“The Long Depression – Marxism and the Global Crisis of Capitalism” by Michael Roberts, 2016
While you might be confused by the title as I was,
this book is actually a breakthrough in Marxist economics. Robert’s contends that the present period of
lowered stagnation is really a ‘depression.’
He theorizes that in its length, lower employment and growth and lack of productive
profitability it marks itself as similar to the depressions of the 1930s and
the 1870s. But this is not the central point of the book. In the process of looking at
the cycles of capitalist prosperity, Roberts calmly analyses the origins of
capital’s crises from various political perspectives – Keynesian, Austrian,
neo-classical, monetarist, post-Keynesian and neo-Marxist, giving a reader a
real panorama of almost every theory.
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| The Profit Bias We Live in Everyday |
Robert’s breakthrough is showing how the falling rate
of profit internal to capitalist production is key to understanding the recessions
and depressions that form the cycles of capital. The ‘tendency of the rate of profit to fall’
was developed by Marx in Capital , Vol. 3, Theories of Surplus Value and
the Grundrisse. It is based on the interplay of variable and
constant capital, i.e. between the rate of extraction of surplus value from
workers (variable) and the value of machinery, software, buildings, etc.
necessary to make things (constant/fixed).
Marx posited that an increase in the latter would force the profit rate
down, as profit comes from the exploitation of labor only. The formula is “R (rate of profit) = S
(surplus value) / C (constant capital) + V (variable capital.)
For most leftist activists, understanding that profit
is key to understanding capitalism is second nature. However, some Marxists, such as Paul Sweezy
of the Monthly Review school, have
rejected Marx’s understanding on this issue. Some think recessions or
depressions are caused by ‘under-consumption’ or over-production. Marx called
‘under-consumptionism’ a tautology – a tautology which Keynes based most of his
theory on. This book puts reality back
together, with hard data on profit rates over time, including absolutely
revealing charts. Robert’s figures from the OCED, WTO, NBER, BEA,
Federal Reserve, other Marxist economists, as well as his own calculations, show
the intimate relationship between rising or falling profit rates and the reverse
image of falling or rising increases in constant capital.
Roberts is an economist that worked in the capitalist
banking and securities industry for 30 years.
Unlike Tony Norfield, he has figured out how to glean data on profit
rates (and even surplus value rates) for all 3 depressions that affected the U.S. Nor is he alone in this ability, as he cites
a number of other Marxists like Minq Li who have done similar research. He has rates for individual countries in the
EU before and after the 2008 crash, data regarding the long Japanese stagnation
and data for the BRICS too - Brazil,
South Africa and India. Roberts also analyses China, which is an
exception to the rule. Its mixed economy
is dominated by the state, and does not behave in the same manner as fully capitalist
economies. Roberts points out that a
recent World Bank report is clear China is not capitalist, though the law of
value still operates in parts of the Chinese economy. This is why China is always being counseled by
capitalist economists to engage in ‘more privatization’ or scolded for having a
Communist Party that controls the economy.
Roberts compares the explanations of capital’s 3
depression crises by other economic schools and describes how they fall
short. For instance, Keynesianism
didn’t work even in the 1930s in the U.S., a depression which ended
through a government takeover of the economy and war-spending. Nor has it worked on Japan’s stagnation
when it has been tried. It was dropped
by the U.S.
ruling class in the 1970s due to dropping profit rates and replaced with
neo-liberalism, which drove rates up for a time. Roberts shows how financial crises can
‘trigger’ recessions or depressions, but are not the underlying cause. Under-consumption and over-production are
results, not causes of capitalist economic downturns. Under-investment is a result of lack of
profits, not a cause. Excessive debt or
credit is a result of lack of profits from production, not the reverse. Excessive
saving is a result of lack of opportunities to profit. Financialization and
financial crises are brought about by falling profits in the productive sector
of the economy. Inequality is a result
of the search after profits, not a cause of the crisis. And so on. Many crisis theories reverse the actual process,
finding results are really causes, or external shocks dominate. Of course, results can intensify any crisis.
In essence, the cause of destructive capitalist depressions
and recessions is embedded within the profit system. It is basically a reflection of dialectics on
the economic level.
