Section VIII: VIIIThe Long Liquidation, 1971 to 2026

Then the signal crisis appeared: the American architecture’s monetary half died first, on August 15, 1971, when the dollar left gold, and the medium that replaced it, financial denomination, was the one the order would eventually fail through. The petrodollar arrangement of 1974 put the world’s oil trade and the reserves it generated in dollars and Treasuries, which turned every barrel sold anywhere into a dollar balance and the surplus balances into a bid for the incumbent’s paper, and it was built because the productive base beneath the dollar had already stopped carrying it. The American rate of profit peaked in the mid-1960s and fell through the 1970s as European and Japanese competition generalized the advantages the postwar base had held alone.

The first response was to cut the wage, and the route chosen was abroad. Offshoring did two things to the American labor-hour at once: it bought labor-power in the periphery for a fraction of the core’s price, and it shipped the cheapened goods back into the core’s wage basket, so that a flat wage bought the same bundle while the labor time inside the bundle fell and the owner kept the difference. This held up the rate for 40 years. Manufacturing employment fell from roughly 19 million in 1979 to roughly 12 million in 2025, and the stagnation of the wage was masked for a generation by the price of the goods the wage bought. The other side of the same route was China’s opening, and it is the case the challengers’ century ended on. The periphery’s wages rose, the real productive economy of the core capitalist economies could not be revived on any timeline the rate of profit could wait for, and by the 2020s there was no further outside to move production to.⁴⁰

Deng’s 1978 Reform and Opening Up recovered NEP’s structure and directly connected it with this offshoring whether or not its authors named the precedent. The transition phase was to last decades, possibly a century. The “primary stage of socialism doctrine,” formalized in 1987, made this explicit: China is in the primary stage of socialism which lasts approximately 100 years from the founding of the People’s Republic. During such a developmental stage, productive forces must be created through controlled use of capitalist methods, foreign investment, and market mechanisms, while the party retains absolute political and economic supremacy and the long-term goal of socialist development is preserved. The end of the primary stage transitions to socialist development proper. The end of socialist development transitions to communism. The timeline is intergenerational, nearly stagist.

The transition phase was given an explicit duration, preventing a Stalinist and later Maoist impatience for ideologically correct voluntarist leaps toward socialist construction that destroyed NEP in the original case. Foreign investment was channeled rather than allowed to dictate terms. The party was initially partially insulated from the wealth accumulation it permitted. The “commanding heights” of strategic industry stayed nationalized and the party stayed above the wealth it licensed, which is why a turn was available when it came.

This reaches into the NEP debate’s hardest problem, one Preobrazhensky formalized from inside NEP, while another Soviet economist and intellectual Kritsman simultaneously rejected much of NEP as a period of primitive capitalist accumulation.

Preobrazhensky’s law of “primitive socialist accumulation” held that there is no equilibrium between the state sector and pre-socialist forms: either the state sector accumulates at the expense of private ownership through nonequivalent exchange, or the private forms accumulate at the expense of the state sector. The direction of transfer decides which mode of production is being built.

The test Preobrazhensky specified still applies, and it cuts in both directions: which sector accumulates, at whose expense?

Applied to the record, it cuts against Reform and Opening Up: across long stretches of 1978 to 2012 the transfer ran the wrong way, private and foreign capital accumulating against a state sector managed as a legacy cost, and by Preobrazhensky’s criterion those stretches were drift. A later 2012 reassertion, the consolidation of the heights, the discipline of platform and property capital, the redirection of accumulation into the plan’s use-value targets, is the transfer turned back which we will examine later.

