countries.
In the so-called emerging economies (excluding China), total debt has surged to 126% of GDP. The external debt stock of poorer countries reached an unprecedented $8.8 trillion in 2023, marking a 2.4% increase from the previous year.
What is particularly alarming is that debt repayments now exceed new inflows of credit and capital. In 2023, low- and middle-income countries (excluding China) suffered a net outflow of $30 billion to the private sector on long-term debt—a severe drain on development. Since 2022, foreign private creditors have extracted $141 billion more in debt service payments from public sector borrowers in developing economies than they disbursed in fresh financing. For two consecutive years, external creditors have been taking out more than they have put in.
The total debt servicing costs (principal plus interest) of all low- and middle-income countries hit a record $1.4 trillion in 2023. Excluding China, the figure stood at $971 billion, a 19.7% rise from the previous year and more than double the level of a decade ago.
The social impact is devastating: 3.3 billion people live in countries where interest payments now exceed health spending, while 2.7 billion people are in countries where debt service costs surpass education budgets. On average, the interest burden as a share of tax revenues has nearly doubled since 2011 across developing nations.
Even advanced economies are sinking deeper into debt. In the United States, the Committee for a Responsible Federal Budget projects public debt to rise by at least $3.3 trillion by 2034, pushing the debt-to-GDP ratio from the current 100% to 125%—well above the 117% projected under existing law. Annual deficits are also expected to grow, climbing to 6.9% of GDP by 2034, compared to 6.4% in 2024.
The private sector is no less overburdened. U.S. corporations are now carrying the heaviest debt load in history, with outstanding debt reaching 487% of their income. Over the past two years, corporate bankruptcies have risen by 87%, surpassing levels seen during the COVID crisis—an outcome exacerbated by the high interest rates imposed to rein in inflation.
Inequality: Pyramids of Wealth amidst Deserts of Poverty
Economic inequality can be analyzed in several dimensions: the inequality of income (wages and profits); of personal wealth (assets minus debt); of capital assets (ownership of companies and stocks); of wealth and income between nations; and of inequality within nations themselves. Importantly, inequality is always relative, not absolute. The obscene and appalling levels of inequality, in all their aspects, also reveal a profound malfunction of the system.
The countries of the so-called Global South are not “catching up” with the wealthy imperialist nations of the Global North—whether measured by income per person, productivity, or any index of human development. On the contrary, vast inequalities of income and wealth, both within and between nations, continue to worsen.
In 2023, the global average national income per capita (including the in-kind value of public services) was about €12,800 per year (PPP), or €1,065 per month. Yet this conceals immense disparities: in Sub-Saharan Africa, the average income was just €240 per month, compared to over €3,500 in North America and Oceania—a ratio of 1 to 15. Annual per-capita output in the US reached $73,000, roughly 26 times higher than in low-income countries. Even lower-middle-income economies such as India, Nigeria, and the Philippines produce only about one-ninth of America’s output per person.
Rapid growth in parts of Asia, especially China and India, has lifted many out of extreme poverty. Yet, according to the World Inequality Report, the global richest 0.1% and 1% have captured a vastly disproportionate share of gains. In 2020, the richest 1% received 20.6% of global income, an increase of 2.8 percentage points since 1980. The top 0.1% alone pocketed 8.59% of income, up by nearly two percentage points since 1980.
China has rapidly grown its own wealthy elite, but despite its population being more than four times larger than the US, America still has 4.8 times more high-net-worth individuals.
The global wealth pyramid underscores the extremes:
Just 60 million adults (1.6% of the world’s adults) hold $226 trillion—48.1% of all personal wealth.
At the other extreme, 1.57 billion adults (41% of the world’s adults) together own only $2.7 trillion, or 0.6% of global personal wealth.
The top 1% of the world still hold about 42% of all personal wealth—unchanged since 1995.
When the middle rungs are added, 3.1 billion adults (82% of the world’s population) hold only $61 trillion, or 12.7% of all wealth. The remaining 87.3% is concentrated in the hands of 680 million people—just 18.2% of the world’s adult population.
