Crisis or breakdown?

This is a tricky post to do.  I am pretty tentative about what I’m going to say.  It’s a bit like talking out loud.  But then I suppose that’s what blog posts are.  They are fairly quick responses to events or issues.  They are not carefully planned academic papers with rigorous theory backed up by well-referenced sources and comprehensive empirical evidence – as all good analysis should be!  So bear with me.

The issue is this: is Marx’s causal explanation of capitalist crises just that: a theory of recurrent and even regular crises, of booms and slumps in capitalist accumulation?  Or is it more than that (or alternatively), a theory of breakdown, namely an explanation of how capitalism cannot continue indefinitely (even if it has regular crises), but must reach its limits as a system of social organisation, then break down and be replaced by a new system?

This is an issue or debate that some of you who read my blog have raised in various places.  So what follows is my attempt to answer that question.  I think we can first clarify what we mean by crisis or breakdown by some schematic graphic examples.  The Marxist theory of crisis and its laws could  described as showing that capitalism proceeds in cycles of boom and slump like this:

Such a path of economic development is hugely wasteful of human life and time, as it involves not just the loss of potential output or use values to society, but also loss of employment and livelihood of hundreds of millions of working people and their families at recurrent intervals.  It breeds social inequality and instability, and frequent wars.  But unless the working class seizes political power and replaces the capitalist system with another, the graph suggests that capitalism will find a way out.  There is no permanent crisis in the sense of total endogenous breakdown.

Now the ‘breakdown theory’ of capitalist crisis would look more like this graphically.

First, the capitalist economy rises as it is still a progressive system in developing the productive forces, but eventually the contradictions of capitalist accumulation become so great that capitalism becomes a fetter on human progress.  It no longer reduces labour time or increases use values sufficiently.  Capitalism then heads for breakdown and the final confrontation with the working class.  It’s socialism or barbarism.

The most well-known proponent of this breakdown interpretation of Marx’s theory is Henryk Grossman (see my book, The Great Recession, for further analysis).  Writing in the 1920s onwards, Grossman was the first to point out, in opposition to the dominant Marxist underconsumption theory of crisis propounded by the Stalinist Comintern or Bukharin’s disproportional theory, that crises of capitalism and its final collapse  are explained by Marx’s law of the tendency of the rate to fall.  But even more important, it was not specifically the fall in the rate of profit that provoked a crisis or slump, but a fall in the mass of profit or surplus value.  It was this observation that Grossman reckoned was “decisively important ” in Marx’s theory of crisis.

Moreover, for Grossman, it was crisis and breakdown, as the title of his key book confirms (The law of accumulation and the collapse of the capitalist system (also a theory of crisis).  Capital goes into crisis because of lack of sufficient surplus value for accumulation.  At a certain point, the drive to accumulate will be blocked by the need to fund workers’ living standards and capitalist consumption. The law of  profitability (i.e. a rising organic composition of capital driving down the rate of profit) can be counteracted by various factors: a higher rate of surplus value, a cheapening of the cost of constant capital, a quicker turnover of capital, foreign trade (globalisation), the driving of wages below the value of labour power etc.  But none of these counteracting factors will be able to stop ‘the law as such’  eventually operating to drive down profitability and finally the mass of profit.  The rate of profit can then only be reestablished by reducing the living standards of the workers that create value and writing off the value of existing ‘dead’ constant capital.  When the counteracting factors become inadequate, capitalism heads towards breakdown.

But Grossman did not think capitalism would collapse ‘automatically’, without the intervention of human action.  Indeed, the class struggle would come into play as workers and capitalists battled over the declining mass of surplus value.  It could come to a choice between socialism and barbarism, but as Grossman’s disciple, Paul Mattick puts it: “in principle, in developed capitalism, any great crisis can become the final crisis. But if it does not, it remains a presupposition for further accumulation. But permanent crisis is just as conceivable in the Marxian system as surmountable crises…. under present day conditions of world capital, a state of persistent economic and political crisis can arise as it just as possible that the crisis will give capital a chance of beginning a new expansion“. (Economic crisis and crisis theory, 1981).