Transitions to Modernity

The Soviet Union was a bubble of a claimed post-capitalist form on a sea of capitalism, isolated by Kennan’s containment and the “domino theory” of US interventionism. The bubble was popped in 1991 and followed by a Restoration that called itself “the end of history.” The Restoration ran the post-Napoleonic Concert’s script to the letter: the victors declared the result permanent, absorbed the form, and discarded the essence. The sea of capitalism had already been transformed by the bubble’s existence: the welfare state, the New Deal settlement, European social democracy, nationalized industries, full-employment commitments, decolonization under pressure: the core adopted socialistic forms as inoculation while discarding socializing essence. Then the Soviet bubble popped and this time the “Old Regime” began shedding both the content and the form, during the period of Chinese Reform and Opening up, the neoliberal turn predating 1991 and accelerating after it because a disciplining alternative was essentially already gone.

There the analogies have holes, and these holes are the questions the second half of this work exists to answer.

By the 1980s, the common wisdom goes, capitalist economies and especially the United States was out-producing, and more culturally viable than, Soviet planning. The collapse of 1991 and the adoption of capitalism in China was that pre-known verdict arriving.

The question is whether instead, a later and better-positioned vehicle fuses the old with the new and in doing so paves the way for a superseding, the way Britain fused merchant and monarch, paving the way for the United States to completely supersede the constitutional-merchant-monarchy into the full, “unleaded” bourgeois-democratic order well after the Napoleonic precursor bubble was popped.

The Soviet Union may very well have been the 1789-to-1815 episode, premature, crushed, its content half-diffused and half-reversed, France never more productive than Britain but more able to mobilize and shake the existing foundation out of a stupor of prior, outdated production, military and societal practices.

Such a productivity differential is exactly where a repair happens today. The productive question has reopened in this century on inverted terms: a potential successor, post 2012-turn, now carries the more productive economy in the domains that set the next global industrial base precisely through planning, and the now-financialized US is not out-producing it. The engine that drained the monarchical sea into our current bourgeois-democratic globe is again present, attached to a different carrier than the one that was crushed in 1991.

If Britain was the rising fusion of monarchy and merchant-state in 1815, a capitalist essence carried inside the monarchical form, then China is a candidate fusion now, a planned socialist essence carried inside a non-Absolutist-capitalist form, with the industrial development, the private firms, and the Shanghai billionaires as the birthmarks the way the crown and the Lords were Britain’s. The word fusion does three jobs in this work, and they can overlap. A new relation is carried inside an old form, as Britain carried capitalism inside a monarchy. A successor absorbs its predecessor’s financial methods, as the English state absorbed the Dutch after 1688. An incumbent borrows its challenger’s methods to hold on, as the Holy Alliance borrowed conscription. China is a candidate for the first, which is why its test is the one below.

The birthmark concept cannot be had for free. Reading the “red” as essence off iconography of the Hammer and Sickle alone is the same error as reading capitalism as essence of the existence of markets alone, and Britain’s case seen through the Preobrazhenskyist lens is the real test to re-run: the ownership-of-property and political powers recorded over time, the residue of the last system either subordinated across the decades or subordinating.

The Concert of Europe is the strongest of the historical echoes and close to exact. After crushing the Revolution and enacting the Restoration, the monarchical “shells” adopted the bourgeois forms while keeping their prior dynastic essence: the modernizing state, the fiscal-military apparatus, eventually industrial development, and yet the essence grew inside the rotting monarchical shell for decades. In 1918 a crisis caused “the new” to finally burst forth from the rotted carcasses, propagating new republics, constitutional monarchies, socialist revolts and fascist reactions.

The condition is that there must be real content for such a mechanism to run. The monarchies’ attempt to industrialize and build the modern state created real bourgeois-democratic content which grew inside the old form. The dialectical bet is the same today: the content of the Soviet experiment was real, the adoption of forms and discarding of essence creates real socialist content that is growing inside the old form, and the limits of the current mode of production are intensifying to a general conflict. Something will burst from the rot at this next rupture.

The evidence is in the capitalists’ ever greater modern adoption of the planned economy in form, while keeping the capital-accumulating purpose, with state equity stakes, state-directed industrial policy, export controls and tariffs, and emergency defense requisition unquestionably taking over for the “free hand of the markets” inside the US and other capitalist societies, and the general right-ward, reactionary lurch of the current decade.