Regional disparities remain stark. In 2024, personal wealth rose in Eastern Europe (from a low base) and in North America, but fell in Latin America, Western Europe, and Oceania. Average household wealth in Britain dropped by 3.6%—the second steepest decline among major economies. Average personal wealth per adult in North America is six times higher than in China, 12 times higher than in Eastern Europe, and nearly 20 times higher than in Latin America.
Global inequality in personal wealth has worsened since the start of the 21st century. South Africa, even after apartheid, remains the most unequal country in terms of wealth distribution (measured by the Gini coefficient), followed closely by Brazil. The Gini ratio has worsened across many regions during the “Long Depression” since 2008. Among advanced capitalist nations, Sweden surprisingly ranks as unequal as the US. Capitalism—whether neoliberal or social democratic—produces the same concentration of wealth.
The US, however, stands out as the most unequal among G7 economies. The sheer scale of American inequality is staggering. To visualize:
- $100,000 in $100 bills forms a 4.3-inch stack.
- $1 million equals 43 inches.
- $1 billion is a 3,600-foot stack (about 12 football fields high).
- Elon Musk’s wealth of $486 billion would reach 330 miles high—60 Mount Everests stacked.
Wealth inequality is inseparable from income inequality. The higher the concentration of personal wealth in a society, the higher its income inequality tends to be. The World Inequality Report shows that since 1980, the share of national income going to the richest 10% has increased in nearly every country. Today, the top 10% capture more than 50% of global income, while the bottom 50% receive just 5%.
India offers a stark case: while seven million of its citizens belong to the global elite, 700 million languish among the world’s poorest. The richest 1% in India now corner 73% of national income and own more than four times the wealth of the bottom 70% (953 million people). A female domestic worker in India would need 22,277 years to earn what a top tech CEO makes in a single year.
Inequality is not merely contemporary but deeply historical. A study of Florence by two Bank of Italy economists found that today’s wealthiest families are direct descendants of those who were richest 600 years ago. From merchant capitalism in Renaissance Italy, through industrial capitalism, and now under global finance capital, wealth has remained concentrated in the same lineages.
Thus, Marx’s prediction 150 years ago stands confirmed: capitalism leads to the relentless concentration and centralization of wealth, particularly in the means of production and finance. Contrary to the optimistic assurances of mainstream economists, poverty remains the global norm for billions, while inequality continues to sharpen within advanced economies, as capital accumulates in ever fewer hands.
Growth Without Grace: The Erosion of Living Standards
In its most recent review of the UK economy, the IMF urged the government to strictly follow its “fiscal rules” on budget deficits and debt. With growth forecast to average just 1.4% a year for the rest of the decade, it recommended either raising taxes, curbing pension increases (already among the lowest in Europe), introducing NHS charges (effectively dismantling the free healthcare system established in 1948), or some combination of these. It also endorsed cuts to disability benefits.
The IMF further warned that unless the government abandons its pledge not to raise taxes on “working people,” deeper cuts in public services would be needed. It suggested linking access to services with people’s ability to pay—such as co-payments for healthcare from higher earners—while exempting the poorest.
A similar pattern can be seen in Japan, where the persistent stagnation since the 1990s is rooted in a sharp fall in the profitability of productive investment—steeper than in any other G7 country. Successive LDP governments have slashed senior citizens’ social security benefits by 30% in real terms since 1995, and per capita healthcare spending on the over-65s has been reduced by almost 20% in three decades. At the same time, corporate tax rates have been slashed from 50% to 15%. While profits have surged from 8% to 16% of GDP, tax revenues have fallen from 4% to 2.5%. Instead of stimulating productive investment, companies hoarded capital or diverted it into government bonds and stock markets.
In the US, wage growth for ordinary citizens has steadily slowed since World War II, averaging just 0.9% annually since 2008. Adjusted for inflation, blue-collar hourly wages remain stuck at late-1970s levels, despite massive gains in productivity.
