Adopted by the 10th Congress of the Freedom Road Socialist Organization
Introduction
The U.S. economy will continue to face at least three major headwinds in the next three years. The first is the continued relative decline of U.S. economic power as compared to the rest of the world in general, and the economy of socialist China in particular. Secondly, the fundamental processes of exploitation and the accumulation of capital are more likely to come to a head in the growing likelihood of a recession. Last, but not least, the economic costs of climate change will become more and more significant, even as the United States invests less in green energy.
1—The Relative Decline of U.S. Economic Power
(a) Post-World War II U.S. economic hegemony
In the middle of the post-World War II economic boom in the United States, the U.S. economy was 40% of global economy in 1960. But by 2025, the U.S. economy was less than 15% of the world’s total. This reflects the recovery of other capitalist countries, especially Germany and Japan, from the devastation of World War II, the rapid growth of capitalism of formerly colonized countries, especially in Asia and Africa, and the rapid economic growth in socialist countries, not only in China, but also in Laos and Vietnam.1
The United States, with Britain as a junior partner, set up international institutions to promote U.S.-led imperialist globalization in the wake of World War II. These included the Bretton Woods exchange rate system that put the United States Dollar at the center of the capitalist world’s currency exchange rates, the International Monetary Fund (IMF) to manage financial crisis, the World Bank to aid imperialist-led economic development, and last but not least the General Agreement on Tariffs and Trade (GATT), to institutionalize U.S.-centered free trade and capital flows.
(b) The relative decline of U.S. economic power
The first to fall was the Bretton Woods exchange rate system, which the United States pulled out of in 1971, which we use to mark the beginning of the era of the relative decline of U.S. imperialism. This led to the floating exchange rate system that dominates the world capitalist economy to this day. The decade that followed saw the Arab oil embargo of 1973, the panicked collapse of the U.S. puppet government in the southern part of Vietnam in 1975, and finally the Iranian Revolution in 1979. These were major defeats for U.S. imperialism. Severe economic shocks from the rising cost of oil changed the initial rise in inflation during the U.S. war in Vietnam during the 1960s into double-digit inflation in the 1970s. In addition to high inflation, the “long 1970s” from 1969 to 1982 saw four recessions, including two of the longest and deepest recessions in 1974 and 1981. The 1974 recession was marked by “Stagflation” or a period of rising inflation during a recession, an exception to the general pattern of inflation rates going down during recessions. The 1974-1975 recession drove unemployment up to a then-record 9%, only to be exceeded by the 1981-1982 recession where unemployment topped 10%. The rate of economic growth, measured by real GDP, fell from more than 4% in the 1950s and 1960s, to more than 3% in the 1970s, 1980, and 1990s, and then to barely 2% in the 2000s and 2010s.2
(c) Growing Economic Inequality
Another feature of the relative decline of the U.S. economy is growing economic inequality. In the post-World War II era the increases in the productivity of labor was shared between workers and capitalists because of the strength of labor unions, which peaked at representing 30% of the class and were not afraid to use their basic weapon of the strike.3
This period came to an end in the 1970s, when economic inequality began to rise as “the rich got richer and the poor got poorer.” This was fundamentally a class war by the monopoly capitalists against the working class.The 1980s saw a war on the labor movement, and a general reduction of social welfare that continues to today. The purchasing power of workers’ wages—that is, how much the average worker can buy given the level of prices—has fallen almost 1% in the last thirty years. While this is not large, it is a big change from the increases of the 1950s and 1960s. This has led to workers working more hours per year, and more households with at least two income earners.4
From 1980 to the present, the average value created by an hour of work in the United States has soared 83%. With the product that a worker creates in each hour of work going up, there is a growing gap between their wages and the product created by their labor. This means there is increasing exploitation of the working class, which has meant growing profits. These profits flowed to the monopoly capitalists who own most means of production, with the stock market hitting new record highs at the middle of 2025.
In addition to stagnant real wages, workers have been hit by increased use of part-time and temporary work, and recently the so-called “gig” economy that leaves its workers without stable pay and usually no benefits or unemployment insurance. This erosion of purchasing power and job stability has led to a growing number of strikes and unionization drives in recent years.