Additional evidence exists in financialization, and the decades of financing were iatrogenic: each treatment cured the crisis in front of it while the cure also produced the next crisis. The Glass-Steagall separation was repealed in 1999 and derivatives were exempted from regulation in 2000. Financial profits rose from about 15% of corporate profits in 1980 to more than 40% by 2007. The financial sector decoupled from the production it nominally served. The 2008 collapse was treated with the largest surgery in the architecture’s history, TARP, quantitative easing, a balance sheet from $900 billion to $4.5 trillion, and the surgery preserved the architecture rather than reforming it, relieving the pressure by enlarging the bypass around a heavily scarred industrial-productive base, and accepted confusion that followed as the cost of the operation.

The pandemic was treated similarly at twice the dosage, a balance sheet near $9 trillion, and the dose produced inflation that elected reactionary coalitions now in power. Each treatment left the patient more dependent on the next treatment, growing increasingly addicted to state rescue of a continually re-faltering private sector. The financial system that emerged holds claims on a productive base that is already largely moved elsewhere, and the AI build-out may be the last of the treatments, a prosthesis where the economic base used to be.

The pandemic also did something the treatments could not undo: it showed the industrial economic base’s absence in the way the population can read without an analyst when the mask, the ventilator, the chip, and the container ship did not arrive and the shortages began, which is relevant for our current conjuncture.⁴¹

The last evidence is the juridical half of the last settlement dying, as it typically did historically in the historical transition’s openings of general war.

Kosovo in 1999 bypassed the Security Council and was ruled illegal but legitimate by the commission that reviewed it. Iraq in 2003 bypassed it again and was called illegal by the Secretary-General of the UN. Libya in 2011 took the Council’s authorization for civilian protection and spent it on a full-blown regime change, which is why the Council never authorized force in the Syrian civil war, the chemical-weapons resolution of 2013 and the cross-border relief of 2014 being the kind of thing it would sign.

Moscow and Beijing learned to read every Security Council resolution as a blank check for hegemonic overreach.

Putin named the pattern at Munich in February 2007, between Iraq and Libya: an almost unconstrained hyper-use of force, a world in which no one feels safe because no one can feel that international law is a stone wall that will protect them, and the consequence he drew is that dominance of hegemonic force outside of a rule of law encourages states to acquire weapons of mass destruction. This is “domination without hegemony,” Arrighi’s phrase, after Guha, for a power that can still coerce but can no longer lead: when the credibility of rule as service to the ruled wanes, in his sentence, “hegemony deflates into sheer domination.”⁴² International law is the juridical form of consent-based leadership, and a hegemon dismantles it only when it has stopped paying.

The record has more entries than the list above, and the entries between Iraq and Iran in 2026 are the ones that made the present war. The Balkan wars of the 1990s were the form’s first test after the Soviet collapse. The April 2008 promises to Ukraine and Georgia to join the NATO alliance, and then in August 2008 Georgia became the first armed Russian answer to such a promise, a five-day war Moscow fought and won.

The Ukrainian Maidan of February 2014 and the seizure of Crimea a month after turned the promise of 2008 into an armed frontier, and the Minsk agreements that followed were a settlement form both sides signed and neither guaranteed or collateralized.

February 2022 opened the crucible. The “no limits” partnership declaration of Russia and China of February 4 preceded the invasion by 20 days, and the sanctions on Russia that answered the invasion weaponized the global interconnected financial layer itself, freezing a sovereign’s reserves, which is the day a yuan bridge became a necessity for every state that could imagine being next in line.

Syria was the rehearsal, and history has a precedent for rehearsals. From 1936 to 1939 the powers that would fight the Second World War fought it first in Spain by proxy: the Condor Legion tested the air weapon at Guernica, Moscow sent advisers and tanks to gather learnings for the next conflict, Rome sent divisions, the International Brigades came from everywhere, and the Non-Intervention Committee in London performed the League of Nations death a second time. Madrid fell on March 28, 1939 and the general war began five months later.