This disconnect between growth figures and people’s living standards is rooted in the changing nature of growth. Since the neoliberal shift of the 1980s, unproductive sectors such as finance, real estate, and stock markets have expanded relative to the real economy. Their boom cycles are misread as prosperity, yet generate little improvement for the majority. In 2023, finance, insurance, real estate, and rental services made up over 20% of US GDP, while manufacturing fell to 10% and agriculture to less than 1%. Growth led by speculation and short-term profit-taking is “joyless growth,” offering little relief to workers.
This pattern is not unique to the US. Other neoliberal economies shaped by the Washington Consensus, such as India, exhibit the same contradiction: high growth on paper alongside deteriorating social conditions.
China, BRICS and the Myth of Anti-Imperialist Bloc
In recent years, with the decline of Western imperialism and its (neo)liberal order alongside the rise of China, the perception has grown that alliances such as BRICS could serve as an alternative to the Bretton Woods system and the Washington Consensus–based global order (NATO, IMF, World Bank, EU, etc.).
Despite some token reforms to its voting and decision-making structures over the past eight decades, the IMF remains firmly under G7 control, leaving most other countries virtually voiceless. Out of the 24 seats on the IMF board, the US, UK, France, Germany, Saudi Arabia, Japan and China each hold individual seats—while the US retains veto power over all major decisions.
Economically, the IMF is most notorious for enforcing “Structural Adjustment Programmes.” Loans to distressed economies are granted only on the condition that governments cut deficits, slash public spending, liberalize trade and privatize key sectors. Similarly, the World Bank’s criteria for loans and aid to the poorest nations rest on the neoclassical belief that public investment merely exists to “stimulate” private investment and development. In doing so, its economists deliberately sideline the role of state-led planning and investment.
These institutions represent the core of Western imperialism’s financial and economic machinery, created after the Second World War to continue colonial plunder in new forms. It is unnecessary to recount in detail how, over the past seven to eight decades—and especially the last three—Western powers have unleashed wars and aggressions in one region after another, often through NATO, destroying nations and committing massacres on a scale unprecedented in human history. This economic and military barbarism has only intensified as Western imperialism has declined.
The relentless oppression and exploitation by Western imperialism has, unsurprisingly, fueled immense hatred and anger in the Third World. Inevitably, this has led many to seek alternatives or allies among the powers of the East. Until 1991, the Soviet Union mostly served this role. Over the past two decades, however, a growing trend within left-wing circles has been to view China—and, to some extent, Russia—as an “anti-imperialist” alternative.
This narrative takes several forms. One is the belief that China represents a more progressive force than Western imperialism. Across the Global South, individuals, left-wing organizations and even state factions actively promote this view. Likewise, some speak of an emerging “Eastern Bloc” of anti-imperialist powers, including China, Russia, Iran and various Third World nations. While some claim this bloc already exists, others simply express the desire for it.
On the other hand, there are those who do not consider China progressive, yet exaggerate its strength and influence. For them, China, in its economic, technological and military capabilities, is already equal to—or even more powerful than—the United States, and American imperialism is essentially finished.
On the contrary, another simplistic stance is to label China’s economy as simply “capitalist,” applying the dynamics and categories of market economies—and even the analyses of Western imperialist economists—to China, while ignoring its unique and peculiar characteristics.
What is certain, however, is that over the past three decades China has risen as a major global economic power, and now possesses a modern, growing military. Meanwhile, Western imperialism—especially the US—faces historic weakness, decline and fragmentation. Yet this is a contradictory and ongoing process, whose ultimate outcome remains uncertain.
Let us therefore consider China’s rise. In just a few decades, it has become the world’s second-largest economy. By population, this represents the most extensive economic growth in human history: a nation of over a billion people achieving decades of uninterrupted expansion without major downturns.
