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Updated on April 17, 2014

the SHUTDOWN : its APPARENT cause

The USA, world's number one economy, and the most advanced capitalist state of the world underwent this year (from October 01 to October 16) what is known as a government shutdown (partial), a most intriguing phenomenon, which no other nation is known to have gone through to date. Apparently, it seems to have its origin in the Republican opposition to the Affordable Care Act (ACA) aka Obamacare. This Obamacare that seems to be President Obama's pet health care project is supposed to do a lot of good to the American poor and thus strengthen and widen the political-support base of the Democrats. The Republicans should not like or relish all this, and so it is quite intelligible that they would try their uttermost to thwart every bid to implement it. As they were the majority in the US House of Representatives, the House Republicans refused to pass the US Budget 2013-2014, which action of theirs was aimed at blocking the passage of the President's Budget proposals through the US Congress and thus depriving the President's pet project of necessary funds unless their demand that its implementation was deferred was met. But Democrats including President Obama adamantly stuck to their stand.This led to the shutdown. Nevertheless, this happens to be, to my way of thinking, the apparent cause for the shutdown. The real reason lies elsewhere.

four POINTS not to be MISSED

In order to comprehend the real reason for the shutdown at issue, you must first take note of the very fact that the USA is a capitalist state. Then, you have to comprehend the fact that the survival of capitalism presupposes the existence of an ever-expanding market. Another important point not to be missed in this regard is that capitalism is a commodity economy. And a fourth point, a most important one, is what I view as a basic law of the commodity economy by which wealth accumulates in a few people's hands.

WHY an EVER-EXPANDING market? WHAT's wrong with a STABLE market?

I believe that the market must always expand in order to ensure the survival of capitalism because a stable market means zero growth in the job market, which means the section of the workforce rendered redundant as a result of the growth in labour productivity* which is the result of technological advancement are left with no other choice than to join the ranks of the jobless and swell the army of the poor and down and out. But the swelling of the army of the poor leads to the contraction of the market because the swelling of the army of the poor (i.e. people with lesser purchasing power) means a fall in demand for commodities with which the market must shrink. And with the shrinking market, capitalism is bound to cease to exist. As the technological advancement is a constant process, capitalism cannot continue to exist unless its market keeps on expanding constantly.
[*Growth in labour productivity means less labour (or fewer labourers) for a given amount of work.]

the BASIC LAW of commodity economy

Commodities consists of goods and services meant for sale, and selling is meant to reap profits. And again commodity prices are determined by laws of supply and demand. If the demand for a commodity goes up, the more the difference between demand and supply grows, the higher the price of the commodity moves, and the bigger grows the profit it yields. As the supply and demand figures of different commodities are different, different commodities yield different amounts of profit. This shows that economic inequality is an expression of the commodity economy. A high-demand commodity sells at a premium to yield high return. As a result, sellers of high-demand commodities amass huge wealth while sellers of other commodities just look on. This shows that the accumulation of wealth in a few people's hands expresses a basic law of a commodity economy, hence capitalism because capitalism is a kind of commodity economy.


Thus, in a capitalist economic system wealth accumulates, by what I view as the basic law of capitalism, in a few people's hands. But the accumulation of wealth in the hands of the few implies, because the sum total of the wealth of a nation is always limited, the pauperisation of the multitude, which means a big fall in the purchasing power of the multitude, hence a big decrease in the demand for commodities. And with a decrease in the demand, the market contracts. Thus, the accumulation of wealth in a few people's hands leads to the contraction of the market. But the contraction of the market means the collapse of capitalism. It so happens because a fall in demand implies the piling up of unsold goods, consequent on which a section of the labour force is rendered redundant and laid off. With the laying off of the redundant labour, the market contracts further, which leads to further lay-off, and thus a chain reaction sets in, as a result of which capitalism meets its end in the end. From the communistic viewpoint, this is the inevitable outcome of the internal contradiction of capitalism.

The contradiction in question is defined as the opposition between the essential condition for the survival of capitalism, namely the existence of an ever-growing market, and the basic law of capitalism which makes the market shrink. We communists view it as the internal contradiction of capitalism, and we also view it as insoluble as it happens to owe its origin to a basic law of capitalism.

