Brad Delong,the Marxists and the Long Depression

Last week, I presented a paper at the annual meeting of the American Economics Association (ASSA) as part of a joint session between the AEA and the Union for Radical Political Economy (URPE).  At this joint session, Marxist and heterodox economists presented papers and mainstream economists commented on them as ‘discussants’.

My paper was entitled ‘Depressions, recessions and recoveries’ (Recessions,depressions and recoveries 071215) and argued that the US and global economies were in a long depression that could be distinguished from a ‘normal’ capitalist economic recession because the economy did not return to the previous economic growth rate in the recovery from a slump.  Instead, economic growth, employment and incomes grew sluggishly well below trend and economies slipped back into recession.  Such depressions are rare; there have only been three: in the 1880s in Europe and the US; in the 1930s and now since 2008.

I argued in the paper that the main reasons the global economy is in a long depression are because the profitability of capital has not recovered and because corporate and public debt remains historically high, both weighing down on investment in technology to boost productivity and growth.  A combination of depressionary factors had come together, not seen since the 1930sOne consequence of this depression is that no amount of mainstream policies like monetary boosts (QE) or fiscal stimulus (government spending) can turn things around.  Regular readers of my blog will know that I have been pushing this thesis from several years (actually since 2009) and I have a book, entitled The Long Depression, coming out in the next month or so.

Now I was expecting that my discussant, Professor Brad Delong, a leading Keynesian economist at the University of Berkeley, California and a close associate of other Keynesians like Larry Summers and Paul Krugman, and a well-known economics blogger, would launch into a detailed critique of my paper.  But no, Professor Delong made no comment at all on my paper.

But lo and behold just a few days later, Delong had an article in the Huffington post, called “Future Economists Will Probably Call This Decade the ‘Longest Depression’”.  In this piece, it seems, that it was Joseph Stiglitz, not me or other Marxist economists like Anwar Shaikh, or even Paul Krugman (see various quotes in my paper) that have characterised the economy is being in a depression.

Delong comments “Unless something big and constructive in the way of global economic policy is done soon, we will have to change Stiglitz’s first name to “Cassandra” — the Trojan prophet-princess who was always wise and always correct, yet cursed by the god Apollo to be always ignored. Future economic historians may not call the period that began in 2007 the “Greatest Depression.” But as of now, it is highly and increasingly probable that they will call it the “Longest Depression.”  Now that’s praise indeed for Nobel prize winner, Joseph Stiglitz.

Delong continues in his article “back before 2008, I used to teach my students that during a disturbance in the business cycle, we’d be 40 percent of the way back to normal in a year. The long-run trend of economic growth, I would say, was barely affected by short-run business cycle disturbances. There would always be short-run bubbles and panics and inflations and recessions. They would press production and employment away from its long-run trend — perhaps by as much as 5 percent. But they would be transitory.  After the shock hit, the economy would rapidly head back to normal. The equilibrium-restoring logic and magic of supply and demand would push the economy to close two-fifths of the gap to normal each year. After four years, only a seventh of the peak disturbance would remain.”

But this was wrong, thanks to Stiglitz.  Says Delong “In the aftermath of 2008, Stiglitz was indeed one of those warning that I and economists like me were wrong. Without extraordinary, sustained and aggressive policies to rebalance the economy, he said, we would never get back to what before 2008 we had thought was normal. I was wrong. He was right.”  Okay, so we Marxist economists will get no credit from Delong for picking out the current state of the global economy as a depression.  That apparently goes to mainstream economists like Stiglitz or Krugman, or Larry Summers with his ‘secular stagnation’ thesis.

At the joint AEA-URPE session, Brad Delong may not have commented directly on my paper but he did criticise the Marxist analysis based on profitability as being the mirror image of the right-wing, pro-banking sector wing of the mainstream.  Delong said that former US treasury secretary Timothy Geithner during the Great Recession held to the view that economic policy must be devoted to restoring the ‘confidence fairy’ for big business and finance, thus opposing bank regulation or government interference in any way.  The Marxists were the same because they argued that nothing could be done to turn an economy around unless the profitability of big capital rose.  In a way, both were ‘waiting for Godot’ – my phrase not Delong’s.

That’s wrong, said Delong.  Something can be done.  We can’t wait for the economy to recover under its own steam as the likes of Stanford monetarist John Taylor or Martin Feldstein argued in a mainstream economic debate at ASSA – or apparently Marxist economists.  We can solve it with economic policies now.

