US’s Grand Division of Capital, Round Three

【This article is an edited version of a translation of Professor Jin Canrong’s piece published in the Global Times.】

The U.S. is now witnessing a third wave of capital division, characterized by intensifying conflicts between capital focusing on domestic market and capital focusing on a global market, as well as between real and virtual capital.

The U.S. as a nation has the DNA of “capital-controlled governance.” Beyond capital’s influence in politics, its control can also be seen in the deliberate creation of divisive social issues, such as race, immigration, regional conflicts between the North and South, and sexual orientation. By stoking racial and cultural tensions and undermining class solidarity, capital aims to divert systemic reflection on the flaws and dysfunctions of democratic mechanisms, thereby maintaining its dominance over society.

However, this approach comes with a significant risk: the capital groups themselves must not fracture. When divisions emerge within the capitalist group, internal chaos will ensue. Historically, the U.S. has been on the brink of collapse at least twice as a result of the internal division within the capitalist group.

Previous Two Rounds of Capital Division in American History

The First Round of Capital Division

After winning the War of Independence in 1783, the United States entered into a period of rebuilding.

The economic structure was primarily based on agriculture, shipping, and rudimentary manufacturing, with no domestic industrial development. Basic supplies relied on trade with Europe.

At the time, capital in the U.S. was primarily trade-oriented, and European powers, particularly Britain and France, had significant influence over the country’s development. France had supported the U.S. during the War of Independence, while Britain, as the former colonial ruler, remained the world’s most powerful naval and economic force. The outbreak of the French Revolution added complexity to  Europe’s political landscape and created divisions within the U.S. over relations with these two major powers.

American trade capital was then divided into two factions: the pro-British and the pro-French factions. The pro-British faction was represented by John Adams, the second president of the United States. This faction supported the establishment of a strong central government and the promotion of commerce and industry. They believed that maintaining close ties with Britain would help drive America’s economic growth. The 1794 Jay Treaty, which reestablished trade relations between the U.S. and Britain, was a major achievement of the pro-British faction but faced strong opposition from the pro-French faction.

The pro-French faction, represented by Thomas Jefferson, the third U.S. president, emphasized the importance of an agrarian economy. They were skeptical of Britain’s industrialization and concentration of financial capital, opposed the British monarchy, and supported the French Revolution. The economic interests of this faction were primarily tied to Southern plantation owners who traded with France.

The division between these two trade capital factions led to political polarization within the U.S. The Federalists sympathized with commercial interests and advocated for close ties with Britain, while the Democratic-Republicans aligned with agricultural interests and supported closer ties with France. This marked the early stages of partisan struggles.

The division also resulted in conflicting economic policies: the Federalists pushed for industrialization and financial centralization, while the Democratic-Republicans advocated for agricultural development and local autonomy. These opposing views contributed to regional economic imbalances and sowed the seeds for the Civil War.

However, the risk of civil war was ultimately mitigated through compromise. A key factor was the leadership of George Washington, the founding president. In 1793, Washington issued the Proclamation of Neutrality, arguing that the U.S. should avoid unnecessary wars to protect its economy and security. He emphasized that the U.S. should avoid forming permanent alliances with foreign nations to maintain its independence and sovereignty.

At the time, the U.S. also faced certain external threats. British military bases remained in the North, French colonies were located in the West, and Spanish-controlled Florida bordered the South. Both Britain and France armed and supported Native Americans to resist U.S. settlers, while also using naval forces to harass and attack American merchant ships. These external threats provided opportunities for internal compromise.

The Second Round of Capital Division

The second round of capital division occurred in the 19th century, during and after the War of 1812. Britain’s blockade of U.S. ports disrupted American maritime trade but inadvertently spurred economic independence and laid the foundation for future industrial development. After the war, the U.S. government realized the importance of self-sufficiency and implemented policies that favored industrial growth. With the rise of industrial capital, the nature of American capital shifted from trade-based to industrial and commercial-based.

This shift brought new demands for expansion but also triggered new conflicts—primarily the economic clash between the North and the South.

The Southern economy, characterized by agriculture and particularly cotton production, thrived in the warm climate and fertile soil of the region. At the time, cotton was one of the world’s most strategic commodities, holding a position of importance comparable to oil today. The Southern economy relied on exporting agricultural products to Europe and the North, which led to a preference for low tariffs to facilitate trade.

In contrast, the North, dominated by industrialization and manufacturing, supported high tariffs to protect emerging domestic industries from foreign competition. Northern industrialists also believed that the Southern cotton plantations could be integrated into the North’s economic system to ensure a steady supply of raw materials. Southern slaveholders, however, insisted on continued territorial expansion and the preservation of slavery. Political demands, cultural differences, and opposing views on slavery further deepened the divide between the North and South, ultimately leading to the outbreak of the Civil War.