HOW does capitalism MANAGE to SURVIVE? WHAT is WELFARISM meant for?

Put in short and simply, capitalism is unable to continue to exist without an ever-growing market. But, by the basic law of capitalism, wealth accumulates in a few people's hands while the rest are left penniless. This phenomenon leads to the contraction of the market. And with the contracting market, capitalism is bound to die a death eventually. In order to prevent this eventuality, the capitalist State steps up with various welfare schemes and programmes, viz. income-redistributive taxation and subsidisation of goods and services, free education, free health care, unemployment dole, et cetera, et cetera. The welfare spending creates artificial demand with which the market not only stops shrinking but starts growing as well and this way prevents capitalism from dying out. In order to make sure that the market keeps on growing, not only must the capitalist State continue with its welfare schemes and programmes, it must also introduce new and new such programmes.

The fact of the matter is capitalism would cease to exist without welfarism. The Republicans just fail to see this point.


The plain truth is if theStates stop subsidising education, almost 100 per cent American girls and over 90 per cent American boys would drop out. Then, who would fight to defend America's freedom, and with whom would America continue the war against terror? It's simply impossible to survive the 21st century warfare with an army of the illiterate, isn't it? No education subsidy would mean, as I view it, no defence, hence the disappearance of America from the world atlas. This incontestably establishes the thesis that welfarism is not an act of generosity on the part of the State but a compulsion on the State. In order to get an idea of the weight of welfarism in the US economy, hence in respect of the very existence and survival of the USA, you only have to run your eyes over the long list of numerous welfare schemes and programmes in operation currently in the USA. And you ought not to miss in this regard the following points, either.

According to an estimate, around 89 per cent of all the American elementary and secondary school students attended free public schools in 2009.1 In 2011, the USA spent a total of $595.1 billion (as against $602.6 billion spent in 20102) on the education of American boys and girls of the public elementary and secondary schools3 and the average per-pupil spending figure was $10,5603 (as against $10,615 in 20102). Did parents of those students (i.e. 11% of the total American elementary and secondary schoolchildren) who attended private schools in 2009 bear the full cost of their kids' education? The answer is perhaps a straight no because, as I've heard, in America both the public educational institutions and the private educational institutions (including the profit-making ones) receive funds from both the federal and state governments as well as the US taxpayers (funds provided by the American taxpayers are known as 'taxpayer subsidies').

According to a study (published in 2011) by American Institute of Research and Nexus Research and Policy Center, each American student earning a bachelor's degree at a public college or university received over $60,000 in subsidies (known as 'Taxpayer Subsidies'), which figure rose substantially and reached 'nearly $110,000 in the most selective public institutions.'4 It also says that these figures 'reflect the amount of money colleges and universities receive in direct government support and tax breaks. They do not include loans and grants provided by state and federal governments to help students meet tuition costs.'4 It obviously follows from the foregoing that the actual cost of obtaining a bachelor's degree from public institutions is far higher than the cost figures cited above and that without 'taxpayer subsidies', 'loans and grants' from the federal and state governments, an American's dream of obtaining an academic degree would turn into a mirage.

In the USA you must meet many an American that cannot afford a home. The US Department of Housing and Urban Development runs a programme known as Public Housing Program which is meant to make federally subsidised low-rent homes available to the American poor and down and out.

The US Department of Agriculture (USDA) runs the National School Lunch Program which is a 'federally assisted meal program' and aimed at serving 'nutritionally balanced' meals (breakfasts, lunches, and after-school snacks) to millions of American children daily. Meals served under this programme are mostly either free or nominally charged. A packet of lunch costing $3.10 is charged at only 40 cents (i.e. about 13 per cent of the full cost) now (i.e. for July 2013 through June 2014).5 The USDA also provides funds for Special Milk Program, Summer Food Service Program, and Special Supplemental Nutrition Program for Women, Infants, and Children, all of which are meant to afford poor American children and adults adequate food and nutrition, and spends millions of dollars every year for this purpose.

Some other worth-a-mention federal and state-run welfare programmes aimed at helping American single moms and their kids and other needy Americans with food, clothing, and other necessities, in addition to financial assistance, day care assistance, etc are Temporary Assistance for Needy Families (designed to help you with cash assistance and food stamps meant to help you buy food at subsidised price), Child and Adult Care Food Program, Supplemental Nutrition Assistance Program, Youth Education and Training Activities programme, et cetera, et cetera.

