The case has been made -- Ecology and Class Struggle I -- that the service class in the US and elsewhere is currently engaged in a revolutionary struggle to delineate and institutionalize a vital, new social contract to "govern" the age of climate-change mitigation that now lies before us.
Further, it is stated that in the US (obviously, a key player in global affairs), the service class displays such powerful savvy and networking capacity that -- through the course of the revolutionary uprising in 2020 (upon George Floyd's murder) and the elections that followed -- it attained dual power with corporate neoliberalism.
Additionally, it is argued that the American State now endeavors to crush white supremacy, a strategic correction that will run its full course and eventually impart reparative justice in the nation.
Finally, the US will also tackle climate change while boosting unions, domestic infrastructure and American jobs.
Dual Power
While the Biden Administration's Build Back Better (BBB) plan is strong in many regards, it nevertheless lacks the clarity of true, service class science and vision. Accordingly, Biden stumbled out of the gate in some areas (on immigration limits and suspending Big Pharma's intellectual property rights on vaccines) but, under pressure of progressive forces, corrected himself. This reflects the dual power reality at the base of his administration.
Dual power -- a situation in which two classes with clashing strategic interests share real political power -- is inherently temporary, and, often, it is unstable. But in our present case, the dual power of the Biden Administration is the first sign of restored stability after the years-long, mounting crisis that led to 2020's revolutionary tipping point. Though inevitably transitory, today's emergent dual power is good enough (and about all that could be expected) for this moment, good enough to get the nation started in a new direction. And because infusive BBB spending is going to spur the economy, dual power is likely to spawn and entrench key elements of the coming social contract. More immediately and crucially, it is fueling the hunger of today's living generations to break with the corporate culture and the neoliberal politics that has brought civilization to the brink of total collapse.
Revolt Upends Corporate Cultural Hegemony
Biden, remarkably (IMO), is proving himself a capable spokesperson for the multigenerational "cultural revolution" now unfolding in American public affairs. In all modern, industrial nations, paradigm shifts of this order occur every 80 years or so as the last generational adherents of an old, fraying social contract die off (Strauss and Howe, The Fourth Turning (1997))…just as the mounting dissonance between the old order and emergent necessities forces a society-wide re-examination of social values and goals. In such times, nations re-galvanize and elevate a "Gray Champion" to embrace, chart and institutionalize the kind of social contract necessary to liberate society and allow its renewed advance.
Clearly, Biden and his people realize that he is positioned to be the Gray Champion for this era's historic turn. He -- like FDR, Lincoln and Washington before -- is going to do whatever he -- and, by extension, the popular movement that put him in office -- thinks must be done to marshal forces and defeat our national calamity.
Class Struggle Inside
Yet, within the generation tide for which Biden now so ably speaks rest two, distinct sets of class interest. Within his Administration, the service class -- a collective body of working people with real human needs -- presses demands to sustain life in a teetering, endangered, post-industrial world while, at the same time, impersonal, corporate power -- by default as well as manipulation -- pursues, as always, its innate, drive for profit, whatever the social and ecological cost for the world's people and other living things.
Eventually, this conflict -- this dual power -- must be resolved. No society remains on the "pins and needles" of revolutionary transformation forever.
Social turnings of today's scale are years in roiling fomentation, but, eventually, they bubble over, as in 2020, in stupendous culmination. Then, they spill out and flow, ever so slowly but rightly, into a final period of legal codification and institutional restructuring. In another decade, all is resolved.
American experience (Strauss and Howe, Generations: the History of America's Future, 1584 to 2069 (1991)) indicates that the transformational spirit that now grips our culture will abate soon after the 2028 election, and we will generally make do (in the mitigation era beyond) with whatever social contract we construct between now and then.
Global Dimension
Nor is this social contract going to be, merely, an American one. Because the US is the world's remnant, imperial superpower and because of its prominence in core realms of civilization's contemporary political economy, the American resolution of this turning has out-sized implications for resolution of the worldwide socioecological crisis, a crisis that cannot be resolved in any single nation, nor one nation at a time.
Both the social justice and climate mitigation agenda are global endeavors that can succeed only if they are undertaken everywhere, in one collaborative endeavor, sooner rather than later.
