The Collapse of American Capitalism

As the decisive political year 2026 begins, the source of our national angst is becoming clearer. It’s nothing less than the collapse of American capitalism. Our peculiar brand of extreme, unregulated, self-promotional,science- and engineering-free, over-the-top capitalism is collapsing of its own weight, not to mention its many contradictions. The discontents and depredations of President Donald Trump’s incipient despotisms are mere symptoms of that dread disease.

Before you click out, consider this. China, which will clearly own our new twenty-first century, is now, by far, the world’s foremost capitalist nation. It’s a robust example of state capitalism. There a vast array of private firms has free reign to produce things and make money, subject to strict regulation by the state in its interest. That simple subjection to government control makes all the difference.

China’s great industrial firms are beating ours, Europe’s and even some in Japan in productivity, price and more recently quality. They are nearly all privately owned and privately run and therefore “capitalistic” in every sense. In this respect, they resemble the robust private firms of postwar US.

After WWII, private industrial firms in our country gave us and the world an astonishing series of innovative products and services. They also vastly expanded our productive and military power. But they were then subject to a legal regime of strict regulation in the public interest, the national interest, and the interest of common sense. Our antitrust laws, unlike now, were then actually enforced. This was the regulated capitalism of FDR and his immediate successors.

Names alone are deceptive. China calls its single ruling political party the “Chinese Communist Party” (emphasis added). But China’s economy today has nothing in common with the clumsy, top-down state control of the entire economy that failed so miserably in the Soviet Union and ultimately caused its economic collapse. In that economy, clueless state commissars would determine, more from political tracts than from data and markets, how many shoes and cars to produce. Even in today’s sorry Russia, Vladimir Putin has abandoned that failed system for a clumsy, mostly private and independent kleptocracy.

As I outlined in a much earlier essay, China’s state control of its many robust capitalists has more in common with China’s own ancient “Mandarin” system of local political and social control than it does with the failed economic systems of Russian and Eastern European Communism. (In some respects China’s ancient Mandarin system resembled our own state-by-state “federalism.”) American propagandists’ continual derogatory reference to China as a “Communist” nation simply misses the mark. They confuse formal titles with reality, a reality they consistently refuse to face. China is beating us at our own capitalist game, and they, like wizened witches of old, fall back on curses and imprecations to turn the tide.

China’s so-called “Communist Party” is, after all, a nation-within-a-nation. Over 100 million strong, it’s larger than modern Germany. So China is now the world’s—and human history’s—leading exemplar of state capitalism, i.e., capitalism strictly regulated and controlled by the state in the public interest. And the state, although now (unfortunately) ruled by a single man (Xi Jinping), is administered by a vast so-called “Communist” bureaucracy much larger than our own. To enhance this divergence, Trump is busy making our own bureaucracy ever smaller.

But I digress. The subject is the collapse of our capitalism, here in the US. The signs and symptoms are everywhere. I will mention just three.

The first is “financialization.” Vast sectors of our national economy, and vast legions of workers, are now engaged in careers that can only be described as pushing paper for the purpose of making money without producing anything tangible, or, for that matter, any non-financial service like fixing your car or computer, building a house, or cleaning your teeth.

A prime example is the so-called “private equity” firms that have exploded in number and wealth since the turn of the century. They buy up everything from local radio stations, houses and apartments, to rural hospitals, then load them with debt to finance the purchase. Later, if they don’t kill them outright by driving them into bankruptcy, they sell them for a quick profit while squeezing their local management, workers and customers for cash. The raped firms they leave behind soon wither, decline or die, or they succumb to a later wave of financialized consolidation.

A second example of financialization is the stampede to cryptocurrencies, including the President’s own. Crypto purports to offer a digital replacement for money. But do we really need one when the Internet, credit cards, and online services like PayPal and ApplePay have already brought digital speed and convenience in finance to virtually every type of transaction? The only extra “benefit” of crypto that I can see is secrecy—a thing most valuable in fields of “commerce” like bribery, drug-running, gun-running, laundering money from crime, and secret financial speculation. Who but financial speculators with inside information needs a currency that fluctuates like tech stocks?