What this means is that 50-80% of working people (depending on the survey) are living paycheck to paycheck or are earning just enough to meet their needs. More and more households are borrowing to deal with day-to-day expenses. Consumer credit (which does not include mortgage debt) rose five-fold, from $1 trillion in 1995 to $5 trillion in 2025. A new form of borrowing, the “Buy Now, Pay Later” plans, have exploded as working people struggle to juggle their inadequate pay with rising prices.
More and more people with lower credit scores, mainly low and middle strata workers, are falling behind on their loan payments. More and more households are also “underwater” on their car loans, where they owe more on their loan than the car is worth, as the rising price of automobiles exceeded increases in incomes.
Trump’s tariffs fell the hardest on farmers among all businesses. Farm bankruptcies soared 46% in 2025 as compared to 2024. Family farmers were caught between declining export sales and prices as other countries, especially China, retaliated to Trump’s trade war. At the same time farm inputs such as fertilizer and machinery went up in price because of tariffs.
(d) Housing and homelessness
In the wake of the 2008 financial crisis, fewer and fewer households are homeowners. After peaking in 2005 at about 69%, home ownership in 2025 is now only 65.1%. African American homeownership is another example of economic inequality: at less than 45% it is almost 30 percentage points less than the 74% homeownership rate among white Americans. Soaring home prices are pricing more and more people out of homeownership and into the rental market, adding to the pressure for higher rents.
The housing crisis can be seen in the growing number of homeless. While the official government count is less than a million, considering the uncounted homeless—those that are couch surfing, living in their vehicles, or even at their workplaces—pushes that total closer to three million, or almost 1% of the U.S. population. Nothing shows the growing contradiction of monopoly capitalism in the United States like the homeless living on the streets and near freeways within sight of multi-million-dollar homes.5
(e) Opposition to U.S.-led imperialist globalization
The decline of U.S. economic supremacy can also be seen in the growing opposition to U.S.-led imperialist globalization that devastated millions of workers in the United States while increasing the profits of the monopoly capitalists. Here in the United States this exploded with the 1999 “Battle of Seattle” that effectively shut down the World Trade Organization (WTO) conference there. Internationally this could be seen in the 2005 breakdown of the Doha round of tariff reductions when developing economy countries, led by India and socialist China, walked out over the United States refusal to discuss their agricultural subsidies which violate WTO rules.
(f) U.S. retreat under Trump
President Trump’s “Liberation Day” tariffs in April 2025 on almost every country in the world (and a few places without any people) marked another stage of relative economic decline. By placing double digit tariffs on every country—allies and adversaries alike, including Canada and Mexico, which just signed a new Free Trade Agreement during Trump’s first term—meant the decisive end to the U.S.-led, multilateral trading system embodied in the World Trade Organization that succeeded the GATT in 1995.
Trump’s attempt to wage a trade war on the rest of the world met firm opposition from socialist China, the world’s largest economy. As China retaliated to Trump’s April 2 tariffs tit for tat, the Trump administration drove tariffs on imported goods from China to a record high of at least 145%, with even higher tariffs on some appliances, electric vehicles, solar panels, and other goods. But the U.S. government finally had to agree to a mutual reduction in tariffs once China imposed export restrictions on rare earth metals that are widely used in automobile manufacturing and other industries.
Trump’s trade war on the world threatens to ignite a round of inflation in the United States. Not only will the tariffs lead to higher prices, but also domestic manufacturers will take the chance to raise their own prices. Domestic steel prices are already went up by more than 15% in the first half of 2025 following the 25% tariff imposed by Trump (which was later raised to 50%). The first signs of higher inflation were seen in the Producer Price Index (PPI) report for December, 2025.6
Trump’s war on immigrants is also another way to try to wall off the United States economy from the rest of the world. More rapid economic growth in the United States in the last few decades as compared to the other monopoly capitalist economies of Europe and Japan was largely fed by more immigration and higher population growth. In the short term, Trump’s efforts to actually reduce the immigrant population through mass deportations can disrupt productions and fuel inflation. But in the longer run it can slow economic growth and actually increase unemployment among the American-born as many immigrant workers fill key occupations in industry.7
(g) U.S. economic cold war with China
China’s socialist economic model is becoming more attractive to other nations and peoples of the world. China’s GDP, using PPP, was already larger than that of the United States. China is leading in transportation, in miles of high-speed rail, and production of electric autos and buses. China is also a leader in green energy in terms of solar energy and wind turbines, as well as communications, from quantum communications to the roll-out of 5G cellular service. China’s space program is making steady progress and is racking up several firsts, especially in the exploration of the far side of the moon. China’s financial system is the first to roll-out a Central Bank Digital Currency (CBGC), while the United States and other capitalist countries are lagging behind, as this would cut into financial corporations’ profits. While socialist China has been able to eliminate extreme poverty, economic inequality and homelessness continues to grow in the United States in good times and bad.
