The supposed dynamism of capitalism, a system celebrated for its unrelenting drive towards production and accumulation, is now facing another unravelling of its contradictions. The mirage of a post-pandemic recovery has stalled, revealing a toxic brew of stagnating growth, persistent inflation, and an out-of-control tech and AI bubble: classic stagflation in action.
Stagnant growth and persistent inflation are no strangers to the current landscape, each feeding off the other in a vicious cycle. High interest rates stifle investment, curbing growth, while volatile energy and food prices – the latter exacerbated by capitalist-induced climate change – fuel inflation. The US, once modestly leading in global economic performance, is converging with its struggling peers[1]. The Financial Times has noted that corporate bankruptcies in the US have hit a 14-year high (although the vampire squids of the banking industry enjoy fat profits from elevated interest rates). Meanwhile, tariffs and austerity measures (packaged in Milesi terms as inefficient government spending cuts) are being implemented, though much of the talk, if not all as in the case of China, has been more about posturing than action. Either way, these policies threaten to disrupt the productive sectors of the economy with a sharp shock.
While the productive sector teeters, the financial world is caught up in a bubble-fuelled frenzy. This latest mania, described by the Financial Times (2 December 2024) as “the mother of all bubbles,” is driven by an insatiable appetite for tech and AI stocks: AI, of course, potentially being nothing more than the digital equivalent of a glorified Yellow Pages for the 21st century. The so-called “Magnificent Seven” is leading the charge – Microsoft, Apple, Amazon, Nvidia, Meta, Alphabet, and Tesla – whose soaring stock prices are reaching dizzying heights. Even smaller tech firms, like Reddit, have been swept up in the speculative wave, with Reddit’s share price surging over 530% since its March 2024 IPO: impressive for a company that only reported a profit for the first time in the third quarter of 2024 after almost two decades of operating losses.
America’s dominance in the global stock market has grown even more disproportionate. Today, the US controls nearly 70% of the world’s leading stock index, up from 30% in the 1980s, far exceeding its 27% share of the global economy. Much like dot.com in 2000 or mortgage securitisation in 2008, a crash on Wall Street could reverberate globally, sending stock prices into a tailspin and threatening to destabilise economies worldwide. However, the impact on the productive sector remains uncertain: it will largely depend on how exposed banks are to the tech bubble.
Much like previous financial manias, this bubble may be unlikely to survive much longer. Rising interest rates and shrinking corporate earnings may inevitably expose the fragility of this stock market rally, and when it bursts – possibly 2025? possibly 2026? – it will erase speculative wealth. This crash will be no deviation: it is the inevitable outcome of capitalism’s inherent contradictions, a system perpetually creating and bursting speculative bubbles in its insatiable pursuit of profit without social constraint.
The confluence of current events may well hit Ireland. The US has threatened a trade war with Europe, and given that the US is Ireland’s most important export market, the imposition of tariffs could deliver a blow to the country’s vital export sector. As Michael Taft astutely points out: “Disentangling ourselves from this concentration, however, will not be easy. It is the product of decades of past policy, deeply embedded in our industrial policy infrastructure, with a domestic sector unable to make up but a little of that slack.”
In the end, the writing is on the wall. The stagnation is going nowhere, the bubbles are expanding, and the inevitable crisis draws ever closer. Capitalism’s contradictions and the fragility of its system remain, as ever, the Left’s springboard to fight for a better future.
[1]Cullinane, Niall (2024) “Prospects for Capitalism in 2025” Socialist Voice website: https://socialistvoice.ie/2025/01/prospects-for-capitalism-in-2025/