You see the problem is not profitability.  As the great Joe Stiglitz said at the mainstream ASSA debate, the problem is the lack of demand bred by rising inequality of incomes and wealth, and/or secular stagnation caused by excessive savings. Delong again: “The problems we face now, Stiglitz points out, include “a deficiency of aggregate demand, brought on by a combination of growing inequality and a mindless wave of fiscal austerity.” He says the only cure is an increase in aggregate demand, far-reaching redistribution of income and deep reform of our financial system. The obstacles to this cure, he writes, “are not rooted in economics, but in politics and ideology.”

You see, we Marxists are wrong because there are policy actions that can put things right and yet we do not advocate them.  Delong’s position sums up the view of the Keynesian ‘left’.  The crisis in capitalism can be solved within capitalism in the usual ‘social democratic’ way through increased public spending and progressive taxation on inequality.  In his article, Delong calls for “debt relief to unwind the overhang and 2) much tighter financial regulation to prevent the growth of new fragilities. And if those prove inconsistent with full recovery, then we need massive government spending on infrastructure and other investments financed by money printing until full employment is reattained.”

Those who read my blog regularly will know that I have attempted to show that the causes of the Great Recession and the ensuing Long Depression (first noticed by Joe Stiglitz according to Delong) were not a ‘lack of demand’ or rising inequality.  (Does inequality causes crises). These are symptoms or descriptions of the crisis not the causes.  The causes lie with the profitability of capital remaining so low and debt being so high, even after the Great Recession.  Bank regulation, quantitative easing, fiscal stimulus in some countries and other measures have failed to get major economies back to pre-crisis trend growth.

Marxists are not opposed to bank regulation (but public ownership would be better); we are not opposed to progressive taxation and/or closing the tax gap (avoidance and evasion), or government spending on education, infrastructure or health.  Such measures can only help labour at capital’s expense.  But that is the point.  Such measures will severely undermine the profitability of capital.  So they are opposed by the ruling strategists of capital.  ‘Social democratic’ reforms were conceded (reluctantly) to labour pressure in the ‘Golden Age’ of the 1950s and 1960s when the profitability of capital was high.  But after profitability fell to lows by the early 1980s, the ‘neo-liberal’ counter-revolution of lower corporate taxes and taxes on the rich, bank deregulation, trade union restrictions and privatisation became the norm.  This was no accident.  It was done to drive up profitability with some success.

It is an illusion on the part of Delong and Stiglitz that capitalism is prepared to return to that era to save itself with ‘extra demand’.  The ‘second coming’ of social democracy (to use Delong’s phrase) is not on the agenda.  And anyway it would not work, in my view.  Meanwhile the global economy stumbles on in its Long Depression, as discovered by Joseph Stiglitz and as revealed by the shocking start to the year for stock markets and economies globally.

18 Responses to “Brad Delong,the Marxists and the Long Depression”

  1. SimonH Says:

    To me waiting for the second coming of social democracy is waiting for Godot.

  2. fosforos17 Says:

    If this were about priority in use of the word “depression” I might put in a claim, since I have been using that word to describe the world capitalist economic conjuncture since 2000. Except that, unlike Roberts and the other economists he named (except Anwar Sheik) I have been looking at it in terms of the Long Waves. That is to say, as a Kondratiev Depression, resulting from the exhaustion of the long hydrocarbon-based prosperity. The depression is particularly severe and lengthy as a result, not of income inequality, low final demand, or low profitability (all these being symptoms) but of the tremendous ecological debt (exhaustion of the real-profitability-potential of the land and all mineral resources) and the equally humungous financial overhang (the capitalized values of privately and state owned mineral reserves and the accounting debt created to enable that mass of fictitious capital). Since we are still a long way from the worldwide proletarian socialist revolution that would *begin* the long transition from the capitalist mode of production to the communist mode of production, the next Kondratiev upswing–founded on a technological revolution stemming from the combination of silicon-based intelligence with total transition to a nonhydrocarbon energy system–will take place, (if allowed to take place at al), within the institutional structure of the world state/monopolycapitalist economic system. And that absolutely requires, in an unanticipated way, an expropriation of the expropriators through the ruthless destruction (as Marx, by the way, gave credit to Ricardo for anticipating) of the *capital values* expressing the wealth of key elements of the global ruling class. That must be effectuated through imposition (starting with the US and perhaps the EU as well) of a high, and annually increasing, tax on the production of all carbon-based fuels, imposed at the well head, minepit, or point of direct or indirect import. It is clear that enough profitable investment opportunities would be created, by the need for fastest possible transition to a nonhydrocarbon economy, to set off the upswing of a new Kondratiev wave and thus end the longest depression. Let me just add that the Saudi policy of genocide in Yemen and piratical jihad in Iraq/Syria is a symptom of the suicidal resistance to be expected from hydrocarbon-based capital to any attempt to save the planetary ecosystem by the expropriation of their expropriated wealth. The planet’s demand for radical political action could not be clearer or stronger.