At the time of the revolution in 1949, China was among the most backward countries in the world—plagued by poverty, illiteracy, ignorance, slavery and elements of barbarism. Today, it is an urbanized, industrialized, literate and relatively healthy society. In terms of living standards, culture and development, it far surpasses countries such as Pakistan, India and Bangladesh—despite all of them being at roughly the same level in 1947–49.
Since 1978, household consumption in China has increased by 1,800%. Literacy has risen from just 20% in 1949 to 98% today. Life expectancy is now higher than in the United States. By World Bank standards, China is on the verge of achieving “high-income” status.
China’s share of global GDP was barely 2% in 1982; by 2012, it had reached nearly 15%. In 2010, it surpassed Japan to become the world’s second-largest economy, and forecasts suggest it will overtake the US by 2028. By purchasing power parity (PPP), however, it has already become the world’s largest economy, surpassing the US around 2014.
Between 2002 and 2022, China’s share of global GDP rose from 8% to 18%, while the US share fell from nearly 20% to 15%. By 2024, China’s share had reached about 20%. The panic gripping Western imperialists is therefore hardly baseless—the figures speak for themselves.
Consider this: between 2011 and 2013 alone, China used 6.6 gigatons of concrete—two gigatons more than the US consumed in the entire 20th century. Today, China is advancing rapidly in cutting-edge sectors such as artificial intelligence, high-speed rail, space exploration, and robotics—often outpacing the United States. The real aim of US trade restrictions is not simply to address its trade deficit but to block China from gaining the upper hand in these technological fields, long treated as the exclusive domain of American and Western imperialism.
From the late 1970s to 2018, China’s economy grew at an average annual rate of 9.5%, compared to just 2.8% for the global economy. In other words, for forty years, China doubled the size of its economy roughly every eight years.
After Mao’s death, Deng Xiaoping’s market reforms from 1978 provided a major lifeline for Western capitalism, granting it access to vast reserves of cheap labor. But this labor force was not merely cheap—it was also skilled, disciplined, healthy, and educated. This distinction is crucial.
Western imperialists assumed that capitalist restoration would eventually transform China into a liberal, neoliberal state and integrate it as a subordinate, compliant partner—just as they hoped Russia would become after the Soviet collapse. In both cases, however, those expectations turned into nightmares.
Why? The answer lies in history. Both Russia and China followed trajectories that set them apart from the backward, colonized regions of the Global South. The Bolshevik Revolution of 1917 abolished feudalism and capitalism in Russia, creating a planned economy—even if later in a bureaucratic, Stalinist form. Similarly, after 1949, China adopted much of the Soviet model. This history sharply distinguished them from South Asia, Africa, and Latin America, where capitalism and colonialism left deeper scars.
If cheap labor and markets alone explained China’s success after 1978, then why have no other Third World countries—with the exception of a few minor cases—achieved similar results? Which of these two factors, for instance, is missing in Pakistan? Theoreticians of capital have no real answer to such questions.
The truth is that despite inefficiencies and bureaucratic mismanagement, the state ownership and planned economy established after 1949 carried out tasks capitalism failed to achieve in places like Pakistan: land reforms, modernization of agriculture, large-scale industrialization, and technological advancement. The foundations of post-1978 growth were laid during Mao’s rule, including the creation of a skilled, literate, and healthy workforce, as well as the construction of massive economic and social infrastructure.
The early Five-Year Plans after 1953 were decisive. Thousands of factories and plants were built, enabling China to become largely self-sufficient in producing steel, electricity, vehicles, machinery and even aircraft. By the 1980s, China was still poor in terms of income and consumption, much like India, Pakistan, and Bangladesh, yet its social indicators—literacy, life expectancy and infant mortality—were already far superior, even compared to South Asian countries in 2025.
Leaving aside the past two decades, the Soviet Union’s earlier development far outstripped China’s. But both countries, thanks to these foundations, were able to maintain a degree of independence from Western imperialism, despite the damage of capitalist restoration.