In 2006, Richard Nixon’s data man, Kevin Phillips, published a book that everyone concerned about our national future should read. Its title, American Theocracy, is misleading. Only one of its three sections is about the rise of evangelicals in American politics. The most important and probably least-read section concerns so-called “financialization.” It describes in detail, and with available historical and statistical analysis, how the financialization, in turn, of Holland, Spain and Britain brought their respective globe-spanning empires down from global economic power and influence to their present low-influence senescence.

Holland, Spain and Britain are still around and still mostly democratic. But anyone who thinks the exact same aging process isn’t happening to our nation, just as Phillips predicted but at Trump’s trademark Warp Speed, hasn’t been paying attention.

The second clear symptom of economic decline is a dismal crash in the rate of real innovation. What do I mean by real innovation? Loosely speaking, I mean innovation in tangible things or products, not just software. Although a useful tool, software is not “innovation” in any field of science or engineering that I know. It’s just an automated and therefore faster way of performing experiments or implementing and organizing business and administrative ideas. Or, as in the case of Uber, it’s an automated way of capturing (for bosses) workers’ gains in efficiency by simple logistics or by exploiting instantaneous market trends, such as charging higher fares when there’s greater consumer demand for a specific route.

During the late nineteenth and the last century, we Americans made or rapidly adopted most of the innovations that make our modern world. They include electric lighting, airplanes, electric grids, voice recording, broadcast radio, antibiotics, television, high-altitude flight (with pressurized cabins), rocket ships for space flight , digital computers, transistors, chips full of tiny transistors, minicomputers, microcomputers/PCs, MRIs, CAT scans, cells phones, smart phones, genomic medicine, and now “designer drugs” conceived by computers analyzing possible chemical compounds.

Yet since Apple introduced the first smart phone nearly twenty years ago, I can’t think of any physical invention (except perhaps genomic medicine and designer drugs) that we Americans produced or rapidly adopted that is remotely comparable in economic potential to any of those in the previous paragraph. All that we have introduced—and we have done so massively, with astronomical levels of investment—is more software to run the machines and systems that we already have. We have made no major breakthroughs in physics, chemistry, biology, medicine or related engineering. (Practical exploitation of the strange physics of quantum mechanics is still years away.)

More important, the software stuff that we have produced has many undesirable side effects. They include: the destruction of our trusted media, the rise of social media and the decline of belief in common facts, the greatest political divide since our civil war, and a concentration of wealth unseen in America since the First Gilded Age, which brought us the Great Depression. Perhaps the most important software innovation is the advent of AI, but that is a decidedly two-edged “advance,” as discussed below.

The third and final symptom of the collapse of American capitalism is the main subject of this essay: promo. Call it “promotion,” “marketing,” “advertising,” “public relations” or what you will. It’s the process and the technique of persuading people—be they customers or voters—to want, buy and do things they otherwise wouldn’t want, buy or do. In the social and political sphere, it’s better known as “propaganda,” but it’s basically the same thing. Viewed honestly, it’s the art and science of getting people to believe things that just aren’t so and thus to do things not in their own interest, but in the “information” providers’ business, financial, political, personal, or practical interest. It’s the modern art of public deception and persuasion in all its forms.

The first thing to know about promo is that, in most cases, it involves no direct benefit or any efficiency gain. The dismal presidency of Donald Trump is both a product and an extreme exemplar of promo. Take, for example, the informal name of his recently prized legislative achievement: “The One Big Beautiful Bill.” What does it do? The promo name suggests that it does everything necessary all at once. It’s like the title of that manic hit movie “Everything, Everywhere All at Once.” Even the bill’s staid, formal title provides no further information. It’s “An Act to provide for reconciliation pursuant to title II of H. Con. Res. 14.”