The Affordable Care Act of 2010 is the latest federal health care project designed to make health care affordable for all Americans under 65 and make sure that they have adequate health cover. The US federal government also runs three more health care projects. They are Medicare, Medicaid, and Children Health Insurance Program (CHIP), 'Medicaid and CHIP provide health coverage to nearly 60 million Americans, including children, pregnant women, parents, seniors and individuals with disabilities.'6 A very proud achievement of the USA is its per-capita spending on health care, which happens to be the highest in the world. The American per-capita health-care spending figure was $8607.9* in 2011 (higher than last year's $8232.9* ). Nevertheless, around 45.9 per cent* of this, or $3954.2* (as against last year's $3966.7*) was government spending.

['$' stands for PPP int. $. * Source: WHO Global Health Observatory Data]

America is recognised as the wealthiest country, in terms of the size of GDP, of the world. In 2012 the USA with a GDP worth around $15.69 trillion ranked first (while China with a GDP valued at about $8.36 trillion was ranked second) as per the World Bank's data. But being the wealthiest country is one thing, being a country of wealthy citizens is quite another thing. That not all Americans are wealthy is a fact, which is manifestly corroborated by the very many welfare projects and programmes referred to and described above. The high value (0.477* in 20127) of America's income gini index suggests that wealth distribution is very unequal in America. Naturally, the question that should occur to every sensible human is, what percentage of Americans deserve to be reckoned truly wealthy?
[*According to the US Census Bureau's yardstick, the value 1.0 of gini index denotes absolute inequality where the gini index 0.0 stands for no inequality.]

According to the US Census Bureau stats, only 4.5 per cent US households' per-household earnings were equal to or above $200,000 in 2012 (Table A-1; Income, Poverty, and Health Insurance Coverage in the United States: 2012). Were the Americans that belonged to those 4.5 per cent households truly wealthy? According to the US President, the wealthiest in America make up only '2% of Americans'8, and they consist of only those Americans that have per-capita income per annum over $250,000.8 In order to make these '2% 0f Americans' pay 'a little more' tax and extend a lot of tax relief and tax credits to the rest (i.e. the American non-wealthiest that have per-capita earnings per annum not over $250,000 and make up 98% of Americans ), the US Congress, yielding to President Obama's insistence and Democratic demand, gave its approval to the creation of a new federal law, namely the American Taxpayer Relief Act 2012, in January this year (i.e. 2013). The tax relief and tax credits (viz. the Child Tax Credit, the Earned Income Tax Credit, and the New America Opportunity Tax Credit) in question are meant to help those 98 per cent of Americans spend a little more for the well-being of their families and upbringing of their kids, and for this reason they bear incontestable evidence of the fact that even the per-capita per-annum income figure of $250,000 is not enough for you to ensure decent living for yourself and other members of your family and decent upbringing of your kids. How many Americans deserve to be placed in the category of the truly wealthy? I should like to leave you to find yourself the answer to this query.

Such being the state of affairs, is it a sensible idea to abandon welfarism? Is it possible for the USA to close all the welfare projects it operates? We have seen that were it not for the free and partially subsidised education, the USA would just have disappeared from the world atlas long since. Is it a practical idea to close the federal Public Housing Program ? The moment it is closed, almost half the cement factories in the USA would close down. Hundreds of workers of the closed factories along with thousands of construction workers and transport-industry workers (i.e. those that were engaged in the transportation of building materials) would, finding no other alternative, be forced to join the ranks of the unemployed and thus swell the army of paupers, with which the US domestic market is bound to undergo massive contraction, which leads to large-scale lay-offs, with which the market contracts further, and thus a chain reaction is set off. It is quite unlikely that the massive contraction of the American home market would be made up for by a proportionate expansion of foreign markets. Furthermore, the inevitable economic downturn ensuing large-scale closures and lay-offs would cause the US Treasury lose huge chunks of revenue (mainly because of a huge decline in excise due to the declining GDP). The huge slump in the revenue is unlikely to be offset through borrowing from foreign countries because the more the USA borrows money, the more it sinks into a debt trap, and the more the USA gets trapped in the debt trap, the more its credit rating goes down, consequent on which foreign money market gets closed to the USA finally. The national economic crisis would be accompanied by an alarming increase in the number of antisocials and antisocial activities as well as political instabilities leading to total chaos. Under the circumstances, the USA would, I am dead sure of it, fail to meet its very basic defence cost. And of course I can't assure you that America's enemies won't try their best to avail themselves of this situation in order to attain their evil aim. And of course I don't think you're so stupid an idiot as to be unable to envision what might happen to America thereafter.