That said, their paths diverged sharply after the 1980s. In Russia, the collapse of the USSR destroyed the Stalinist state. Under “shock therapy,” state assets were sold off in a frenzy of looting, producing a corrupt, mafia-style bourgeoisie of ex-bureaucrats and opportunists. The result was a parasitic, authoritarian capitalism with imperialist ambitions echoing the old Tsarist regime. Symbolically, Putin’s Russia restored the Tsarist double-headed eagle with crown and cross as its state emblem. National wealth was treated as private property, while Putin himself amassed an estimated fortune of more than $200 billion.
Beneath this, Russia has never fully recovered from the socio-cultural trauma of the Soviet collapse and the devastation of shock therapy. While Putin oversaw some recovery in his early years, the economy has long been stagnant and dependent on oil and gas revenues. Such resource-based economies may accumulate wealth, but they remain structurally weak—an example of the so-called “Dutch Disease.”
China’s path of capitalist restoration was quite different. Crucially, the Stalinist state survived and retained strong control over the economy. The last significant wave of privatization came in the late 1990s, when small, unprofitable industries were sold or shut down. The commanding heights of the economy—banking, finance and heavy industry—remained state-owned. These sectors were modernized and integrated into national development. To this day, China is the only major economy that still runs Five-Year Plans. State ownership and planning have played a central role in its growth—something rarely acknowledged by the mainstream economists.
But that is only half the story. Since the 1990s, the private sector in China has expanded rapidly and now dominates more than half of the economy. A new bourgeoisie has emerged, with over 800 billionaires and countless millionaires. Alongside this, corruption, inequality, crime, ruthless struggle for one’s own survival and exploitation have surged. The Communist Party has morphed from an ideological, political force into a vast managerial machine, overseeing and containing the beast of “state capitalism.”
It is true that the key levers of China’s economy remain largely under state control, but this contradictory arrangement is far from stable. The recent turmoil in the stock market and real estate sectors, Xi Jinping’s appeals to “common prosperity,” bureaucratic reshuffles, corruption crackdowns—sometimes even targeting major capitalists and officials who defy party-state directives—along with strict censorship and repression, all point to deep-seated contradictions that may become more visible in the future.
Despite its achievements, China still trails far behind Western imperialist economies in per capita terms. The gap is enormous: while US GDP per capita stands at roughly $80,000, China’s is only about $13,000 (and even on a PPP basis, it is less than a third of the US). To bridge this, the Chinese bureaucracy is aggressively expanding its global influence and resource access—yet some researchers argue that the resources required for China to “catch up” with America simply do not exist on this planet.
In comparison, Modi’s so-called “Shining India” is nothing more than a grotesque parody. Its growth statistics are wildly inflated, while the benefits for the working masses are negligible. This is a form of growth even more distorted than what Pakistan experienced under Musharraf. Inequality has surged to levels worse than under British colonial rule. As mentioned earlier, on one side, seven million upper-middle-class and wealthy Indians rank among the richest globally; on the other, 700 million people live in conditions worse than those of the poorest Africans. According to research by Indian venture capital firm Blume, one billion Indians cannot even think beyond basic survival needs.
The share of the richest 10% in India’s national income has jumped from 34% in 1990 to more than 57% today, while the bottom 50% has seen its share fall from 22.5% to just 15%. Can such a society remain stable without constantly stoking religious hysteria, superstition, and sectarian hatred?
Turning to BRICS: the original grouping included Brazil, Russia, India, China and South Africa, but has now expanded to Egypt, Ethiopia, the UAE and Indonesia, etc. Unlike Western alliances, however, BRICS is anything but cohesive. China accounts for nearly 20% of the world economy, India about 7%, while Russia, Brazil, and South Africa contribute only 3%, 2.4%, and 0.6%, respectively. Hence, economic weight, influence and levels of development differ significantly.
Moreover, most members do not enjoy cordial relations. India has long-standing tensions with China; contradictions persist between Russia and Brazil; and Iran remains in conflict with Arab states, etc.