In fact, the bill lowers taxes on the rich and reduces government regulation, thus moving us back toward the over-the-top, unrestrained capitalism that produced the Robber Barons and led to the First Gilded Age and the Great Depression. The Congressional Budget Office estimates that the bill will, by 2034, increase the national deficit by $2.8 trillion while raising incomes of the highest 10% of earners by 2.7%, due mainly due to tax cuts, and lowering incomes of the lowest 10% by 3.1%. So it would rob the poor to make the rich richer, while vastly increasing an already swollen national debt. With an effect like that, it makes good sense to have a promo title that sounds good but conveys no real meaning.

It gets worse, much worse. The Internet’s original promise was to put the sum total of human knowledge and information at the fingertips of every person on the planet. Now that “human knowledge” is degenerating into rampant promo in virtually every sphere, with disinformation and lies rising in volume to rival true stuff. Let me give an example.

In the Internet’s early days, the Boolean search logic that every computer nerd knows was supposed to let consumers find any product they needed in seconds. For example, if you wanted a six-inch, adjustable, curved crescent wrench made of aluminum, not iron, you could type the following in search engine’s search field: “crescent wrench” and (“curve” or “curved”) and “adjustable” and “six-inch” or “6 in.” and “copper” but not “iron.” In the Internet’s early days, your search results would match all those criteria and appear in order of the closeness of their matches. Today, due to the “miracle” of promo, your search results are mostly useless because they appear in the order in which vendors of wrenches have paid the search engine to prioritize their products. The result is like going into a hardware store, asking a clerk for the wrench you want, and having her point to the tool department and say “Go look!”

All this promo must do something for the vendors because they pay for it. (Although common sense says this all may be a commercial stampede, there must be some data that keeps vendors paying.) But for the customer this promo stampede reduces all the power of the Internet and digital computers to next to nothing. They might as well not have been invented. And this conclusion holds without regard to the numerous product ads, often winking and blinking in full-motion video, to distract your attention from the search results themselves.

In theory, the advent of AI could provide a cure. Most AI engines now provide honest answers to search requests for specific products or services, often with useful supplementary information. And since AI engines are more powerful than simple search engines, their results can be both more precise and more useful, as well as promo-free.

But how long will this advantage last? In my experience, most AI engines are free of charge. (The only one yet to insist that I pay was Anthropic’s Claude, and then only after I tossed it some pretty sophisticated legal queries.) Yet news media tell us that AI providers are investing hundreds of billions, if not trillions, of dollars in vast data centers and the means to power them, in what seems the biggest financial stampede since the dot-com and 2008 bubbles.

How can this state of affairs continue without massive advertising and promotion—even under-the-cover slanting of results—invading the “pure” logic and utility that AI mavens are touting now? Pretty soon, runners in the AI stampede are going to have to start showing financial results before the bubble bursts. And the most likely source of money is more over-the-top promo. I can already visualize results of serious scientific and legal inquiries appearing surrounded by blinking videos of nude pole dancers singing catchy odes to expensive cars, scotch, wristwatches and ladies’ handbags.

This is not the capitalism of the railroads, the automobile industry, the airline industry, the pharmaceutical industry or even the early movie and television industries. It’s the capitalism of a self-indulgent, self-regarding, under-educated, over-egoed and exploitive computer/financial class that has no clue about physics, chemistry, biology, engineering, medicine or the histories of successful human societies. It’s a recipe for the most rapid decline of a successful capitalist democracy in human history.

Enter China. Not only does it have the second (to India) largest population of any single nation on Earth. Not only are its literate people generally imbued with the discipline of having had to learn humanity’s most complicated written language. Not only is its misnamed “Communist Party” a huge, struggling meritocracy of people imbued with patriotism and national fervor, derived in part from a 75-year rise from abject poverty and disorder to the “world’s factory” and soon the world’s research laboratory.

The essence of today’s China is a vast state-capitalist nation, ruled by smart, practical leaders (many of them trained as engineers) whose main motivators appear to be not their own private wealth, but their nation’s advancement. If you’d ask me to compare the leadership of China’s elite with the “leadership” of our tech-bro class and the likes of Elon Musk, I’d say there isn’t even a contest. Intelligence, experience, practical knowledge, genuine scientific curiosity and real patriotism beat ego, self-regard, self-aggrandizement and self-enrichment as useful character traits and motivations every time.