This war, driven by capital division, profoundly impacted the political, economic, and social development of the United States.

The Ongoing Third Round of Capital Division

Characterized by political polarization, social fragmentation, and a series of related events, the United States is currently experiencing an intensifying third round of capital division. U.S. capital groups have split into virtual and global capital versus real and domestic capital. Virtual and global capital, epitomized by Wall Street, is geographically concentrated on the U.S. East and West Coasts, where immigrant and minority population are significantly represented. In contrast, domestic and real capital, such as steel and automotive industries, is primarily located in the Midwest, where a predominantly white population makes up the demographic.

The split between virtual capital and real capital marks the key feature of the third round of capital division. Virtual capital generates profit through investments, trading, and financial operations, without directly engaging in production. Real capital, on the other hand, is connected to tangible assets like factories, machinery, raw materials, and infrastructure, which participate in the processes of production and circulation, generating value in the form of commodity, production, or monetary capital.

Over the past two decades, the scale and influence of U.S. financial capital have expanded exponentially. With advancements in high technology and innovations in financial markets, virtual capital has rapidly flowed and appreciated globally. However, its expansion carries risks of recklessness and uncertainties, posing significant risks to global financial markets, as evidenced by the 2008 global financial crisis.

On the other hand, real capital faced its own challenges. As economic globalization deepens and financial capital grows rapidly, real capital has been increasingly squeezed by global competition and financialization trends. U.S. manufacturing has suffered from “hollowing out” and technological disruptions, intensifying the divide between real and virtual capital. While virtual capital profits flow to financial sectors and high-income groups, real capital’s returns on investment are constrained by economic cycles and production costs. Consequently, wealth and income inequality increased sharply.

Another prominent division lies between global capital and domestic capital. U.S. global capital refers to multinational corporate groups and global investors operating and investing in international markets, such as the Federal Reserve and Wall Street. Domestic capital, by contrast, is primarily focused on the domestic market, relying on domestic production and consumption.

With the rise of globalization, global capital has rapidly grown and expanded, generating profits through global supply chains, international investments, and market integration, while facilitating technology transfer, economic growth, and global market consolidation. Domestic capital, like real capital, faces external competitive pressures, leading to resource scarcity and declining market share.

To maximize capital interests, the U.S. government has tended to adopt protectionist measures to support domestic enterprises while simultaneously implementing globalization policies to attract foreign investment. However, this duality in economic policy risks destabilizing the domestic market and further exacerbating social divisions.

How the Division of Capital Influences the Policies of Both Parties

The current division of capital in the United States is closely intertwined with partisan struggles between Democrats and Republicans, as well as the ideological divide between the left and the right.

In recent years, the Democratic Party has become more aligned with  the interests of virtual capital and global capital, including financial capital, tech capital, and multinational corporations. These sectors are typically concentrated in coastal cities and economically developed regions of the U.S., which also form the Democratic Party’s core base of support. As a result, Democrats tend to favor policies such as free trade, multilateralism, and immigration, which facilitate the flow and expansion of global capital.

On the other hand, the Republican Party more often represents domestic capital and real capital, particularly traditional manufacturing, agriculture, and energy sectors. The Republican Party enjoys strong support in the Midwest and Southern regions, where economies rely more heavily on tangible industries and domestic production. Consequently, Republicans are more inclined toward protectionism, lower taxes, and deregulation to safeguard and promote the interests of domestic capital.

This division of capital has exacerbated political polarization in the U.S. The value gaps between the two parties have widened, and their policy stances have become increasingly irreconcilable, leading to inefficiencies in legislative and executive functions. Partisan conflict has also resulted in the politicization of the judiciary, with both parties using judicial measures to attack each other, further fueling political polarization.

Moreover, the division of capital has intensified voter group conflicts. Beneficiaries of virtual and global capital are often high-income groups that tend to support the Democratic Party, while beneficiaries of real and domestic capital are primarily workers and farmers who lean toward the Republican Party. This geographic and economic divide then feeds into societal fragmentation. As a result, the U.S. is experiencing growing internal divisions over values, identity, and economic interests, which could lead to prolonged social instability and political turmoil.

In terms of foreign policy, significant divisions also exist between Democrats and Republicans, particularly on issues such as globalization and international cooperation. Increasingly guided by “new isolationism,” the Republican Party has abandoned traditional pragmatism, with actions such as withdrawing from international agreements and treaties (“withdrawal” and “breaking agreements”) significantly weakening America’s global leadership.

Meanwhile, the Democratic Party, spokesperson for global capital, places greater emphasis on the U.S. external interests. To secure resources, expand markets, and protect financial investments, Democrats prioritize the use of diplomatic and military tools for external intervention, including using force and waging wars to expand geopolitical influence and create favorable conditions for economic gains.