Given this necessity -- and because wealth and access to investment credit go hand-in-hand, yet are highly concentrated in the global North (that is, in Europe, Japan and, especially, the US) -- the power of financial corporations has become the central issue in the future of our world's civilization.
Anti-Bank Populism
In all modern societies, distrust of banks is deep-rooted and long-held. Savers -- people and businesses -- have persistently looked to government to regulate banks and to protect deposits when banks fail. Banks, like most private business ventures, like to minimize public interference. Reacting to the last great wave of anti-bank populism (early in the 20th century), the banking "industry" (as it was known in the Industrial Age) managed and kept scrutiny to a minimum by creating central banks -- endorsed by governments but run by the industry -- that, in theory, placed their vast gold reserves at the government's disposal (eventually at Ft. Knox) in exchange for a perpetual, open-ended, interest-earning, private lending agency conducted in the government's currency and subject, if necessary, to government regulation (see Federal Reserve Act of 1913).
Thus, central banks, themselves, are structures of capitalist class rule that took shape in the turn-of-the-century merger of industrial and bank capital. Ideologically, central banks perpetuated the myth that the gold held by private banks was (is) the foundation upon and the only reason that such banks can lend. In fact, of course, it was the public's practical acceptance and the government's official endorsement (per the Constitution) that makes the system of US currency and credit viable.
The "regulate, if necessary" part of the Federal Reserve Act became crucially important in the Great Depression. Taking office in 1933, after almost four years of deepening economic collapse under the previous administration, FDR believed the government had to spend a lot of money to grease a revival of the nation's stalled economy. Tapping British economist John Maynard Keynes for advice, he played a trump card by calling a bank holiday and, then, reopening with the announcement that the US dollar and its creation/investment would no longer be constrained by the gold reserves of the banking industry. Instead, the government, henceforth, would spend as many US-backed, paper dollars into the domestic market as it wishes, but none of them, in a complete break from past policy, could be converted into gold. A few years later, in 1939, the wisdom of FDR's decision was proven ten-fold by the sudden need to fund a huge surge in domestic production to fight World War II.
Bretton Woods Steps Back
As that war came to its end in 1945 and believing, no doubt, that it faced an existential struggle with communism, Western capitalism strangled any possibility of international, anti-bank populism at Bretton Woods when today's international financial machinery (the International Monetary Fund (IMF), World Bank and Bank of International Settlements (BIS)) was set up. Instead of letting go, entirely, of the pre-war tradition of requiring gold in international payments, the US saw the possibility of using the leverage of its massive gold reserves to force its post-war, anti-communist allies into subordinate financial status.
Dominating the proceedings, the American delegation decreed that while the US dollar, in theory and alone, would be convertible at a fixed rate to gold, henceforth, all Western trade would be settled only in paper US dollars. As time passed, however, and as Europe's and Japan's economies strengthened through the Sixties (when the US mired itself in the wasteful Viet Nam war), the requirement that these nations dump their strengthening currencies for weakening dollars (to make international payments) produced a schism between the US and its allies. Threatening to demand actual gold for their dollars, Japan and Europe forced then-President Nixon, finally and formally, to renounce the gold standard in its entirety in 1971. Today, gold means nothing in currency, credit or international exchange. Nothing.
Expropriation of Capital
The decision to take the world off the gold standard was, in fact, an act of expropriation of finance capital by the State. Capital went along with -- even encouraged -- the shift because there was no other way, and, of course, the US government was already (seemingly permanently) under the effective control of capitalist interests. Even among the era's financial barons, the traditional, seamless relationship between the state-created but privately-operated Federal Reserve and the public US Treasury -- both generally led by Presidential appointees who had trained on Wall Street -- disguised the expropriation as a mere tweak in "business as usual." Thus, while settling the international exchange problem (with a fully-fiat, global currency market), the official end of finance capital's formal claim on the dollar left the State in full, practical control of the dollar, thereby made a public asset whether understood and acknowledged or not. Despite this underlying expropriation, finance capital continued its age-old practice of making profit by extending credit in the public's name and with the State's blessing.