Roberts understands, as do many leftist activists,
that there are ‘counter-tendencies’ to the tendency of the rate of profit to
fall. Proletarians see these issues
everyday. Without seriously 1. increasing
the rate of exploitation of workers or 2.
imposing austerity and privatization on the proletariat or 3. lowering the
amount of constant capital needed or 4. bringing in cheap imports or technology
or 5. having a larger reserve army of labor or 6. destroying capital in various
ways (war!), it cannot regain its prior level of profitability. So it tries all of these, as we have seen –
though Roberts barely mentions war. When
these counter-tendencies eventually weaken, as Marx said they would, it results
in situations like the present economic stagnation or worse. Stagnation or ‘secular stagnation’ is
something recognized by Monthly Review
and many Keynesians like the NYT’s Krugman.
Roberts thinks the present lowered, dead-in-the-water
world-wide growth situation will continue unless drastic events occur to
reignite profitability.
Most present economic analyses point to finance
capital as the ‘heart’ of present capital.
Roberts, following Marx, shows that if profits are hard to come by in
‘productive’ capital, then capital switches to a ‘rentier’ form (I.E. the FIRE
sector), betting on ‘fictitious capital’ to make a profit instead. In other words, casino capitalism. That is exactly what is going on now, as
capital attempts to concentrate in the securities markets, making money with
money. (M=M+) Or losing it too, as we’ve
seen lately. But nothing real is
actually being created, only digits on a computer screen.
Roberts also analyses the present role of debt. Corporate debt, followed by government and consumer
debt, is at the highest levels in history.
The search for profits drives the expansion of credit … and debt. Roberts contends the level of corporate cash
has been the same for 30 years, but it is now invested differently, like share
buybacks. Any evidence of rising levels
of cash in corporate coffers shows the failure to invest in productive
enterprise.
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| Cycles of Capital |
The reason we are now hearing endless stories about
robots, artificial intelligence and the ‘universal basic income’ is because
capital is trying to reduce labor’s share of work, and gain profits temporarily
through another round of higher-end automation. Roberts estimates that every 18-20 years or
so, capital must replace their machinery, software and buildings, which is the
real essence of capital ‘depreciation’ in the tax code. Increases in profits and labor productivity
from globalization and the first computer hardware and software revolution has
stalled, then dropped. Increasing
robotization and AI will increase fixed capital, which will ultimately drive down
profits once again. It is the bind
capital is always in. He calls it the ‘capital bias.’
Capital’s progressive nature is its ability to
develop technology and improve productivity in the creation of real
things. When that fails, the actual
economic mechanism indicates it can be ‘past its use-by date,’ as some leftist
economists contend. Roberts thinks
capital can always reignite another profitability cycle after much destruction
to regular proletarians and society at large, while he quotes others who say
the present world situation regarding growth, the environment and exploitation
is ‘endgame.’
Roberts predicts another economic crisis in 2018 per
his reading of capitalist cycles, but ‘forecasting’ is always a dangerous
business. He ends the book by tracking
capital’s business cycles since the 1800s, all based on the economists that researched them. Longest is the Krondratiev ‘long wave’ of 50 to 70
years that tracks depressions; shorter waves labeled ‘Kuznets’ based on major
construction lasting 18 years; even
shorter cycles named ‘Juglar’ for recessions
every 8 to 10 years; and the smallest cycles called ‘Kitchin,’ which reflect
inventory cycles of about 4 years.
Krondratiev was a Russian Marxist who first discerned
the ‘long wave’ of capitalist economic development, but with much less data
than that available to Roberts. Marx
developed the theory that cycles were connected to the replacement of fixed
capital, i.e. depreciation rates. In
effect, Roberts links patterns and sub-patterns that explain capital’s crises
over long periods of time. When the
patterns coincide determines what the crisis actually looks like, and how deep it will be.
If you are going to read one book about how
capitalism actually works as an economic system, this is it. It ties the room together!
Other book reviews on this topic: “The City,” “The Rise of China,”
“The Endless Crisis,” “Monopoly Capital,” The Great Financial
Crisis,” “Zombie Capitalism,” “J is For Junk Economics,” “Capitalism’s
Crisis Deepens” and “Fortunes of Feminism.”
And I bought it at May Day Books!
Happy International Women’s
Day!
Clara Zetkin, German Marxist, seconded
Luise Zeitz in approving a resolution to establish International Women’s Day at a
meeting of the 2nd Socialist International in 1910.
Red Frog
March 8, 2018
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