  3. Victor Onrust Says:

    For years I am a fan of decimal (ISO) date notation i.e. 151207. If you don’t like that you should use some delimiter: 07/12/15. 071215 is not very handy.

  4. George (Γιώργος) Says:

    This is not new Michael. The progressive wing of the ruling classes and their ideologists (e.g Keynesians) may finally come to acknowledge certain aspects of the case that radical critics (e.g marxists) have been putting forward all along, but these points can never be driven to their full logical implications. So, for them, of course its Joseph Stiglitz and not you.
    But in my view, what truly separates “us” from “them” is not the old dichotomy between reforms and revolution. I have seen, here in Greece, how hard-line revolutionary talking goes hand in hand with total inactivity in the name of “socialism or nothing”. What gives us -as classes on the downside of advantage- the upper hand, is rather the knowledge that economic phenomena of this magnitude are not “problems” waiting for clever economists to provide morally minded politicians with clever solutions. They are socially mediated situations. They are products of social relations and relations of power.
    So, equality and financial regulation are first of all OUR demands. They are not ends in themselves, but legitimate instances in the process of class struggle. Yes, social democracy once addressed them, riding on the massive profits of the capitalist golden age, but today, how can they be fulfilled without putting in danger the whole hegemony of capital. If not us, then who?

  5. billjefferies Says:

    Its curious to describe the current phase of the world economy as a Great Depression, for the simple reason, it’s not.

  6. SimonH Says:

    You might want to elaborate a bit there Bill. Obviously things aren’t the same as the last Depression but considering all the changes that have happened why would it be?

  7. Edgar Says:

    If it isn’t a great depression then it is certainly more than a blip and is a contraction that has only occurred a few times in history. I think this is pretty much accepted by most orthodox and heterodox economists.

    I would argue that 1929 was a great crash even if China and other developed economies were not experiencing it. As Simon says things have changed somewhat.

  8. John Says:

    Have you read David Kotz’s latest book, Michael? What are your thoughts on his work?

  9. Jack Ferrara Says:

    Dear Dr. Roberts,
    I am doing some independent research into Marxist Political Economy and I recently found your blog and I am wondering if you might have the time to add some perspective to a couple of questions I have? Let me know at


    Jack Ferrara

  10. B.L. Zebub Says:

    Prof. DeLong should make up his mind.

    This was him in June 2013:

    “Summoning the confidence fairy? Right now I make fun of the people who claim they know how to do so.[i.e. the Austerians] But it is the case that credible fiscal contraction in the future is expansionary now precisely because it has effects on perceived likely future interest rates and future tax rates. To the extent that you have to do a deficit reduction down-payment now to make fiscal contraction in the future credible fiscal contraction now can be expansionary. That was the basis of Clinton administration economic policy in 1993 and 1994. And that seems to have worked relatively well. Summoning the confidence theory via fiscal contraction is not an obviously silly thing to do.”

    The theme, DeLong says, is confusion. It shows.

  11. N. Says:

    These people are in denial of the real causes of the crisis. The argue that the trigger is the main problem:

  12. Jack Rasmus Says:

    The 2008-09 financial crisis and real contraction is certainly not a ‘depression’, measured by any indicator one may choose. At the same time, it’s not a normal recession, when compared to the prior 11 downturns in the US since 1947. Some have been calling it a ‘great recession’, but they then don’t explain quantitatively or qualitatively why is it ‘great’. So we get an explanation by ‘adverbs’ (which is not economic analysis). The 2008-15 scenario is simply ‘worse than’ a normal recession and ‘not as bad as’ a bona fide depression. I’ve chosen to call it an ‘Epic’ recession, which is a financial induced crash followed by short, shallow recoveries and similar short relapses or recessions. In the US, it’s been ‘relapses’, or thus far 4 single quarter contractions to near zero, zero or negative GDP growth rates; in Europe it’s been a bona fide double dip in 2011-13 and average annual growth of -0.5% to 1.0%; in Japan, no less than 4 recessions since 2008 (and actually a fifth this past year, until Japan quickly doctored up its stats in a quick revision of data within a week, to show a 1.8% positive swing in growth.