Unleashed Inflation Spurs Reagan Revolution
Nixon's decision to take the world off the gold standard occurred at a time when the dollar was stretched thin by a fully employed economy fighting a war in Viet Nam while advancing the social programs of LBJ's Great Society at home. With aggregate demand exceeding available labor resources, inflation let loose. By the end of the 70s, it was a serious problem, a major factor in the "Reagan Revolution's" 1980 election win.
When mainstream and liberal economists of the 70s could not master inflation, they opened the door for a revival of austerity politics and economics, soon to be known as "supply side" and "trickle down." As Reagan put it, "Government is the problem." He slashed government spending on social programs and broke the union movement's power to press wage and benefit demands in the private economy. Inflation rapidly fell into line, but tightening production turned next into recession. To re-boot the economy (ahead of his first mid-term election), Reagan pumped vast sums into an arms race with the Soviet Union and a spat of local wars in the Caribbean and Central America. To suppress resistance in black and brown communities, he launched the war on drugs and built prisons for mass incarceration.
Market Forces Ascendant
Throughout his two terms, Reagan avoided financial system tinkering, preferring to let it run its course with little public oversight. Meanwhile, public sector retirement funds grew into massive market players while most traditional (union-affiliated, mostly) pension funds weakened and were jettisoned for individual retirement accounts, pulling a growing number of Americans into reliance on market investments yet with more limited market power than ever. Through the 80s, corporate stocks and bonds absorbed several severe shocks as millions of investors, large and small, adjusted to mounting competition and uncertainty in domestic as well as international markets.
The advent and steadily widening influence of financial markets established both the terrain and a vital cutting edge for the inevitable re-examination of economic theory and financial practice that the postwar age of service-based production required. Freed of gold and empowered to manage the economy, one particular strata of service providers -- financial forecasters, economists, portfolio managers, bank analysts, etc. -- suddenly had a big job to do.
Those in the establishment -- at the big banks, global investment funds (Vanguard, etc.) and the Federal Reserve -- adapted slowest, perhaps, because their existing positions of power and streams of flowing revenues dispelled any ramifications of their ignorance.
Service Class Political Economy Crystalizes
Those who reacted most nimbly fell into two groups, both rooted in the cultural criticism of "the Sixties" that was led by the Boom generation. On the one hand, young, Boomer economists and MBAs who'd gone into finance after college and were responsible, now, for managing other people's money (in corporate positions or, increasingly common, in their own ventures) needed to know, for real, how money works, or their service would fail. On the other hand, young radicals who were turning to academic careers in economics and finance (after the movements of the 60s died down) also wanted to know how the system works so they could properly educate the next generation of problem-solving activists.
Ultimately, Warren Mosler, a self-made American wealth manager, and Bill Mitchell, an Australian professor of economics, uncovered and explained the new truth that, indeed, money -- with the end of the gold standard -- had fully transformed into a public asset. As they explained, fiat currency, created solely by the government, enables a nation's economy by the government's mere act of requiring individuals and other entities to pay taxes in its currency. The tax requirement ensures that people will seek currency-paying jobs, thus allowing the government to provision itself (with willing workers) and forging a means (markets) by which, throughout a nation, labor can be exchanged for the goods and services needed for life.
The founders of Modern Monetary Theory (MMT), as it's now known, observed the key fact that, in systems of fiat currency, the government creates money and spends it into the economy before anyone in the economy can pay taxes or lend to others.
For this reason, MMT asserts, the government never runs out of money, and it doesn't actually need to tax or borrow. It can pump as much money into the economy as it wishes, subject only to how much labor is available. Inflation will occur only when all labor is fully employed. Once there's full employment, more government spending will spark competition for limited labor and drive up its price, though without spurring any increase in overall production.
That's what causes inflation, but generally, in normal times, with population persistently tending to expand, employment is less than full. Yet, it is an unfortunate, continuing belief (and practice) of mainstream economists (and their financial boosters) that balanced Federal budgets or, even, surplus budgets, are useful to ensure the unemployment necessary to avoid any risk of inflation…and, following this advice, American administrations and the Fed long ago decided it is best simply to keep a permanent strata of Americans unemployed. The long failure of neoliberal politicians from Bill Clinton to George Bush to Barak Obama to address this basic, anti-worker bias -- even as they pursued policies that moved a huge wave of jobs out of the country -- fueled public resentment and led to Trump's 2016 election.