Meanwhile, Western imperialism continues to dominate not just financially but militarily. The US dollar remains the backbone of global finance: involved in 90% of all currency exchanges, 50% of global trade, and comprising 60% of foreign reserves. The Chinese yuan, despite recent gains, accounts for only 7% of global transactions and 3% of reserves.
Behind this dollar dominance lies overwhelming military might. The United States maintains 750 military bases in 80 countries, while China has only four, with only the Djibouti base being strategically significant—though Beijing plans to expand. US weaponry remains the most advanced, and Washington spends at least three times more on defense than China. Despite rapid modernization, China’s military lags behind in both quality and scale, while Russia is even weaker. This is why both states largely avoid global military overreach, focusing instead on their own borders and regions.
Russia maintains 21 major foreign bases, mainly in Central Asia and Eastern Europe, plus Syria, and has recently expanded into Africa, with reports of bases in Burkina Faso, Mali, and Niger. These countries were until recently under intense French domination, but coups fueled by anti-imperialist anger expelled French troops. Yet these new regimes have no revolutionary programs to break with capitalism; instead, like Maduro in Venezuela, they lean toward China and Russia as “alternatives” to the West. Moscow has also deployed its infamous Wagner Group across the region.
This is a clear case of “the enemy of my enemy is my friend.” Still, sections of the left mistakenly present these alignments as proof of China and Russia’s “anti-imperialist” credentials. In reality, it is little more than a delusion.
Historically, the Stalinist bureaucracies of the USSR and China mercilessly instrumentalized anti-imperialist struggles to advance their own foreign-policy agendas. Today’s reality may be even more cynical: while China and Russia may offer cheap loans or aid to expand their influence, this does not mean they are free of imperialist ambitions. There is no such thing as a free lunch!
The same holds for the BRICS Development Bank, which, compared to the IMF or World Bank, is insignificant. Capitalist states that account for every penny of “development aid” are not philanthropic institutions.
For these reasons, given their internal contradictions and the wider crisis of global capitalism, alliances like BRICS are in no position to construct a new financial order comparable to Bretton Woods—not in the foreseeable future. The decline of the old imperialist powers and the rise of new ones is riddled with contradictions, and, as history shows, such transitions can be explosive.
The theory of imperialism builds on Marxist crisis theory and the world market. Monopolies can partially escape the equalisation of profit rates by enforcing prices above production prices, securing monopoly profits and temporarily avoiding the falling rate of profit. Yet monopolies remain unstable: they can be broken by more productive competitors, and on the world market fierce competition between dominant capitals generates its own “monopoly rate of profit”. Thus the law of value is modified internationally, as the tendency toward an average global profit rate is blocked by concentrated monopoly capital.
This produces uneven and combined development in (semi-)colonies. Certain sectors receive capital inflows and develop along international standards, while others stagnate because necessary goods must be imported at world-market prices. Trade deficits and debt force these states to devalue their currencies and to avoid inflation, rising interest rates undermining local industry and imposing austerity. Foreign investment increasingly integrates (semi-colonies) into global production chains, where most value is captured by monopolies in the imperialist centres.
Profit rates still differ significantly between imperialist countries and semi-colonies. Even in more advanced semi-colonies or raw-material exporters, unequal exchange operates through capital export, which drives distorted and uneven development. Following Lenin, capital export remains the key mechanism by which imperialist centres extract super-profits.
Lenin also adds a political dimension: monopolistic division of the world economy underpins a system of Great Powers that politically partition the globe. Economic dominance does not mechanically determine this structure; shifts in the economic weight of monopolies and states regularly clash with existing hegemonies. Such contradictions generate conflicts and potentially wars, leading to new divisions of the world—if capitalism survives the resulting global crisis.
Good Capitalism or Socialism?
The inherently unstable and crisis-ridden nature of capitalism is undeniable. Since the crash of 2008, even the staunchest defenders of the system can no longer ignore it. Yet, confined within the boundaries of capitalist ideology, they are unable—or unwilling—to look beyond its limitations. Many knowingly justify and protect this flawed and exploitative order simply because their livelihoods depend on it.
