What would Karl Marx make of memecoins?

The term “late-stage capitalism” has lately been on everyone’s lips. I hear the description from friends concerned with economics and a very hip, tattooed Brooklynite who sold me a pair of vintage jeans.

Late-stage capitalism now appears to be a default answer to every headline calamity. Medical insurance crisis? Late-stage capitalism. Violent right-wing blue-collar workers for Trump? Late-stage capitalism. The rise of Silicon Valley bros taking over the world? Late-stage capitalism. Is it any wonder that a majority of Gen Zers don’t think capitalism works?

Although all the above may be true, there is an unexplored area of late-stage capitalism that has gone unnoticed: crypto.

Marxist theory would suggest that the first economic era in America’s history was "true capitalism," the kind that Marx and Engels wrote about. It started with the industr i al revolution. Profits were to be squeezed from exploited workers. Productivity was measured in units produced and the physical cost of goods, plus overhead and labor. This was the dynamic that gave rise to the accumulation of capital (that is, the Marxist term “surplus value”). This modality lasted roughly from 1760 to 1960.

The second era was pure finance. Sometime in the late sixties, Harold Geneen and his ITT conglomerate came to represent the new face of capitalism. Where or by whom something was made became irrelevant to corporate bosses. The magical world of leverage was born. Buying revenue streams with borrowed money, improving those streams by any means necessary, outsourcing, automation, subcontracting to the lowest bidder — these were the tools. Increased revenue drove stock prices higher. Rinse and repeat.

The third stage may have been been born in 1977, when Lewis Ranieri invented the collateralized mortgage obligation. This financial instrument made quaint the kind of banking that Jimmy Stewart’s character does in “It’s a Wonderful Life,” whereby a small-town institution held all the mortgages and was the financial anchor of the community. Today, that would be a sucker’s bet.

Everything that isn’t nailed down is financed. Leverage includes the issuance of junk bonds using pools of rich people’s capital. Everything is financed — cars new and used (through auto loans), consumer purchases (through credit card debt), real estate rents, higher education and even furniture payments. Speculation is rampant.

But there is more! Wall Street even invents new tools like leveraged 3X funds, designed to "gain three times the daily or monthly return of the respective underlying index" — long or short, plus or minus.

Although Marx himself never used the term “late-stage capitalism,” his prediction of frequent crises in capitalism has certainly come true. From the endless “panics” that 18th- and 19th-century America endured (almost every seven years) to the Great Depression and the financial meltdown of 2008, Marx foresaw the self-destructive nature of concentrated wealth.

But until the rise of cryptocurrency, investors could, by looking closely, see the underlining asset they were investing in. Whether mortgages, equity shares, commodity or interest-rate futures, investment was based on something underneath the layers of leverage.

In the new speculative nirvana of crypto, this quaint notion has been made redundant. Bitcoin and the thousands of memecoins have no underlying revenues, definable asset value or industrial use. Marx had a term for this: “fictitious capital.”

The recent rush into crypto by “respected” financial institutions like BlackRock is the kind of thing that historically signals the top of a market about to implode. Think of Bank of America’s acquisition of Countywide, which promptly lost $40 billion, triggering years of litigation and losses. Think of the dot-com bubble, when the top-rated Janus Global Technology fund lost 84 percent of its value.

Of course, there are practical uses for crypto: tax evasion, laundering narcotics money, evading war sanctions, online romance scam payments, terrorist fundraising and a host of other ways to get around the law.

What would Marx say if he were here to see Haliey Welch, the “Hawk Tuah girl” — now subject to litigation because buyers of her memecoin are shocked it may have been a worthless scam. I believe he would be smiling from ear to ear. In his wildest imagination, he could not have imagined capitalism would devolve to creating value based on the viral video of a girl crudely describing a sex act. If betting on the rise of a memecoin is not capitalist folly, I don’t know what is.

Of course we now have $Trump and $Melania memecoins — perhaps the best evidence of late-stage capitalism — or more likely the end-stage.

Jonathan Russo writes about politics, economics, foreign and domestic policy and cultural issues.

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