Robert Kurz argues something like this in his extremely profound paper of 1995, The apotheosis of money: the structural limits of capital valorization, casino capitalism and the global financial crisis – a paper that some readers of my blog have brought to my notice.  Kurz highlights some key indicators in modern capitalism that tell you that it is in its terminal stage. First, there is the growth of unproductive labour. Most labour is increasingly employed in sectors that do no provide surplus value for accumulation, but in circulating existing capital or preserving the capitalist state. I agree that this is a very telling indicator of the decline in the ‘progressive’ nature of capitalism on the productive forces.  I have made a rough estimate of how much employment in the US goes into unproductive activities (i.e. sectors that do not create new surplus value) compared to those that are productive (mainly goods and transport).  The result is clear.

Kurz is not convinced that the huge supplies of value-creating labour in the so-called emerging economies can be exploited to compensate for the growing unproductive nature of mature capitalist economies.  In that sense, the terms, ‘the last stage of capitalism’ (Lenin) or the ‘collapse’ of capitalism are very relevant.

Another key indicator of the terminal stage of capitalism for Kurz is the huge growth of state credit or debt, which has become a ‘new normal’ condition for capital to accumulate.  Fictitious capital in the form of state credit and the abolition of a physical base to money with the ending of the gold standard are big signs.  Money is no longer a reliable store of value because value is increasingly difficult to extract from labour.  Indeed, financialisation and the pyramid of private credit that eventually collapsed like a house of cards in 2007 suggest the decaying nature of this formerly progressive mode of social production.

Sure, says Kurz, the globalisation of the capitalist mode of production into non-capitalist areas and  the development of the world market is an important way in which capitalism can stave off breakdown or collapse.  It is a powerful counteracting factor, but yet another indication that capitalism is in its mature phase historically.  He doubts that China or Asia can provide a new lease of life for capitalism with exploitation of technology and labour there.  But Kurz was writing in 1995 and can we say a decade and half later that China/India/Asia is not providing new capitalist accumulation?  Has “the basis of capitalist reproduction” truly reached its absolute limit, as Kurz argues?  It’s true that the great expansion of value creation in China and the BRICs did not stop the Great Recession and the ensuing Long Depression we are now in.  Don’t those events confirm the view that capitalism is terminally ill?

Kurz recognises that capitalism can revive itself after crises and slumps through the devaluation of capital but he doubts that after even the most destructive process that capitalism can any longer rise from the ashes of a long depression like Phoenix for two reasons.  First, it can no longer properly exploit the technical advances to deliver new levels of profitability and second, the productive sector in industry is now too weak and small to do so.  So capitalism is ‘a walking corpse’, that cannot start again from the beginning on a new purified terrain.  Society is faced with proceeding to socialism or back to pre-capitalist barbarism, because it cannot continue in its current form.

The idea that capitalism can no longer exploit technology successfully is the theme adopted by David Graeber in his insightful piece, Of flying cars and the declining rate of profit in the Baffler, 4 June 2012.  Graeber brilliantly argues that capitalism has failed to deliver on the hopes and promises of technological advance in the last 50 years: what happened to robot factories, moon bases, personal jet packs and robots in the home?  Leisure time has not increased for the average working household, on the contrary.  Blue sky research that does not require or lead to immediate practical applications is disappearing as universities fight to provide business with any small improvement in profit-making rather than innovations that could transform society.  Bureaucracy rules: “no population in history has spent nearly so much time engaged in paperwork”.  Modern capitalism cannot afford to solve the climate crisis and other environmental nightmares, or find a cure for cancers.

Why has it failed?  Because capitalism is a mode of production for profit; and profitability is in secular and terminal decline, in Graeber’s view.  Graeber says there are three claims that capitalism makes to justify it as a progressive mode of social organisation: it fosters scientific and technological growth; second, it increases overall prosperity; and third, it creates a more secure and democratic world.  But it increasingly fails to deliver on all three: “we can feel especially confident that none of this will happen within the framework of contemporary capitalism or any form of capitalism”.