From 2011 to 2024 the powers now at war in the Gulf fought in Syria by proxy: Moscow’s intervention of September 2015, Tehran building the proxy corridor to the Mediterranean through militias it trained and armed, Washington intervening in the east through the Kurds and the oil fields, Tel Aviv striking Assad and the Iranian corridor for a decade, the chemical weapon red line of 2013 not enforced, which every party read.

October 7 is the next hinge. Haaretz published on September 8 2026 from Eldar and Yuval’s Kidnapped: 843 Days of Abandonment that Palestinian resistance leader Yahya Sinwar spent 2023 negotiating a long truce through Fatah and Emirati intermediaries: prisoners for calm, work permits, the siege eased, the national self-determination question reopened. When the talks stalled in early September he told the go-between with the Israelis twice to tell Israel to expect an earthquake if nothing moved. The Emirati president carried the warning to the Israeli prime minister in a 45-minute call about 10 days before the attack, and to the director of the CIA. The prime minister answered that Gaza was under control and the real trouble would come in the West Bank, and told neither his Shin Bet chief nor his chief of staff, both of whom told the paper they had not been informed. After the attack, in the same reporting, Hamas offered through the emir of Qatar to release the civilian hostages they took in the attack over 50 and under 18, at once and for nothing. The emir’s call was answered with the words that “there was no one to talk to” and that Washington would wait three days.

The former CIA director’s summary was that Hamas sought a permanent end to the Israeli-Palestinian conflict and the Israeli prime minister would consider only a first phase that preserved Israeli rights to resume it at will. The Israeli prime minister’s office called the report an absolute lie, the former prime minister running against him in October called it true, and the Emirates neither confirmed nor denied. A war that was offered its ending in the first week has been running and expanding for more than 800 days.⁴³

War crimes perpetrated in return on Gaza brought the prior settlement’s own courts into the record: the ICJ’s provisional measures in January 2024 and the ICC’s warrants that November were answered with sanctions not on war crimes but on the court’s officers.

By September 2026 the British foreign secretary was naming Israeli ethnic cleansing conducted with the British government’s support, and 12 governments led by London had closed their markets to settlement goods, a measure the secretary of state said the United States would obviously not join. Annexation itself proceeds by tender rather than statute: a record 54 Israeli settlements approved in 2025, the E1 tenders for 1,200 homes issued in August 2026 that cut the Palestinian territory in two, 65 Palestinian communities emptied since 2023 on the UN count, and the Israeli finance minister’s published plan for sovereignty over 82% of Palestinian land with the minimum of its people.⁴⁴

The Houthis closed the Red Sea from November 2023 in response, Israel and Iran exchanged strikes in April and October 2024. Damascus fell that December, and Israel, the United States and Iran fought 12 days in June 2025 during active negotiations with Iran. The general war opened at the strait of Hormuz 14 months after Damascus as the attack on Iran in February 2026 dispensed again with the need of any pretext and again striking during negotiations, this time killing the head of state and religious leader of Iran.

The difference from 1939 is that the powers today hold the weapon that ends all conversation, so the general war still cannot be finished the way the last one was.

American hegemony expanded to its limit in 1991, the moment of arrival. The capital system made its last and largest global expansion in the same years: the “great doubling” of the world labor force when China, India, and the former Soviet bloc entered the world market in the 1990s, the route abroad the falling rate took, the Chinese wall battered down in fact by the accessions of the 2000s. It was the second time the incumbent’s cycle found room for productive forces the order had not yet exhausted, and the room it opened is the room the successor now holds.

The reserve army Marx described in the chapter on the general law of accumulation was constituted at the scale of the planet. Western centrality expanded for the last time with the US system, to the Baltic and the Black Sea and the Gulf, while it also contracted underneath as the economic base returned to Asia. The incumbent’s capital turned inward into finance and the incumbent reached toward final, universal victory.⁴⁵