Capitalist Future: Trade Wars and Shooting Wars

USA— The Trump administration recently announced new tariffs (import taxes that raise prices) on steel and aluminum, and others on imports from China. These taxes will sharpen conflicts between US capitalists and those of other countries, who will fight back.

As they often do, politicians claim that these taxes will provide new jobs in the US. This is simply a scam. Similar tariffs in 2002 cost over a hundred thousand jobs in the US, because US industries like auto and aerospace had to pay higher costs for their materials.

Escalating fights over trade are common under capitalism. They can lead to real wars. Under communism conflicts like this can never happen.

In communism, there will be no trade. There will be no nations, no borders and no nationalism or patriotism. Nothing will be produced for sale. Everything will be produced collectively wherever this can be done best and sent to wherever people need it. Sharing, not exchanging this for that, will be the basis of the world economy.

Under capitalism, however, the drive for profits determines everything. From the1980s until about 10 years ago, exports and imports were expanding quickly, about 6% a year, growing faster than the world economy as a whole. The capitalists increased their profit rate by exploiting workers more intensively.

The corporate profit rate peaked in the late 1990s, and a number of trade agreements were made to lower tariffs and resolve disputes. This was the era of rapid globalization. The big capitalist powers embraced “free trade”—that is, low tariffs.

Since the “Great Recession” of 2007-2009, the growth of world trade has slowed a lot. World trade is only growing about 3% a year and the US corporate profit rate has been falling.

Only about 12% of US corporate profits are due to foreign trade, but rivals to US capitalists are in line for big profits in trade. The European Union has a much larger share of world trade than the US and their trade is growing faster.

China’s current trade is smaller than US trade, but China is making enormous transportation investments in many countries. Their One Belt and Road project plans huge spending on land and sea transportation infrastructure that will increase their trade with South Asia, Europe and Africa. China now has a workforce more than twice as large as the US and EU combined, and their economy is growing fast.

Free trade works for national capitalist states when the capitalists’ profit rates are rising. All the big players can gain from a bigger pie, even if that pie is sliced very unequally. Then globalization looks good. The most powerful capitalist economies will be the strongest boosters of “free trade.”

However, the US is now a declining power relative to world capitalism. Rival capitalists have grown larger. China is rising, gaining in economic and military power. Although “free trade” is still the dominant ideology of the big capitalist powers, the opposite view—called “protectionism”—is growing.

The Trump administration is raising tariffs and threatening to scrap trade deals like NAFTA, even if this means sharpening contradictions with long-time allies and with China. This is the desperate strategy of a declining power trying to prevent further decline. The same could be said for “Brexit” in the UK.

The political expressions of this strategy are nationalism and populism, the false ideas that the miseries of the capitalist system in each country are due to immigrants and foreign powers. The Trump campaign and right-wing movements in the UK, France, Italy and elsewhere are built on the big lie that racist attacks on immigrants benefit other workers.

These movements are the early stages of full-blown fascism. Workers who are fooled by them help declining bosses increase their profits, increasing their exploitation of the whole working class.

Many governments are still trying to lower trade barriers. The EU completed free trade agreements with both Canada and Japan at the end of last year. Japan, Canada, Australia, New Zealand, Mexico, Malaysia, Vietnam, Peru, Chile, Brunei and Singapore have ratified a Trans-Pacific Partnership agreement without the US.

In the US, however, some big-shot economists see globalization as over. They are backing high tariff policies.  Liberal Democrats like Bernie Sanders are supporting Trump’s protectionism.

With or without protectionism, the US can’t prevent its further decline. The 20th century experience of two world wars shows what happens next. Rising powers demand more and declining powers won’t let get go. The results are not just trade wars but big shooting wars.

The march toward war and fascism can only be stopped by destroying capitalism with communist revolution. Join ICWP and help do it.

Front page of this issue