The U.S. government clearly sees China as the main threat to the empire, and labels efforts to restore U.S. economic leadership as combating China. The United States’ economic cold war with China is not without costs to the U.S. economy. Trump’s tariffs on Chinese goods will fall hardest on lower and middle income workers who spend most of their income on goods. U.S. bans on Chinese battery buses and steep tariffs on solar panels have slowed the fight against climate change. Meanwhile, the United States emits 60% more CO2 per person than China and the transport sector accounts for 38% of U.S. emissions in comparison to 9% of Chinese emissions.
Ironically, Trump’s trade wars and imposing tariffs of 15% or more on the rest of the world is likely to accelerate China’s role as the main trading partner of more and more countries. Even before Trump took office, China surpassed the United States in trade with all the countries in Africa, almost all the countries in Asia (except for Israel and Jordan), most of South America, and almost all of Eastern Europe. Trump’s trade war will lead to the United States fencing itself off from the rest of world economically, accelerating the decline of U.S. technology and particularly its application.8
2—Recessions and Depressions
The Marxist perspective is that recessions are an inherent part of a capitalist economy. What Marx called “crises of overproduction” are a result of the fundamental contradiction of capitalism, between the social character of production, where masses of workers in large capitalist firms have superseded independent small businesses, and the private character of appropriation, by a small number of capitalists.9
One of the signs that the capitalist economy had become dominant in the United States over the earlier period of primitive accumulation based on chattel slavery of Africans and the genocide of Indigenous peoples to seize their land, was the first recorded recession in 1857. Since then, there have been 34 recessions in U.S. economic history, or on average a recession every 5 years.10
The rise of monopoly capitalism, or imperialism, intensified these crises of overproduction. The growth of finance capital and debt increased the likelihood of financial crisis. While financial crises are not the cause of recessions, they can make them much worse. The Great Depression in the United States began with a recession during the summer of 1929, then the stock market crash in October, followed by the first wave of bank failures in 1930. By the time that the economy hit rock bottom in 1933, there had been two more waves of bank failures, unemployment was about 25%, and prices had fallen 25%.11
Under monopoly capitalism, the growth of the state is a result of growing military spending to wage imperialist war, more social welfare spending to fend off the revolutionary impulse of the working class, and government borrowing and spending as well as control of interest rates to try to combat depressions. These policies were justified by the economist Keynes, who sought to ensure the survival of the monopoly capitalist system.12
But despite the Keynesian policies adopted by the New Deal in the 1930s, it was only the massive military spending of World War II that pulled the U.S. economy out of the Great Depression. While Keynesian policies have reduced the frequency of recessions—from once every four years before World War II, to once every six years afterward—it has required more and more doses of Keynesian “medicine” in the form of deficit spending to overcome each crisis.