I have great sympathy with the Kurz-Graeber view, but with reservations on timing.  I’m not so sure that emerging capitalism cannot provide a new period of capitalist development if the end of this long depression does not lead to the replacement of the capitalist mode by political action from energised working class movements.  Also, it is by no means certain that mature capitalism cannot still develop and exploit new technologies, even if it has failed so far, in areas like robotics, artificial intelligence, 3d printing and nanotechnology. Indeed, some argue that US technology in developing shale oil and gas will shift the balance of economic power in energy back towards North America and the mature capitalist economies and away from the Middle East and Asia.

So which is the right schema?  Crisis or breakdown? Well, I don’t think either is the full story.  I prefer a schema that looks like this and basically combines both the crisis and breakdown graphics:

So there are continual recurring crises or cycles that spin round the secular trend for capitalist development that spreads over centuries.

Michael Lebowitz makes a telling case for regarding the law of the TRPF in this dual nature, in his old essay of 1976 entitled Marx’s falling rate of profit: a dialectical view.  Lebowitz rejects the view that the Marx’s law of profitability is just some slow long-term secular trend, but instead should be seen as showing that capitalism faces a continual barrier, namely the regular renewal of capital itself.  By this, Lebowitz means that the law of profitability leads to “the tendency to create a world market as capital strives to conquer the world for its market”.  But growth leads to a barrier of insufficient profit which has to be overcome for more growth. The barrier of falling profitability must continually be overcome by crises, but “at a certain stage in its development, it will drive towards its own suspension (abolition).”  So there are continual crises, but capitalism is also marching towards breakdown or a terminal stage.

This whole debate on whether Marx’s law of profitability is one of recurrent crises or one of breakdown starts from the premise that the TRPF is the underlying cause and does not involve alternative theories of crisis like underconsumption (overproduction), disproportionality or excessive surplus, or monopoly stagnation.  So if the law of TRPF is key, can empirical evidence of what has happened to the rate of profit in the mature capitalist economies or globally help us decide whether capitalism is in terminal decline and heading towards breakdown and collapse from which it cannot escape or is just in yet another crisis or slump or depression from which it will eventually recover?

Let start with the US.  What does the long-term historical evidence on the US rate of profit show?  Below is a graphic that takes the US rate of profit back to 1869, based on data taken from Dumenil and Levy and updated by me.  So it is full of caveats on the measurement issues (which we have debated at length on this blog).  The graphic suggests that there has been no particular secular decline in the US rate of profit to support the breakdown theory.  It seems that recurring crises that US capitalism recovers from and then renews profitability for a while is a more accurate scenario.  But we can see a secular decline since the 1960s.   So maybe that was the point when US capitalism entered its ‘terminal stage’.

A recent paper by Robert J Gordon, Is US economic growth over?, NBER August 2012, argues the US is in just such a terminal stage.  Indeed, Gordon argues ‘provocatively’ that the rapid technological progress under the capitalist mode of production in the last 250 years is over.  The ability of capitalist accumulation to foster economic growth is faltering and real GDP per capita, at least in the US economy, will be slower that in any extended period since the Civil War, when US capitalism first sprung onto the world arena.   Gordon argues there are six headwinds that will slow future innovation:  an ageing population in the mature economies; rising inequality; an increasing lack of competitive advantage for the mature capitalist economies; poorer education because public investment in education is being destroyed; increasing environmental regulations; and excessive debt.  Gordon concludes that US real economic growth could fall to just an average 0.2% a year for the foreseeable future compared 2-3% of the past.  Whether those headwinds justify such slower economic growth is open to question.

Gordon suggests that capitalism drove the productive forces (and thus economic growth) upwards from about 1750 to 1950.  But now we are in the downward spiral of capitalism that no longer takes the productive forces forward.  He exhibits this in a graphic showing UK and US economic growth rates over the period.  Capitalism, at least in the mature economies, has had its day.

But can capitalism get a further kick forward from exploiting the hundreds of millions coming into the labour forces of Asia, South America and the Middle East?  This would be a classic way of compensating for the falling rate of profit in the mature capitalist economies.  In my recent paper for the 2012 AHE/IPPE conference in Paris (a world rate of profit), I captured the work of John Smith in his excellent paper, Imperialism and the law of value, 2011, which showed the massive increase in the global industrial workforce, now well over 600m people.  Most important, while the industrial workforce in the mature capitalist economies has shrunk to under 150m, as unproductive labour has risen sharply; in the so-called emerging economies the industrial workforce now stands at 500m, having surpassed the industrial work force in the  imperialist countries by the early 1980s.  In addition, there is a large reserve army of labour composed of unemployed, underemployed or inactive adults of another 2.3bn people globally that could also be exploited for new value.

