The Crisis of American Capitalism: Decline, Delusion and Democratic Erosion

Long celebrated as the pinnacle of liberal democracy and free-market success, the United States now stands exposed as a nation in profound systemic crisis. Through the lenses of Richard Wolff's Marxist political economy and Noam Chomsky's institutional critique, America appears not as an exceptional beacon of progress but as a failing state. Its economic structures breed inequality, its political institutions serve oligarchic interests, and its imperial ambitions are unsustainable. This analysis reveals an advanced capitalist society where living standards deteriorate for ordinary citizens while corporate and political elites consolidate power under a carefully maintained illusion of democratic legitimacy.  

At the heart of America's crisis lies an economic system fundamentally hostile to the wellbeing of its people. Wolff’s analysis of surplus value extraction shows how capitalism systematically transfers wealth from workers to owners, generating extreme inequality while suppressing wages. Since 1979, worker productivity has risen by over 60%, yet real wages have stagnated, with all economic gains captured by the wealthiest 10%. This is not incidental but structural—an inevitable result of what Wolff terms “the internal contradictions of capitalism.” Meanwhile, Chomsky's critique of neoliberalism since the Reagan-Thatcher era exposes a calculated class war: union busting, financial deregulation, and the erosion of social safety nets. The consequences are stark-40% of Americans cannot cover a $400 emergency, life expectancy is falling among the poorest, and three individuals now hold more wealth than the bottom 50% of the population.  

The political system, far from providing redress, entrenches these economic injustices. In practice, American democracy functions as a “polyarchy”-a system where elections exist but within boundaries controlled by economic elites. Chomsky’s propaganda model explains how corporate media manufacture consent for policies that benefit owners while marginalising dissent. Wolff highlights how campaign finance and lobbying ensure both major parties serve capital rather than citizens. The consequences are evident: despite overwhelming public support for universal healthcare, stricter gun laws, and higher taxes on the wealthy, such measures are systematically blocked. Instead, the state operates as what Marxist theorists call “the executive committee of the bourgeoisie,” bailing out banks while imposing austerity on workers.  

America’s imperial position compounds these domestic failures. The post-1945 Pax Americana, built on dollar hegemony and military supremacy, is crumbling under the weight of overreach and economic decline. Chomsky documents how decades of Middle Eastern wars have drained trillions without delivering security, instead fuelling instability and blowback. Wolff situates this militarism within capitalism’s need for expansion, securing resources and markets through force when economic dominance wanes. Yet as China rises and the Global South asserts independence, America’s unipolar moment ends not in triumph but in domestic decay. Infrastructure crumbles, public education declines, and social cohesion unravels-symptoms of what historian Gabriel Kolko termed “the tragedy of American capitalism,” where imperial overreach accelerates internal collapse.  

For ordinary Americans, this convergence of economic exploitation, political disenfranchisement, and imperial decline manifests as a quiet catastrophe. Precarious work replaces stable employment, with the gig economy rebranding nineteenth-century exploitation for the digital age. Healthcare remains a privilege, with medical bankruptcies uniquely American among developed nations. Education, once a pathway to opportunity, has become a debt trap. Meanwhile, the state’s ability to address these crises is systematically dismantled by the very corporate interests that profit from them. The result is what sociologist Wolfgang Streeck calls “the crisis of democratic capitalism”-a system that can neither meet citizens’ needs nor reform itself.  

The path ahead leads either to democratic renewal or authoritarian regression. Without radical restructuring-whether through Wolff’s worker cooperatives or Chomsky’s grassroots mobilisation- America risks descending into “post-democracy,” where elections persist but governance serves only capital. The signs are already clear: voter suppression, regulatory capture, and the Supreme Court’s dismantling of campaign finance laws. Economic desperation fuels reactionary politics, with fascist movements scapegoating minorities instead of challenging capital. The climate crisis, ignored due to fossil fuel interests, will further intensify these tensions.  

America stands at what Antonio Gramsci called an “interregnum”- a moment where the old order is dying but the new has yet to be born. Citizens face a declining quality of life within a system incapable of either reform or honest self-diagnosis. Whether this crisis leads to renewed democracy or deeper collapse depends on the development of the class consciousness Wolff advocates and the organisational strength Chomsky emphasises. Without such mobilisation, America’s decline will continue-a slow-motion collapse that leaves its people poorer, sicker, and less free, even as the rhetoric of democracy grows ever more hollow. The stakes could not be higher: either the construction of a genuinely democratic political economy, or what historians may one day recognise as the final crisis of American capitalism.