ABSTRACT
The US per capita gross domestic product reached 91 percent of the British level and the United States would overtake Britain to become the world’s wealthiest capitalist nation. The instability of small government capitalism can be explained by the excessive dependence of capitalist profit on private investment and consumption spending. From the demand perspective, it can be shown that, under the small government capitalism, the level of capitalist profit is largely determined by the sum of capitalist investment and private consumption in excess of labor income. Gross domestic product measured by income approach equals the sum of total labor income, total domestic profit, taxes on capitalists, and consumption of fixed capital. “Net government expenditures” is partly financed by individual income taxes paid by working class households and partly financed by borrowing from the domestic and foreign capitalists. Growing working class power, over-accumulation, and intensified international competition led to sustained decline of the profit rate.