And even if the mature capitalist economies are in ‘down mode’ that may not be the case for the world economy.  When we look at the situation, we see that, on a yearly average basis, world growth has been by far the greatest since 1980 (see

Population growth rate prior to the year 1 C. E. based on McEvedy & Jones, “Atlas of World Population History”, 1978; later population as well as GDP based on Angus Maddison estimates; energy growth estimates are based on estimates by Vaclav Smil in Energy Transitions: History Requirements, and Prospects, adjusted by recent information from BP’s 2012 Statistical Review of World Energy

But that is not to say this potential labour force will ever be properly exploited by the capitalist mode of production.,  Indeed, in my paper, I show that the world rate of profit (not just the rate of profit in the mature G7 economies) stopped rising in the late 1990s and has not recovered to the level of the golden age for capitalism in the 1960s, despite the massive potential global labour force.  It seems that the countervailing factors of foreign investment in the emerging world, combined with new technology, have not been sufficient to keep pushing up the world rate of profit, so far.

In his insightful book, (The rise of China and the demise of the capitalist world economy, 2008),  Minqi Li argues that the mature capitalist economies of the UK and the US have experienced a secular decline in the rate of profit from the 19th century on, confirming Marx’s law and suggesting that the ‘progressive’ nature of capitalist accumulation in these economies is over.  He reckons that the global warming crisis and the peaking of energy production will make it impossible for capitalism to avoid collapse or breakdown.  Like Gordon, and echoing the views of Immanuel Wallerstein, Li predicts that world economic growth will grind to halt by the 2040s as a result.  Capitalism cannot survive beyond that and there must a new system of human social organisation or total chaos.  “Multiple economic, social, geopolitical and ecological forces are now converging towards the final demise of the existing world system, the capitalist world economy.  All have reached their advanced phases and this demise will take place in front of the eyes within the lifetime of many readers”.  Socialism or ecological  disaster is Minqi Li’s forecast.

I reckon that capitalism will not just collapse of its own accord.  Yes, crises or breakdown is endogenous because of the main contradiction within the capitalist mode of production, of accumulation for profit and not need.  But also it is possible for capitalism to recover and soldier on ‘endogenously’  when sufficient old capital is destroyed in value (and sometimes physically) to allow a new period of rising profitability.  Capitalism can only be replaced by a new system of social organisation through conscious action of human beings, in particular by the majority class of people (the working class globally). Without such conscious action, capitalism can stumble on or society may eventually fall back into barbarism.  By barbarism, we mean a drop back in the productivity of labour and living conditions to pre-capitalist times.  The Roman republic rose tooth and claw over 500 years based on free peasant farming and land owning estates.  Then a predominantly slave-holding Roman empire slid down over 400 years before the European world collapsed into barbarism.  The technology of the Romans (derived from the innovations of the Greeks before them) was forgotten and became unused.  That could happen again and much quicker in world where things move so much more quickly.

16 thoughts on “Crisis or breakdown?

  1. A very interesting post & a subject that should be examined further. Here’s my thoughts:

    There are two main Marxist explanations of crises: the falling rate of profit school & the underconsumption/realisation problem school. I think once it is recognised that there are two types of theoretical crisis, both can be seen as offering valid explanations.

    The two types of crisis are cyclical & breakdown. I realise that ‘breakdown’ is an emotive word & most Marxists shy away from it. I have no problem with it because I firmly believe that capitalism is historically limited & that breakdown doesn’t refer to something totally separate from the class struggle. I see a breakdown crisis relating to a falling rate of profit within the constraints of a finite earth. Part 3 of Volume III of Marx’s Capital, ‘The Law of the Tendential Fall in the Rate of Profit’ argues capital accumulation itself (i.e. economic growth) causes the ratio of constant capital (factories, machines, raw materials, etc) to grow relative to variable capital (labour time). This is known as the rise in the organic composition of capital. There are offsetting tendencies, but all things being equal, as the ratio grows so the rate of profit falls. Now put this in the context of supply side constraints, particularly population growth & so labour time, we can see that to offset the fall in the rate of profit under conditions where there can be no growth in absolute surplus value, the capitalists have to increase relative surplus value. In otherwords, take more of the value created by labour so labourers keep even less of the value they create. Without offsetting increases in the productivity of subsistence goods the living standards of workers fall. Under such conditions the class conflict becomes more obvious & revolutionary ideas are more appealling. An actual worldwide socialist revolution becomes a real, even likely, possibility.