The inescapable truth is if America wants to continue to exist, it must not only continue with all welfare schemes and programmes but introduce more and more such programmes and strive to reach out to every American because if one per cent Americans felt they were neglected, not only would they stop bothering about the good of America, there is no telling either that they wouldn't mean America any harm, let alone the fact that their deprivation would effect the contraction of the American market as well.


1 Table 254, Elementary and Secondary schools—Teachers, Enrollment, ... ; US Census Bureau, Statistical Abstract of the United States: 2012

2 'Which places spent ...' by Jammie Gumbrecht

3 See Figure 2 and Table 8 of Public Education Finances : 2011 (a US Census Bureau report)

4 'Taxpayer Subsidies for Most Colleges and Universities Average Between ...'

5 Federal Register/Vol. 78. No. 144/Friday, July 26, 2013/Notice

6 Keeping America Healthy Eligibility

7 Table A-2. US Census Bureau Income, Poverty, and Health Insurance Coverage in the United States: 2012

8 'Congress Passes Cliff Deal ...' (an article (updated on January 02, 2013) in The Wall Street Journal by Janet Hook, Corey Boles, and Siobhan Hughes)

the REAL REASON for the US shutdown

The USA has no other option, if it wishes to survive and advance, than to continue with welfarism. But continuation with the welfarism means growing public expenditure, hence soaring debt burden. The Republicans are right to point out that the USA's public debts are heading for unmanageable proportions, and that they ought not to be allowed to grow further, but they seem to be unaware of the fact that capitalism just cannot continue to exist without welfarism (the origin of growing public spending). On the other hand, the Democrats stand for welfarism and the growth of the US economy, without which the USA must pass away. Thus, it seems to be as clear as day that the conflict between the Republican stance and the Democratic stance, which led to the shutdown, was just an expression of the insoluble internal contradiction of capitalism.


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    • Mark Lees profile image

      Mark Lees 3 years ago

      Sorry, but there is nothing communist about this article, it assumes that capitalism is necessary and only considers a small section of the concerns of free-market capitalism and controlled capitalism with social welfare elements.

      From the communist viewpoint (and this is very brief and overly simplified for this comment) the cause of the breakdown is because of the inherent instability and inability of the capitalist system to meet its own requirements.

    • Prakash RnP profile image

      Prakash Ranjan Paul 3 years ago from INDIA

      Would you elaborate on your view ?

    • Mark Lees profile image

      Mark Lees 3 years ago

      Which part? The discussion on the nature of capitalism is several hubs worth in itself.

      My view that you have not taken a communist position is because you frame the debate within capitalist terms. Communism is about communal ownership of the means of production- something that has not been addressed. Communists believe that capitalism is inherently unstable because it thrives on equality and they believe it is inevitable that this will cause turmoil (or even revolution).

      Again, this is very simplified but I may write a hub about it over the next month or so.

    • Prakash RnP profile image

      Prakash Ranjan Paul 3 years ago from INDIA

      I would think over your points and await your new hub.

    • Mark Lees profile image

      Mark Lees 3 years ago

      "Communists believe that capitalism is inherently unstable because it thrives on equality" That should read inequality*.

    • Prakash RnP profile image

      Prakash Ranjan Paul 3 years ago from INDIA

      Isn't the concept of the internal contradiction of capitalism communistic ? Isn't the very concept of contradiction the central element of dialectical and historical materialism that constitutes the communist world view ?

      What it is that proves that I've assumed 'capitalism is necessary' isn't clear to me. Would you cite some evidence ?

      Your view that I've framed 'the debate within capitalist terms' isn't clear to me either.

