Last year, corporate America amassed record profits of $4 trillion. This year, the stock market hit multiple record highs. As a result, the capitalists paraded the alleged resilience of the US economy. However, symptoms of a deep, systemic illness are beginning to bubble to the surface.
Tricolor, a subprime auto lender that preyed on undocumented immigrants and low-income workers, loaned more than $1 billion last year—and went bankrupt in late September. Three weeks later, the auto parts supplier, First Brands, also filed for bankruptcy. After amassing mind-boggling levels of debt, First Brands would have to sell off their assets 50 times over to reach solvency.
These aren’t “one-off” situations, and the financial press is sounding the alarm. Jamie Dimon, CEO of JPMorgan Chase, put it aptly: “When you see one cockroach, there are probably more . . . Everyone should be forewarned on this one.” Beneath the surface, the economy rests on an incredibly weak foundation of speculation and debt.
“Zombie” companies
According to the Associated Press, in 2023, out of 5,000 publicly traded companies, 40% were found to be “zombies”—unprofitable entities with barely enough revenue to service their debt. These companies’ business model is built on parasitically feeding off cheap credit, using it to inflate the value of their own stock.
Last year, 23,107 companies filed for bankruptcy, a 70% increase since 2022. According to Moody’s, the average risk of default for US public companies reached 9.2% at the end of 2024, with no clear signs that things have peaked. These “zombie” companies employ 130 million workers worldwide, and their livelihoods are on the line if their bosses default.
Whatever ghoulish term the financial bourgeoisie uses, these “cockroaches” and “zombies” are the natural spawn of nearly two decades of ultracheap borrowing. They are the first signs of the hangover from the cheap-credit rager that followed 2008.
“You’ve got to get up and dance”
After the 2008 meltdown, the capitalists pumped the banks full of cheap credit. They hoped this would reignite the economy and stave off an explosion of open class struggle. The problem is that debt eventually has to be paid back, with interest. The anemic post-2008 recovery was the result of a capitalist class that had become dependent on cheap credit and speculation.
Still, corporations took advantage of low borrowing costs, and showered themselves with cash. In 2008, the CEO of Citi, Chuck Prince, said, “As long as the music is playing, you’ve got to get up and dance.” In other words, as long as there’s profit to be made in lending, the banks will keep on partying.
At the height of the financial debacle of 2008, overall corporate debt was nearly $7 trillion. It has since doubled to $14.01 trillion. On the consumer side, the percentage of subprime borrowers who are at least 60 days late on their car loans has doubled since 2021—worse than during the past three recessions.
This would be bad enough, but banks aren’t the only ones lending. Private creditors, such as Blackstone, got in on the frenzy. If a corporation was too risky to be lent to, they could go to a non-bank, private lender. First Brands was one of these shady creditors. Private credit has grown from $300 billion in 2010 to $1.8 trillion today.
The explosive growth of private lending is alarming economists. Kristalina Georgieva, the head of the IMF, said that “the risk in the private credit market keeps me awake at night.”
The entire world economy is being fueled by an exorbitant and growing amount of debt that cannot be paid off. The music is coming to a screeching halt. By trying to solve the nightmare of 2008, the capitalists have kicked the can down the road, and planted the seeds of a much larger crisis.
When the music stops—what then?
When the next crisis materializes, the system will demand its pound of flesh. Someone will have to pay—and it won’t be the capitalists. If the coming market crash is on the scale of the dot-com “correction,” millions will lose their jobs and find themselves plunged into poverty. Hunger and homelessness will skyrocket, and massive cuts to social spending will ensue.
In 2008, the bailouts allowed the capitalists to avoid the worst effects of a head-on confrontation with the working class. The working class paid mainly through the attrition of inflation, which is more subtle than direct wage cuts and mass austerity—though there was plenty of that, too. But in 2008, the world capitalist class was relatively united. Today, the world situation is defined by deep rifts both between and within the national capitalist classes. They cannot avoid the social fallout.
Millions more will be radicalized. The perspective is for open class warfare in the coming period. We must urgently build the necessary leadership to prepare for this.