The 2008 financial crisis was even greater than the financial crises of 1929-1933. Massive deficit spending (the greatest since World War II), zero interest rates, and bailouts of financial and manufacturing corporations were needed for the economy to recover. The recession of 2020 required even more spending and zero interest rates, and the economic expansion since then has only been maintained with Federal Government borrowing and spending now approaching $2 trillion per year, about 6% of GDP.13
These crises opened the minds of many people in the United States, especially youth, to the fact that capitalism was, in fact, a fundamentally flawed economic system. The Occupy Wall street movement that arose in 2010, and then the Bernie Sanders campaign for President in 2016, reflected this and a mass interest in socialism.14
One of the problems with Keynesian policies is that they require a larger and larger U.S. government debt. Right now, interest payments on the debt are greater than the military spending of the Department of Defense. The higher level of debt is already being used to institute austerity for working people by cutting Medicaid, the Affordable Care Act (Obama Care), and food stamps.15
Our view is that another recession is increasingly likely over the next four years (if it has not already begun by 2026). The ability of working class households to maintain their spending is nearing its limit, and at the same time the accumulation of capital is being disrupted by Trump’s trade wars and higher tariffs. The total accumulation of capital is more and more dependent on the massive spending on data centers and infrastructure for Artificial Intelligence or AI. What is not so clear is how AI is going to increase profits, making possible a bust like 2001 where the collapse in internet-based companies in 2000 and their capital investments triggered a recession.16
Unlike the recessions of the last 50 years, where the inflation rate fell with each recession, there are also economic forces that are tending to push up prices. This phenomenon, of rising unemployment and rising inflation or “stagflation” was last seen in a major way in the 1974-75 recession that was part of the economic and political crisis marking the beginning of the relative decline of U.S. empire. Trump’s tariffs have already started to push up the inflation rate for goods that are imported or more broadly, use imported parts. Trump’s war on immigrants is causing shortages of labor and starting to show in the prices of immigrant-dependent services such as elder care. The AI boom is pushing up employment in the short run, but in the medium term is more likely to replace white collar jobs and require few workers to maintain. At the same time AI demand for power is already driving up the price of electricity in local areas, adding to the general “affordability” crisis, especially in rural areas where most new large data centers are being built.17
Already, many local governments and schools, and even some states are starting to trim their spending as the economy and tax revenues slow. At the Federal level, the DOGE employment cuts as well as the cuts to Medicaid and food stamps add to weaker government spending and employment. Employment at nonprofits, which are heavily dependent on government funding, is also sliding.
A future recession could be worsened by political opposition to more stimulus from the Federal Government, which will be borrowing trillions more to pay for Trump’s tax cuts. The Federal Reserve’s concerns with inflation being caused by the much higher tariffs (15-20% vs. 0-5% before the second Trump term) would limit it in fighting a recession.
Another development that that could spark a future financial crisis is the growing role of so-called cryptocurrencies. These are pure speculative assets with no use aside from criminal activities. New laws such as the 2025 “Genius Act” allow even more widespread use of cryptocurrencies and the growth of so-called “stable coins” that function like money and banks. While satisfying the libertarian ideal of an alternative to government currency, it has neither the backing nor guarantees that the U.S. dollar and banks have. But given the massive donations of crypto firms to the Trump administration, it is likely that the tech bro billionaires will receive more bailouts when their crypto dreams crumble. This will protect them from their own greed but not help working people or the economy at all.
3—Climate Change
Already the economic impact of climate can be felt in certain industries, such as agriculture, home insurance, and housing prices. Not only is the impact of climate change on the economy accelerating, but as each year passes, there is a growing likelihood of the quantitative change (global temperature increasing) turning into a qualitative change (or what climate scientists refer to as a “tipping point”) that could have a major impact on one or more of the world’s major economies.18
One major cost of climate change is natural disasters fueled by climate change. Since 1980, there have been an average of nine natural disasters each year that have cost at least $1 billion. But the pace is accelerating, and in 2024 there were 27 such disasters, or three times the forty-plus year average. These costs totaled more than $180 billion in damages in 2024, almost three times the average of $65 billion.19
The vulnerability of communities is most acute in the Black Belt south, along the Rio Grande valley in the Chicano Nation, the Lakota lands in South Dakota, and Native Alaskan lands. The vulnerability of the lower Appalachia region is also very high. In addition, island colonies such as Puerto Rico also face higher vulnerability due to climate change and their colonial status. Their vulnerability, and that of all but the wealthiest communities, will only increase as the Trump administration winds down or even ends FEMA, the Federal Emergency Management Agency, putting more responsibility on state and local communities. Recently over a hundred FEMA staffers signed a letter to Congress saying that the staffing cuts and lack of experienced leadership made a Katrina-like disaster more likely.20
But the cost of climate change is not limited to the areas directly affected by natural disasters. Property insurance companies are jacking up premiums, limiting coverage, and even pulling out of some areas altogether. Utilities are raising rates at an accelerated pace. Housing prices in some neighborhoods are falling because of rising sea levels. While the wealthy can afford to move, protect their properties, or just pay the higher costs, working class and poor people are being forced out of their homes.