    But can the falling rate of profit provide an explanation for the business cycle? I don’t think so. I think once we recognise that paying with credit is not the same as paying with money & that debts have to eventually be paid off with money (at least for individuals; for corporations & governments they can only become a certain percentage of income), we can see that values can vary from aggregate prices. Once it’s realised that debt saturation has been reached there’s a credit crunch, financial crisis & then recession. I think this offers an explanation for cyclical crises (not necessarily all of them as there can be other shocks, but the abstract cyclical crisis).

    None of this is to dispute that behind the current crisis of overproduction lies the falling rate of profit. That financialisation, even the fiat money regime, is a reaction to this profitability crisis. That what we have now is more than an abstract cyclical crisis. That’s not to say it’s a foregone conclusion that capitalism is finished. It may be that the 1930′s had a similar profitability crisis & the advent of cheap energy (oil/electrification) along with the massive capital devaluation of the depression & WWII restored the rate of profit. This time around it’s harder to see a way out for capitalism.

    All this brings us to an explanation of crisis that recognises both the falling rate of profit & the realisation problem. A unified Marxist theory of crisis.

  2. Thanks for another interesting blog post. I think The article on the TRPF by Basu and Manolakos is quite powerful evidence (the variable is significant at the 1% level they claim). (Though I think they have a major algebra error on page 8.)

    I share your pessimism about the imminent and inevitable breakdown of capitalism. Each time new markets have been discovered to ‘buy’ the system’s way out of trouble, it hasn’t always been obvious in advance where those markets would be, and there’s no reason to suspect it would be different in future.

    One question: if (a big if) the MMTers are correct about credit effectively being created out of nowhere by commercial banks, does that conflict with the Marxist view of financialisation being grounded in surplus value i.e. in the productive economy?

    1. Thanks for reminding me about the Basu/Manolokos paper. I had forgotten about it. It uses the same Dumenil-Levy data for the US rate of profit going back to 1869 as I used in the post. It concludes that there are long waves in the US rate of profit with upward and downward phases. I reached this conclusion earlier in my book, The Great Recession, but I dont agree with their particular wave designations. But they confirm that the rate of profit plays a key role in the health of otherwise of US capitalism in the last 150 years.

      The MMT guys tell us that banks make loans first on demand and then create the liablities accordingly (from deposits, loans and reserves) – double bookkeeping. But waht they dont say is that this new money must eventually by reconciled with new value or the loans will not be honoured and defaulted on. Then the money will disappear as it was fictitious. The MMTers are not explaining what happens in the real economy which eventually drives loans but merely that central banks cannot influence the quantity of money because it is demand-led (endogneous) not supply led (exogenous).

  3. @michael roberts

    How do you define unproductive labor? In capitalism any labor that is being paid by variable capital and it is of a menial (non administrative) character, is productive. It has nothing to do if this labor is manual or mental, if it is industrial labor or in the services. Can you clarify this point please?

    1. Dimitris
      This is always a tricky one. Labour is unproductive if it does not add NEW value for the accumulation of capital. Wworkers in public sector services do not add such value are unproductive. Workers in sectors that just circulate capital like real estate or finance deliver surplus value for their owners, but at the level of the whole economy, these sectors are extracting value from those sectors that create new value for accumulating capital, like manufacturing or transport. It does not matter if workers do mental or manual work in such sectors, they are still productuve for capital accumulation. Productive labour is in relative decline compared to unproductive labour. Capitalism needs more and more unproductuve labour (state machine, defence etc as well as health and education services) to keep social stability and a relatively effective labour force. But that also weakens its ability to reproduce new surplus value that must come from productive labour. Anyway, that is how I wanted to explain it in the post.

