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Leaders around the world increasingly worry about the next capitalist recession (or economic downturn) now looming globally. In Europe’s strongest economy, Germany, a recession has already arrived in all but formal naming. U.S. manufacturing has declined for the last two quarters. Negative interest rates (where lenders pay borrowers to safely make a loan) are an increasingly widespread sign. Another sign is that lenders charge higher interest rates for short-term vs. long-term loans because they fear an impending recession will make borrowers’ ability to repay riskier in the short term. Anxieties about safety reflect the sense of an impending economic crash.

Problem Is Capitalism

Trump is perhaps the most worried among world leaders fearing recession. Having made the economy a central issue for his re-election effort, he needs the U.S. economy to be in “great” shape. He repeats the few statistics available to support such claims. Yet Trump’s fears of a looming recession and its possible consequences for his 2020 re-election are also evident. He recently branded the man he made chair of the U.S. central bank, Jerome Powell, an “enemy” like the leader of China. Powell’s refusal to cut interest rates drastically – a classic tool to slow or postpone a recession – was Trump’s target. Trump recognizes, as other leaders do, that their political futures hinge on the next recession: on when it hits, how bad it gets, and how long it lasts. Recessions have always haunted the leaders of countries where capitalism is the prevailing system.

The basic cause of current and past downturns in capitalist economies is the system itself. It has been plagued by and subjected its people to the plague of cyclically recurring economic downturns for the last 250 years. They happen on average every four to seven years, although particular conditions of time and place can occasionally make the period longer or shorter. They happen wherever in the world the capitalist system came to prevail. As that prevalence became global, so too have the cyclical downturns. Bottom of Form

Market capitalism has mechanisms of self-healing alongside the mechanisms that make it sick. Those who live in capitalist systems repeatedly suffer through both mechanisms so long as that system prevails.

Profit-driven market capitalism has mechanisms and incentives that generate growth but also repeatedly produce imbalances in the supplies and demands for inputs and outputs. Those imbalances cause price movements that eventually and adversely affect profits. Capitalists then cut back their investments resulting in the unemployment and reduced production that comprise and define recessions and downturns. The downturns offset the initial imbalances enabling capitalism’s cycle to repeat.

The recessions are thus not instances of market failures nor instances when markets function imperfectly because of government interventions. Rather, recessions and downturns are how market capitalism “corrects” the imbalances it also causes. In other words, market capitalism has mechanisms of self-healing alongside the mechanisms that make it sick. Those who live in capitalist systems repeatedly suffer through both mechanisms so long as that system prevails.

Capitalism’s downturns hurt political leaders’ careers because of their effects on the well-being of the masses of people. Widespread losses of jobs and businesses mean many mortgages go unpaid and homes get foreclosed. Parents cannot pay for children to finish higher education. People forego needed medical care leading to later, more costly treatment. Stresses from lost jobs and incomes strain family relations often to breaking points. As all levels of government suffer reduced tax revenues, budget deficits and public debts rise and public services decline just when they are needed more than ever because of the economic downturn. Popular dissatisfaction at downturns and all their effects usually spills over to dissatisfaction with politicians and parties in power when they occur.

Capitalist downturns also provoke thoughtful victims and observers to ask two questions: Why does it happen and what might be done to stop it from happening? Will those questions extend to asking why this system reproduces such downturns so recurringly throughout its history everywhere? Will the process of answering include a discussion of the systemic nature and causes of downturns? Will capitalism itself then become a target for criticism? Might that lead to the really big question lurking in such criticism: Can we do better than capitalism with a system that does not have or need recurring downturns?

Most political leaders of countries where capitalism is the prevailing system know, consciously or not, that their job descriptions include a commandment: Thou shalt not challenge or even question capitalism as a system. Instinctively, self-preservation drives them to find and focus public attention elsewhere. Plausible other, nonsystemic causes need to be defined and denounced. If needed, suitable scapegoats – notably those that have proved useful in the past – need to be blamed. Thus, Trump focuses attacks on the Federal Reserve as the short-run scapegoat (its failure to drop interest rates as far and fast as Trump wants will “cause” recession). Likewise, he attacks Democrats and mass media for exaggerating recession risks purposely to bring the recession that will undermine Trump’s re-election.

Similarly, Boris Johnson in the U.K. blames the recession looming there on the European Union (EU), on a delayed Brexit from the EU, on immigrants, and the other usual targets and scapegoats for his Conservative Party. Likewise, many other European leaders follow suit, blaming existing or looming recessions on immigration, on U.S.-China economic warfare, on Brexit, and so on. Much the same leadership patterns appear elsewhere.

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It is important to notice how leaders carefully, consistently avoid any critique of the capitalist system and its internal structure for generating yet another economic downturn in its long, long history of doing that repeatedly. That absence speaks very loudly once you note it. The lack of a systemic critique soon becomes routinized. The public is, in effect, trained to see only the external, conjunctural conditions of, and influences, on economic downturns. The taboo applied generally to systemic critique in capitalism then covers the public discussion of capitalism’s regular, socially disruptive and immensely costly systemic instability.

Instead of systemic critique, we often get overheated debates over alternative policies to limit, contain and moderate recessions. Conservatives generally have wanted to limit government countercyclical intervention in the economy. They favor minimalism and monetary actions (changing interest rates, quantity of money in circulation). Liberals and social democrats favor larger government interventions with a focus more on fiscal policy (changing taxes and government spending). Thus today, Trump hammers the Fed to get lower interest rates but waffles on a large infrastructure spending program that Democrats prefer, for example.

Far less important than the details of these debates is their shared function. Both sides keep the public from discussing the systemic causes of recurring downturns. Both sides avoid any discussion of systemic change as a logical part of a rational response to the latest or impending downturn. However nuanced or mathematicized the professional economics literature on countercyclical policies, like the popular discourses, it too, keeps system change off the agenda for discussion, let alone policy analyses or prescriptions.

Rarely, a few debaters defensively acknowledge that systemic causes and changes might belong logically in the discussion of capitalist downturns. But doing so, they assure their audiences, would be simply “unrealistic.” That is because monetary and fiscal policies fall within what politicians can do, while system change does not. In short, “realism” is their defense for the limitations they place on their studies of and responses to capitalist downturns. But that defense fails. Why and how is it “realistic” to limit public and professional debate and discussion to policies that never end or stop the problem they purport to address?

In the U.S., every president since at least Franklin D. Roosevelt promised the American people that he would not only end the capitalist downturn his administration faced, but also that his policies would make sure such downturns would not afflict succeeding generations. No president could or did keep that promise.

Current Democratic candidates for president, including Elizabeth Warren and Bernie Sanders on the left, have not yet gone beyond the combination of fiscal and monetary anti-recessionary policies captured under the phrase “New Deal.” While proposals for a Green New Deal address environmental as well as anti-recessionary needs, they once again hesitate to go beyond them to propose basic system change.

Genuine “realism” would admit those policies’ failures and open the public and professional discussion of capitalism’s recurring recessions to systemic critiques and solutions involving systemic change.


Richard D. Wolff

Richard D. Wolff is emeritus professor of economics at the University of Massachusetts, Amherst. He is currently a visiting professor at the New School University in New York City. His work is available at and at

Republished from Truthout with the author's permission.