One of the industries most affected is agriculture. Since 2020, grocery prices have been volatile, rising 30% overall. Climate change-induced drought in Texas has led to higher feed costs, which has then induced higher beef costs, soaring 50% from 2020-2024.
While the the United States invented the first practical solar cell in the 1950s, application stagnated under the free-market Reagan administration in the 1980s. Today the Trump administration is shutting down green energy projects. Trump’s “Drill, Baby, Drill” slogan and his attempts to revive the use of coal, the most polluting of all fossil fuels, will cement America’s position as a leading per-capita carbon polluter. The Trump administration is also promoting nuclear (fission) power, leaving aside the decade or more time to build out nuclear power plants, the radioactive waste problem, the fact that nuclear fission is the most expensive way to produce electricity.21
Trump’s rollback of support for solar and wind energy and promotion of even more fossil fuel extraction will be felt acutely by Native communities and disproportionately impact Native reservations. A major challenge to Indigenous sovereignty is exploitation of energy resources. The United States routinely violates treaties to exploit the natural resources on or near reservations. Some examples include the Dakota Access Pipeline, uranium being transported across Navajo (Dine) land, liquefied natural gas (LNG) facilities on Puyallup land, oil drilling on Alaskan native land, the Red Hill bunker fuel leak in O’ahu, and many others.
Despite certain sections of the monopoly capitalists subscribing to outright climate change denialism, a larger section of them see widespread crisis on the horizon and are investing or cutting losses accordingly. We expect that these developments, and climate change overall, will alter and open new terrains of struggle for our movement to strike blows against our enemies.
4—Conclusion
The relative decline of the U.S. economy, and the most dramatic blows to the Empire in the past forty years, shows that the short period of relative resurgence of the United States in the 1990s is over. While it is more difficult to see the path ahead, a few economic trends are clear.
The post-World War II era of U.S.-led imperialist globalization is over. With the U.S. resorting more and more to economic wars with Iran, Venezuela, China, and now Russia, it is increasingly clear that U.S.-led globalization was meant to facilitate domination by the United States and other imperialist countries. The U.S. dollar has come under increasing pressure as additional countries try to free themselves from U.S. financial domination—in fact the dollar decline in the first half of 2025 was the greatest since the first year of Nixon’s second term in 1973.
The U.S. ruling class will try to shift the burden of U.S. economic wars onto the backs of American workers and other oppressed people. Thirty years of relatively low inflation are giving way to a period of higher inflation, with many similarities to the 1970s.
The concentration and centralization of capital mean giant corporations and monopoly landlords are displacing small businesses and landlords at an accelerating pace. This is restricting economic mobility through small businesses and homeownership. More and more people are seeing through the myth of competitive capitalism to the reality of more monopoly corporations.
Resistance is also growing, some spontaneous and individual. Others are organizing through unionization drives at major corporations such as Amazon and Starbucks.
Our job, now more than ever, is to direct the anger of the masses over growing economic pain toward the monopoly capitalist class, and to raise the level of struggle for socialism.
Notes
1. The shares of world economy are calculated using Gross Domestic Product (GDP), using Purchasing Power Parity (PPP) terms. PPP is a way of comparing economies considering that the same product can have different prices in different countries. Because prices are generally higher in the United States than in China, comparisons of GDP using exchange rate values will show the United States as a larger economy. But in PPP terms, the Chinese economy is significantly larger.
Note that the PPP adjustment was formalized in 1968. While the 1960 percentage was based on exchange rate basis, the gap between PPP and exchange rates were smaller in 1960 than today because of the fixed-exchange rates under the Bretton Woods agreement, and because developing countries were at a much lower level of economic development at the time.
2. Real GDP is GDP adjusted for inflation. Higher prices will increase GDP which is measured by market prices. But this is not actual economic growth, just everything costing more. So economists adjust for inflation to arrive at “real” GDP.
3. The post-World War II period was a time of improving living standards for most workers in the United States. This was done by a relatively high rate of unionization and stronger labor laws and social welfare programs such as unemployment insurance, social security and medicare for the elderly and disabled, and medicaid, food stamps, and AFDC (cash aid) for lower income households. While this time is referred to fondly by many social-democrats, this period did not lessen the economic inequalities for oppressed nationalities or for women.