      1. Michael

        I agree that the workers in public sector services are unproductive but what about the workers in the (private) finance that are paid by variable capital, or the workers in the insurance industry that prodoyce insurance packages (products)? How can we define them as unproductive without reffering to the content of their labor, wich is problematic to begin with?

        There are two ways to analyze and define productive labor: first any labor that is organized in a capitalist labor process and is exchanged (payed) by variable capital is productive (it doesn’t matter if it produces a car or a vacation package, or a banking or insurance product, for example). Second that the product that reaches the consumer, the one that is actually buyed (and the surplus value is realised) is a different product than the one that is produced in a factory or an office. It is different because there are embeded in it other forms of labor (manual or mental) like transportation, storage, advertising etc. So even if the use value of a product might remain the same from the factory to the consumer, the exchange value (and that is what concerns the capitalists) changes (sometimes of course even the use value of a product is changed because of advertising). So for examle a car that is sold in a shop is a different product than the one that has been produced in the factory, The first, we might argue, is an ensemble of various products, produced totally capitalistically, ie the original car, the transportation process, the advertising, the storage etc. So the only division between productive and unproductive labor that we can defend is the one between labor that is been exchanged with variable capital and it is menial (it does not have control over the labor process) and mangerial- executive labor either in the private sector or in the state

  4. Michael, I’m new to your blog (perhaps to all blogs!) and I’d like to congratulate you on it. Marxism remains the best hope for the human race – as you say, the alternative is enviromental destruction and nuclear war which at the very best will kill billions. I must admit though that some of your core arguments seem very close to Mandel’s “Late Capitalism”. Nothing wrong with that but it doesn’t seem to get referenced eg in comparison with Mattick who was (like Kliman) a “state capitalist” theorist. Or have I got this wrong?

    1. Bill
      Thanks for your support. I agree with mandel when he directs us towards the trpf as an explanation of crisis and his attempts to recognise waves or cycles in capitalist accumulation although I don’t agree with his view that crises are endogenous but recoveries are not . And as Mattick shows Mandel is electic and slippery in his analysis. I’m closer to mattick on the causes of crisis and his critique of keynes
      But I dont hold to the state capitalist explanation of the soviet union as mattick and kliman do
      So its a mix!

  5. ‘This is a tricky post to do. I am pretty tentative about what I’m going to say. It’s a bit like talking out loud. But then I suppose that’s what blog posts are. They are fairly quick responses to events or issues. They are not carefully planned academic papers with rigorous theory backed up by well-referenced sources and comprehensive empirical evidence – as all good analysis should be! So bear with me.’

    I want to express my gratitude to Michael Roberts for having the gumption to take up this issue. Nobody wishes to be pegged with the term fatalist or millenarian, and be made to look as silly as those who carry signs stating that the world is coming to an end. Yet, the whole ‘revolutionary’ Marxist movement before WWI interpreted Marx’s Capital as meaning that capitalist accumulation was heading towards breakdown or collapse. And if two world wars and the greatest depression of all were not symptoms of that collapse, then how else could one describe the period from 1914-1945. To the Marxist of that epoch, they saw that period of history as a confirmation of Marx’s theory of capitalist accumulation and described that epoch as a period of decline, general crisis, collapse, breakdown, etc., because capital had become a barrier to itself. Of course, this epoch did not become the ‘final’ breakdown or collapse of capitalism. But this could only have turned out ‘final’ if the working class had been able to make the Imperialist powers pay for their barbarism. But thanks to Social Democracy and Stalinism, and the complete re-structuring of the world capitalist economy, after the massive destruction of the Great Depression and especially WWII, under US hegemony, capitalism was given a new life.
    Very few people will be won to the revolutionary struggle for socialism because some academic Marxist show that Marx’s theory of capitalist accumulation means that capitalism is heading towards breakdown. The usefullness of Marx’s theory is its explanatory power of what is happening right now. The increasing competition amongst the Imperialist powers, the increasing drive to outsource production to the more exploitable South, the massive dependence on incresing use of debt, and the world-wide creation of credit bubbles are all ‘symptoms’ that capital is increasingly becoming a barrier to accumulation in the advanced countries. The responses of capitalist classes to the threat of collapse generate increased attacks on the working class throughout the world-as we are witnessing right now. It is not a matter of recurrent crises, but rather an ‘increased’ difficulty with profitable accumulation and the various responses the Imperialist powers are using to get around their inability to find profitable investments at home.
    Some questions for the doubters of the theory of collapse:
    After every economic crisis, is the technical composition higher or lower?
    After WWII, was the technical composition higher or lower?
    What has grown faster, the ratio of debt to world GNP, or world GNP?
    Did Marx argue that the increasingTCC would cause the VCC to rise faster than the increase in the rate of sv and fall in value of constant capital over the long run?
    Is world debt used to expand productive capacity or to make up for insufficient investment opportunities ‘within’ the circuit of existing capital?
    What has the movement of production to the South done for the ROP and the rate of exploitation on a world scale.
    What would happened to world economic growth if debtedness had not ‘increasiungly’ grown in relation to the rate of growth of the world economy, the enormous growh of unproductive expenditures, and the tremendous movement of the productive apparatus to the South since 1970?
    The answer to the last question: collapse. The real question for Marxist economist is what are the limits of those methods for delaying collapse. But, then there is the possibility of returning to barbarism and another world war.
    In Michael Robert’s article on the world rate of profit he said:

    Marx’s model of capitalism assumes a world economy, or capital in general1. It was at that level of abstraction, that Marx developed his model of the laws of motion of capitalism and, in particular, what he considered was the most important law of motion in the capitalist process of production, the law of the tendency of the rate of profit to fall.
    In Marx’s time, Great Britain was capitalism, and that country would have collapsed had it really been the world. But it was not. Instead, it managed to survive by helping to develop its future rivals in Germany, USA, and Japan (just as the EU,US, and Japan are now doing so in the South.) That was what caused the delay Trotsky referred to in his address to the Third International:
    SEVENTY-TWO YEARS AGO the Communist Party proclaimed its program to the world in the form of a Manifesto written by the greatest heralds of the proletarian revolution, Karl Marx and Frederick Engels. Even at that time Communism no sooner entered the arena of struggle than it was beset by baiting, lies, hatred and persecution of the possessing classes who rightfully sensed their mortal enemy in Communism. The development of Communism during this three-quarters of a century proceeded along complex paths: side by side with periods of stormy upsurge it knew periods of decline; side by side with successes – cruel defeats. But essentially the movement proceeded along the path indicated in advance by the Communist Manifesto. The epoch of final, decisive struggle has come later than the apostles of the socialist revolution had expected and hoped. But it has come.
    Hopefully, working people througout the world will have time to build the organizational power necessary to put an end to capitalism before the Imperialist powers lead us into barbarism

  6. “Capitalism can only be replaced by a new system of social organisation through conscious action of human beings, in particular by the majority class of people (the working class globally).”

    Far be it for me to diss the UK-working class but they seem as far from initiating revolutionary change in the economic model that is capitalism as they ever have been. It seems more likely that change may come on mainland Europe over the next decade or two but not here. Our main left wing party [Labour] is ensconced in the right of center snuggled up against the most right wing Liberal party in living memory and a Tory party which as ever is a tool for capitalism.
    The Greens are on 1 or 2% and the Socialist Workers Party are a shambles as always. The Unions moved to the right in step with New Labour. Half the nation got bought off with this years diamond Jubilee and Olympic extravaganzas and the other half couldn’t give a toss.Thus capitalism [if its ever to die a death] will likely make its last stand exactly where it made its first appearance.Right here.Shame.

  7. For “barbarism” should we not read failed states. Is Greece not the Euro-Haiti? Unless Greece turns to socialism quickly the whole country with the exception of the tiny ruling elite face poverty and social breakdown. It’s already happening apace. Spain is heading rapidly in the same direction and then Italy and France. It’s either endless austerity to preserve the Euro- our modern gold standard- or hyperinflation to destroy mountains of fictitious value and vainly to return to profit. Europe went barbaric in the 1920s and 30s and the same process is underway now. No right minded person wants to be labelled a doomsayer but I found the Kurz paper compelling and profound: capitalism is collapsing in on itself and there no good ( marxist) reason to suppose that it is not ultimately terminal. The privatisation of public services is one indicator of the system aggressively searching out diminishing virgin profits: analogous to the oil companies searching out ever more remote regions for new reserves.