As Marx wrote on different occasions, capitalist crisis is a necessary expression of the fundamental law of capitalist development: that capital development constantly crashes into limits (TPRF, over-accumulation) that are produced inherently by capital itself – and can overcome only by massive destruction of capital to create a capital expansion on a new, extended level. This means that each round – between the crisis periods – capital develops productive forces on a higher level, capital accumulation proceeds with new quantity and quality, capital is more concentrated, etc. This also means that each time this systemic crisis gets deeper and more damaging for the whole society. Insofar there is no automatic breakdown – only the increasing necessity to get out of this “Economics of Ruin”.
Reformism, whether dressed up as socialism, anti-imperialism, or communism, suffers from the same limitations. Its inability to break out of the existing relations of production manifests in left- and right-wing variants, each offering excuses for the system’s repeated breakdowns. Reformists typically argue that capitalism itself is not the problem, only that it is poorly managed—that with a few corrections or balancing measures, it can function “fairly.”
We have already seen how neoliberalism was nothing but a vast imperialist project to address capitalism’s historic crisis, with catastrophic consequences for the majority of humanity. Yet many, especially reformist left currents and layers of the trade-union aristocracy, still dream of returning to the so-called “good capitalism” of the postwar decades. Their recipes for a “humane” capitalism usually include debt restructuring, anti-monopoly and anti-corruption measures, progressive taxation, stronger unions, or other variations of “managed capitalism.”
But this perspective rests on a fallacy: that the postwar golden age was created by enlightened governments with “good intentions” and “people-friendly” policies. In reality, the postwar boom was not the result of benevolent management but of historically high profit rates. Those profits allowed space for reforms and temporary class compromises. Moreover, the bourgeoisie of the advanced capitalist countries granted concessions largely out of fear—fear of revolution at home, and of Stalinism abroad.
Once those objective conditions disappeared, the consensus quickly unraveled. Reformists cannot explain why this “golden age” collapsed within just one or two decades, because they fail to grasp capitalism’s inner contradictions. What they denounce as the causes of crisis—monopolization, debt, deregulation, privatization, union-busting, tax breaks for the rich, etc.—are not accidents or malicious choices but necessary outcomes of a system strangled by the crisis of profitability. In the end, all reformism today is forced to peruse the policies to restore, or at least cushion, capitalist profits. The politics of left reformism thus finds itself devoid of any real economic basis, a fact reflected in the repeated failures of traditional and populist reformist regimes, one after another, across the world.
Marx, even in his youth, was clear that the contradictions of capitalism cannot be resolved within capitalism. If humanity remains trapped in a system driven by private ownership and profit, it will inevitably descend into barbarism, or worse, vanish altogether. Commodity production must be replaced with production for need—based on public ownership of the means of production and democratic economic planning. Only socialism can end the absurd contradiction of “poverty amid plenty” and “plenty amid poverty.”
Since 1820, global GDP has risen from around $1.63 trillion to more than $166 trillion in 2023—an increase of over 10,000%, or roughly a hundredfold. This astonishing growth reflects the immense development of the productive forces under capitalism. Humanity today commands levels of wealth and technological capacity unimaginable to previous generations.
Yet despite this historic advance, billions remain trapped in misery and want. Even in the advanced capitalist society, the daily struggle for survival grows harsher with each passing day, and the contradictions between people become ever sharper. Working people today stand more helpless and oppressed before capital than at any other point in history.
But humankind already possesses the productive forces that, if organized rationally, could transform the world within decades. With global planning under workers’ democratic control, we could multiply economic growth, eliminate unemployment, poverty, illiteracy, homelessness and preventable disease within years—while simultaneously reducing working hours and protecting the environment. Mature socialism on a global scale would end the daily struggle for survival, creating a society of abundance, prosperity and harmony. Freed from the chains of profit, humanity could turn its energies to the exploration and mastery of nature, and ultimately, the universe itself.
Adopted by the III World Congress of the ISL