COVID Outflanks Neoliberal Caution
Despite such retrograde "conventional thinking," the financial and economic pressures of the COVID pandemic forced all governments, including the US, into deficit spending at levels not seen since WWII. Within the Biden Administration, some officials wrung their hands, fearing inflation and standing by a hugely cautious approach. They presumed -- as has been standard practice since the Republic's founding -- that the government's deficit would be "funded" by selling bonds to return dollars held in the private sector to the US Treasury. As these new government bond obligations will someday have to be settled, the banks (and their investing partners) want to be sure that future dollars are worth as much as the ones they're using today to buy the bonds. Fearing inflation more than anything, these traders discourage further government spending that might lead toward real full-employment and, thus, the danger of inflation beyond.
"Neoliberalism" is the name for the political thinking that, today, promotes the fiction that the US actually has to borrow from the banks to fund its operations and, therefore, must maintain unemployment to protect bank lenders of these funds against inflation.
In contrast to the neoliberal tip-toers, most Biden Administration financial advisors are pushing him to take the risk. Inflation, today, is virtually non-existent, and unemployment has gone off the chart. If ever there was a time to engage the risk of overheating the economy, this is it. Pressure is rising from every corner of Biden's agenda as issue advocates (from the service class) demand as much government spending as necessary to put Americans to work on all aspects of today's mushrooming social and ecological crisis.
Paradigm Shift in Macroeconomics
MMT is a paradigm shift, not only in macroeconomic and financial thinking, but also in politics and culture. By acknowledging and specifying the State's purpose, power and role in creating and maintaining a functioning, fair economy, MMT demands a transparent and democratic administration of the public's currency in service to the public's interest.
Currently, in the US and worldwide, governments do not overtly recognize, nor accept MMT's inherently service-class demand for a national, publicly-debated and democratically-adopted social investment program that ensures and advances full employment, social justice and ecological salvation.
Yet, while avoiding or rejecting MMT, today's governments -- including, still, the Biden Administration -- tolerate continuing, unsupervised, private bank credit extension, irrespective of national and global objectives. The President and the Treasury need to crimp the Fed's self-aggrandizing "independence" to bring strategic, socioecological realities into full consideration in matters of federal credit and the nation's money supply.
This means finally and publicly acknowledging the empowering insight of MMT and the real, practical, revolutionary, financial remedy that public, fiat currency provides for the difficult mitigation era ahead. Dual power will come to its end when the service class finally dispels neoliberalism's false claims and enshrines a new epoch dedicated to effective social investment of the public's currency for the public's sake.
When two major American parties compete for federal office on the basis of their plans for social investment, progressives may proudly declare the advent of "socialism with Service Age characteristics." If generational cycles are an accurate guide, we'll be there within a decade and that includes restructuring global political economy along the way.
Subjective Factor Leaping
The objective conditions of and for a socialist world already exist, most crucially in the form of State-ownership and direction of each nation's sovereign money supply, including the capacity to create and spend credit as willfully as the government wishes, subject only to inflation risks once full, global employment is achieved.
But, the subjective factor -- general human consciousness -- still lags because finance capital (via the governments and central banks under its sway) effectively misrepresents financial realities to protect and extend its own profit-oriented prerogatives.
With MMT's insight, the end of the road for social and political domination by the financial elite is now in view. Today, while advancing the crucial cause of social justice and ecological salvation, the service class also is refuting and attacking neoliberalism's big lie and its traditional financial power.
The service class has achieved dual power. Now, it's time to finish the job, and put Capital in its proper, subordinate place relative to Labor and all working people.
Steve Clark
Social Science
Alvin Toffler: The Third Wave
Frederick Engels: Origins of the Family, Private Property and the State
William Strauss & Neil Howe: The Fourth Turning: An American Prophecy
Helen Fisher: Anatomy of Love: A Natural History of Mating, Marriage, and Why We Stray
Marvin Harris: Cannibals and Kings: The Origins of Cultures