  8. As usual, this is a really thought-provoking and useful post.

    Two points.

    1. No-one wants to be the person with the sandwich board. But…..

    “capitalism is a mode of production for profit; and profitability is in secular and terminal decline, in Graeber’s view”.

    Secular declne seems irrefutable, despite Dumenil & Levy. Terminal? How can we be sure? A significnta increase in the rate of exploitation might postpone a day of reckoning for a prolonged period. But evidence that the major capitalist power, the US is no longer accumulating capital would be a significant indicator of something more than a cyclical downturn.

    2. The comments on un/ vs productive labour are not convincing. If we adhere to Marx’s strict designation, the nurse or techer who works for the state is an unproductive labourer while the same worker performing the same tasks in the privae sector would be productive (of surplus value, not value, surely?).

    But Marx was writing at a time when all functions, save those of the ‘bodies of armed men’ in the state were in the private sector. If schools and hospitals are privatised in this country, this would allow individual capitalists a new lease of life to make profits. But only if the charges for health and education fall on workers will the aggregate level of profits increase. That is, the passing of the workforce into the private sector does not itself create surplus value (although it is very likely to do so without countervailing actions). Instead, in an advanced captialist economy currently there is a (declining) charge on profits in order to help pay for socially necessary goods (although workers actually pay the bulk of those charges though income and increasingly indirect taxation). Transportig that work into the private sector merely confronts capital 9and labour) the the direct charges of the value created.

    But, I want to repeat, another extremely thoughtful and valuable contribution.

  9. I am a regular follower of the blog and as usual I found this to be a very provocative and informative post. You should also consider the work of Giovanni Arrighi who makes a similar claim about the long term prospects of capitalism, though through an historical framework which sees each cycle of capitalist accumulation being dependent upon a new technological (organizational) breakthrough and the rise of a new hegemon in the system. His main claim is that TRPF is countervailed (on a temporary and transitory basis) by increasing financialization and the shift of capital from one geographical center of accumulation to the next. Rather than a final end to capitalism, what is plausible under this scenario is the shift of the center of capitalist accumulation to Asia (and China in particular), possibly underlying some new organizational form of capitalist accumulation, just as the great depression of 1873-1896 led to the birth of a new organizational form (the Chandlerian corporation) and the rise of a new hegemon (the US) beginning to assume its role as the existing hegemon (Britain) was in decline.

    From this perspective, geopolitics become more significant than capitalist dynamics alone, in particular the reactions of the contemporary declining hegemon (the US) in either accommodating or resisting the transition. We should not assume that over the next few decades US-China relations will continue to be as cordial as they are today, and that might pose a greater risk for the world (the ‘return to barbarism’) than the continuation of economic crises alone. In a different way, this is to suggest that states are still important, and that the future of the world hinges upon the emergence of new political and organizational forms just as much as ‘pure’ capitalist dynamics in terms of profit rates.

  10. The “Roman empire slid down over 400 years before the European world collapsed into barbarism. The technology of the Romans … was forgotten and became unused.”

    A mistaken lament. Those who worked the land – the great majority of the people – were in general better off after the end of the Roman empire. (See Chris Wickham, Framing the Early Middle Ages, chapter five) True, the roads for moving armies around the empire might have decayed, and production of luxury goods that aristocrats commissioned from artisans declined, but technology was not really lost. When a new economic order began to grow within late feudalism, the Renaissance quickly retrieved and advanced ancient technique.

  11. The whole point here is that the productive forces that is developing goes beyond the commodity production. Internet and the immaterial production functions better in a system of commons instead of strict commodity production.

    I dont think it is possible to regress into old technologies any longer because ordinary people benefit to much on the new technology. We share musich, movies, news, we communicate with each other on a whole different level, and everything is made free with the internet.
    The new technologies creates a whole different mode of production that goes beyond the old capitalist property relations.

    This is in itself revolutionary and I dont think we understand what extraordinary changes will come with the rise of the computer and internet. We have just begun the journey.

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