      Communism was defined by Marx and Engels as the 'abolition of private property'. Of course, communism doesn't approve of the private ownership of the means of production. But all this stuff, as I view it, doesn't relate to my essay ' The US GOVT SHUTDOWN ... ' Am I wrong ?

      The inherent instability of capitalism owes its origin to the internal contradiction of capitalism, doesn't it ?

      Am I wrong to trace the US GOVT SHUTDOWN to the internal contradiction of capitalism ?

    • Mark Lees profile image

      Mark Lees 3 years ago

      There are a couple of paragraphs in the middle which talk about the contradiction of capitalism (although it only looks at free-market capitalism, not controlled capitalism such as the British welfare state of the 1950's and 60's).

      The debate is framed in terms of the desires of the Republican and Democratic parties of the USA, both of which are capitalist and predominantly free-market capitalist.

      The closure of the US government was not caused by the the contractions in the market, instead it was caused by the US ideoligical position that individual freedom outweighs all else- it is a rejection of any form of protectionism and welfarism- believing that these infringe on individual capacity to improve your own situation. It is a naked attempt by those most firmly entrecnched in the "American Dream" to prevent any form of social coherence. It is not caused by the ownership of property or the means of production in a purely economic sense but rather in an hegemonic way- it is to keep the social order that they require.

      The internal contradiction you discuss is only one of the forms of instability. The reliance of capitialism as a means of control relies heavily on a "false conciousness" and the closure is an attempt by Republicans to keep the majority of people from realising that their position is created by the system og government and the ideology that they believe in.

      'The ideas of the ruling class are in every epoch the ruling ideas." (Marx)

      It is keeping the majority believing in a system which is harmful to them is which is one of the major instabilities in capitalism. There are others.

    • Prakash RnP profile image

      Prakash Ranjan Paul 3 years ago from INDIA

      As I see it, you've evaded two important questions: (1) whether the concept of internal contradiction of capitalism is communistic and (2) whether the very concept of contradiction is the central element of the communist world view. You haven't responded either to my request to cite some instances in support of your claim that I've assumed 'capitalism is necessary'.

      The internal contradiction in question expresses a basic feature of capitalism and owes its origin to the basic law of commodity economy (and capitalism is a commodity economy). Hence, this contradiction is existent in every capitalist system, be it welfare capitalism or free-market capitalism.

      I don't think I've followed any terms dictated by the Republicans or the Democrats, and I don't think, either, that the USA under the Democratic govt isn't (or under the former Republican govt wasn't) a welfare state.

      I didn't say the US govt shutdown was caused by 'the contraction of the market'. I just traced it to the insoluble internal contradiction of capitalism. And I think I've provided my thesis with adequate incontrovertible points.

      Nevertheless, I must admit that your view of the shutdown is entirely different from mine and worth giving serious thought to.

    • Mark Lees profile image

      Mark Lees 3 years ago

      The communistic viewpoint hinges on the idea that the means of production should be owned by everybody. That is the central economic point of communism. Communism doesn't exist purely as a criticism of capitalism, although the internal contradictions in capitalism are recognised in communist criticisms of capitalism (amongst others).

      Capitalism can exist outside of a commodity economy - Levi's are not a commodity nor are Iphones but both are part of capitalism. Commodity economics can work within other financial systems other than capitalism too. One contradiction in capitalism is to do with the growing inequality and the way of growing the market without increasing costs (such as through higher wages).

      Welfarism is actually a requirement of capitalism and it is a means of the state propping up the private sector. In a purely communist society there is no need for welfarism in this way. Central-state controlled socialism does, but socialism actually works on the basis of operating within a capitalist world. It is not an attempt to get rid of capitalism, it is an attempt to create a safety net for citizens and for private enterprise. Welfarism as nothing to do with communism, and the economics in the US have little to do with the shutdown. The economic contradiction in capitalism has not come anywhere near reaching its critical point in the US because they are still exploiting international markets.

      Your thesis rests on the economic contradictions in capitalism but there is nothing to suggest that. Marxist communism has moved on greatly since the 1860's and it is now understood in terms of much wider social issues and these are what at play.

      I admire your attempt to view this view a communist viewpoint but I am afraid that in limiting it to purely economic contradictions you have missed the key driving factors in the shutdown.

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