4. This class war has seen ebbs and flows—there have been some victories for the working class such as growing unionization of public sector workers, and the expansion of government health insurance under the Affordable Care Act or Obamacare. But the general trend has been a retreat for the power and economic status and stability of workers, and the two areas of gains are the focus of renewed attack by the second Trump administration.
Furthermore, while the increase in womens’ participation in the paid labor force was a step towards equality for women, it also reflected the increasing exploitation of labor so a household had to work more hours to maintain their purchasing power.
5. School districts count about one million children who are not living in their own home. Adding siblings not enrolled in school and a parent or two, this easily comes to another million people, for a total of three million homeless people.
6. The Bureau of Labor Statistics, PPI report for December 2025 stated that producer prices rose 0.5% in December (a 6.2% annualized rate) and 3.0% for the 2025 (the core rate excluding food, energy and trade services was up 3.5% for the year).
7. For example, in housing construction, immigrants are a large portion of roofers and laborers. To the extent housing construction slows because of shortage of these immigrant workers (one cannot build and sell a house without a roof!), this will impact the employment of U.S.-born workers in construction.
8. While recessions are called “crises of overproduction,” there is both a demand side and a supply side to them. Recessions are a result of contradiction between two fundamental characteristics in a capitalist economy. On the one hand the exploitation of labor, which limits the ability of workers to consume, and on the other the accumulation of capital where the profits from exploitation are reinvested in more and newer capital, increasing the ability to produce.
9. https://www.visualcapitalist.com/cp/how-china-overtook-u-s-in-global-trade-dominance-2000-2024/
10. This is another example of how changes in the economic base (the primacy of capitalism over slavery) was then followed by a struggle for control of the superstructure (the government) that led to the Civil War.
11. While it would seem that falling prices would be good, as your dollar is able to buy more, in fact in a prolonged deflation, where prices in general must fall,means falling wages (which are the price of labor power) and business income. This leads to more and more defaults on debt, which can (and did) lead to a financial crisis.
12. In addition to government borrowing and spending to prevent recessions from turning into depressions, Keynes also worked out how to finance imperialist war during World War I, and played a key role in establishing the post-World War II Bretton Woods currency system.
13. The judgment that the 2008 financial crisis was worse than 1929-1933 was made by former chair of the Federal Reserve, Ben Bernanke. Bernanke was an economist who did research on the financial system during the Great Depression.
14. Sanders is, in fact, a social democrat. Many of his proposals dovetail with Keynesian reforms and the 1930s New Deal. But such electoral efforts have often been a starting point for activists who end up adopting Marxism-Leninism.
15. Total military spending, including the entire Veterans Affairs budget of $340 billion and billions more in the Department of Energy that goes to nuclear weapons, is much larger than just the Department of Defense budget.
16. https://www.bbc.com/news/articles/cr57p2ve8glo
17. https://www.credaily.com/briefs/ai-data-centers-reshape-rural-america/
18. On the one hand, a recent study estimated a 62% of at least one tipping point happening by 2100, which would mean very little chance by, say, 2030. On the other hand, most estimates of the impact of climate change have underestimated the future impact. Some of the possible “tipping points” would include collapse of the Atlantic current warming Europe, melting of the Antarctic ice sheets, melting of the permafrost, etc.
19. Data from the National Centers for Environmental Information (NCEI). However because of “evolving priorities, statutory mandates, and staffing changes,” this data will not be updated for 2025 or later years according to the NCEI web site.
20. NCEI map of socioeconomic vulnerability, 2024 (see footnote 19). This includes both the risk of economic costs from climate change and the communities’ ability to prepare for and respond to these risks. Further, DHS, which oversees FEMA, has said that all expenditures over $100,000 must be approved by Secretary Noem, which has slowed spending for recoveries following natural disasters.
21. While the cost of producing electricity solar and wind have been falling for the last 15 years and today are the lowest cost way to produce electricity, nuclear power costs have been rising, with nuclear being the most expensive (not counting natural gas peaker plants which are only used occasionally). Source: https://www.lazard.com/media/eijnqja3/lazards-lcoeplus-june-2025.pdf – Lazard is an investment bank.