    A few minor comments: first, the US was not in a depression in the 1880s. The great recessions were in the 1870s and 1890s, both precipitated by land-speculation in railroad bonds. The 1880s was an interregnum in growth collapse.

    The current 2008-2015 period is more like the 1907-1914 financial crash (1907-08) followed by a short-shallow recovery and double-triple dip recessions in the aftermath, until the massive fiscal injection of wartime production in 1915 began.

    Re. the DeLong-Roberts debate, it reveals that mainstream ‘hybrid’ Keynesianss (De-Long, like Krugman and others can’t really be called Keynesian, since they adhere to the IS-LM fiction in one form or another, which is not Keynesian, but rather a bastardized version that served to ‘rescue’ bankrupt neoclassical explanations of crises), has run out of explanations that are credible. So they have to ‘borrow’ from others, including Marxists.

    Mainstreamers (whether ‘hybrids’ or ‘retro-classicalists’ like Taylor, who simply pour the same old wine into their new bottles), do not understand the negative interactions between debt and income that are driving the recent half-rate US and global recovery since 2009, that is now even running out of steam. They see the lack of income as the linear driver of the condition. Conversely, my Marxist friend, Roberts, sees profitability as the linear driver. Both are not wrong; both are only part right, however.

    ANd both cannot get it right because the conceptual frameworks of both hybrid Keynesians and contemporary Marxist analysis (based on the falling rate of profit hypothesis) are insufficient to explain the trajectory of 21st century global capitalism. Both need a major overhaul, to understand more accurately how and why financial cycles and variables interact with real variables (of which profit is one) and how they mutually determine each other.

    Trained in GDP real analyses, mainstream academic economists simply don’t understand financial variables and their role. Contemporary marxists haven’t really explored the potential in Marx for understanding the dynamics of exchange value and the circuit of capital reproduction after the production of value with productive labor has occurred and before capital in its exchange forms is recommitted to production. Disproportionality analyses, which Marx suggested, between financial asset and real assets is the ground they should be examining in order to understand financial cycle-real cycle interactions necessary to understand 21st century capitalism. But this requires a revision of the Marxist framework.

    As for the hybrid Keynesian framework used by DeLong and Stiglitz, it’s pretty much bankrupt and cannot explain the various new anomalies of 21st century capital that are driving it toward real stagnation amidst financial instability.

    Dr. Jack Rasmus
    (see my blog,, for further explanation of my ‘third’ view–actually a new Marxist view–or my website,, or my new book, ‘Systemic Fragility in the Global Economy’, which I understand Roberts is reviewing, and I his forthcoming book as well. I anticipate an interesting and lively debate between us, which I assure all will be handled more professionally than DeLong unfortunately has handled his with Michael.

    • michael roberts Says:

      Jack, Thanks for these stimulating comments on the AEA debate. I think I try to explain what was ‘great’ about the recession of 2008-9 in my book, The Great Recession and in my ASSA paper and my upcoming book, I try to be precise about what is a depression. So I hope it is more than ‘adverbs’. The depression of the late 19th century spread across 1873-1897 to differing degrees and length depending on the country, UK or US. Again I deal with that in my upcoming book.

      The ideas and arguments in your book deserve a longer and more thoughtful review than I have managed so far and I hope to return to it on this blog soon. As you are going to review mine when it finally gets out of the black hole that is the publisher, we shall be able to conduct a lively debate on our agreements and differences, not only professionally but on a friendly basis. best MR

  13. jschulman Says:

    I’d love to hear Michael’s assessment of this piece, which appeared in NEW POLITICS a couple of years ago:

    • michael roberts Says:

      The paper makes many good points on the reformist nature of ‘taxing the rich’, in particular that the kernel of the crisis is in the profitability of capital, so just trying to redistribute the surplus may help labour but not solve the underlying problem. But I disagree that the public ownership of the banks is no longer a radical demand from labour and weirdly the paper ends by arguing that US capitalism could use state spending to achieve full employment within the capitalist mode of production and so solve its problems. The paper has no discussion of what should be done with the top 500 US companies, including the banks, that control the economy.

  14. Frank Kavanagh Says:

    Isn’t one of the reasons that Finance capitalism is in trouble is because Interest-bearing capital creates Revenue not Capital, so inevitable decline.

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