Corporate debt, fiscal stimulus and the next recession

The debt owed by corporations in the major economies has risen since the end of the Great Recession in 2009.  With global growth slowing and the prospect rising of an outright global recession recurring ten years after the last one, the debt held by corporations may soon become so burdensome to a sufficiently large number of companies that it triggers a round of corporate bankruptcies.  The banks will then see a sharp rise in non-performing loans. That could lead to a new credit crunch as banks refuse to lend to each other.

Such a credit squeeze briefly erupted last month, when the US Federal Reserve was forced to inject over $50bn into the banking system in order to reverse a very sharp rise in inter-bank interest rates as cash-flush banks refused to help out weaker ones.  The cause of that squeeze was a rise in the supply of government bonds as the Trump administration issued more to cover its rising budget deficit.  Some banks were not able to fund the purchases they were committed to without borrowing. So, as bank reserves held with central banks in US, Europe and Japan have surged, interbank money market volume has declined.

As a result of this shock to the credit markets, the Fed has returned to the market to buy short-term Treasury bills to restore bank liquidity.  So, having ended quantitative easing (buying bonds) and started to hike its policy interest rate last year, the Fed has had to backtrack, cut rates and re-introduce QE again. More than half of central banks are now in easing mode, the biggest proportion since the aftermath of the financial crisis. During the third quarter of 2019, 58% of central banks cut interest rates.

In its latest Global Financial Stability report, the IMF expressed its worry that: “corporations in eight major economies are taking on more debt, and their ability to service it is weakening. We look at the potential impact of a material economic slowdown—one that is as half as severe as the global financial crisis of 2007-08 and our conclusion is sobering: debt owed by firms unable to cover interest expenses with earnings, which we call corporate debt-at-risk, could rise to $19 trillion. That is almost 40 percent of total corporate debt in the economies we studied, which include the United States, China, and some European economies.”

And in emerging markets: “external debt is rising among emerging and frontier economies as they attract capital flows from advanced economies, where interest rates are lower. Median external debt has risen to 160 percent of exports from 100 percent in 2008 among emerging market economies. A sharp tightening in financial conditions and higher borrowing costs would make it harder for them to service their debts.” Tobias Adrian and Fabio Natalucci, two senior IMF officials responsible for the Global Financial Stability Report, said: “A sharp, sudden tightening in financial conditions could unmask these vulnerabilities and put pressures on asset price valuations.”

I have suggested for some time (years) that corporate debt could be the financial trigger for a new recession.  It was housing debt (sub-prime mortgages) in 2007-8; now it could be corporate debt (through ‘leveraged loans’ ie loans companies already loaded with debt).

Now it seems that the IMF is catching on to that possibility.  Ex-Goldman Sachs chief economist and now columnist for the FT, Gavyn Davies, has also latched on to this growing risk.  Davies commented: “I argued in March that this problem was not yet dangerous, but that was probably too complacent.”  He was complacent, he says, because “Although US corporate debt-to-income ratios were already close to all-time peaks, other aspects of company balance sheets and financial flows were in much better shape. Profit margins were still fairly robust, the net financial balance of the corporate sector was in comfortable surplus, interest-to-income ratios were low and debt-to-equity ratios were healthy.”  But now: “In the last six months, the condition of US corporate finances has become more worrying. As in other major economies, profit margins have come under increasing downward pressure, because producers’ wage costs have been rising more rapidly than selling prices to the consumer.”

As a result of shrinking profit margins and slowing revenue growth, earnings for S&P 500 companies are now estimated to have fallen in the past 12 months, down from 20 per cent growth in 2018. Furthermore, earnings growth for the large quoted companies contained in the S&P 500, including foreign profits, has been much higher than the figure for the entire company sector in the domestic economy.  Those figures show that US profits have risen by only 6 per cent in the last three years, compared with an increase of 50 per cent for the S&P 500.  And non-financial sector profits are actually lower than in 2014!  It’s a profits recession.

In a previous post ahead of Davies, I looked at the earnings results of the top 500 companies by stock market value in the US, S&P-500.  With nearly all results in for the second quarter of 2019 ending in June, total earnings (profits) are up only 0.5% and sales revenues up only 4.7%.  After taking into account current inflation, real earnings were negative and revenues barely positive.  And that’s for the top 500 companies.  For the smaller companies, the situation is even worse.  Earnings are down over 10% from last year and revenues up only 2.2%, or flat after inflation.  Excluding the finance sector, earnings would be down 21%.  A sector analysis shows that the retail sector did best as the American consumer went on spending, along with the finance sector.  But productive sectors like technology saw a 6.3% fall in profits.  And that is key. For the first half of 2019, the earnings are in negative territory compared to a 23% rise in the first half of 2018.  And the forecast for Q3 earnings is for a further fall of 4.3% yoy.

Davies reckons that: “The deterioration in profits growth has been accompanied by more aggressive corporate financial behaviour, while real capital investment to expand productive capacity has been cut back. According to the IMF stability report, share buybacks, dividends and merger and acquisition activities — financed by leveraged loans and high-yield bonds — have surged in 2019. These activities have spread to small and medium-sized firms, which the IMF says are particularly vulnerable on the profit front.”  Exactly.  As profitability (and now even the mass of profits) falls, companies have tried to counteract this with financial speculation. That might be okay for large firms with considerable cash reserves but not for smaller companies that are not cash-rich.

So Davies now concludes exactly what I argued some time ago. “Taken in isolation from other economic shocks, such corporate financial weaknesses are unlikely to trigger a recession, but they could certainly exacerbate the effects of other contractionary shocks. This is what happened in 2008, when a medium-sized shock in the subprime mortgage market caused an enormous downturn in economic activity. The impact of the trade disputes on business confidence, which has been collapsing in recent months, is the most obvious current threat.”

At the same time as Davies reached this conclusion, the chief US economist for the Societe Generale bank, Stephen Gallagher, argued that US recessions are typically preceded by an erosion in corporate profit margins, or profit per dollar of revenue. Costs generally rise near the end of the cycle while sales flatten out.  There is a profit cycle – something that readers of this blog will know well.  The current profit margin cycle (the blue line in the graph below) is reaching the point of a recession.  The graph shows the historic trend in profit margins at various stages of the business cycle, as well as the margins in this cycle.

Gallagher points out that US profit margins have been squeezed since 2016. The erosion in margins is the key to business-cycle dynamics,” says Gallagher. “If the U.S. does enter a recession in 2020, history is very likely to view it as a trade-war recession. But trade tensions are only the catalyst, not the main cause.” he says.  “With a backdrop of weak profit expectations, the trade uncertainty poses serious challenges for business planning,” Gallagher argues. “In an environment of much stronger profit margins, the same trade uncertainty would likely pose less of a deterrent.”  

As economic historian and author of Crashed, Adam Tooze tweeted, “What if we orientate our analysis of business cycle around what is presumably the basic driver of business activity i.e. corporate profits, rather than intermediate factors that may or may not seriously impact those profits e.g. tariffs?”  Exactly. A financial crash or a trade war does not lead to an economic recession unless there are already serious problems with profitability.

It is not just Gavyn Davies and the IMF that are waking up to the financial and debt risk. In a speech on 25 September, Fed governor Lael Brainard said that “financial risk-taking by US companies in the form of payouts and M&A has increased — in contrast with subdued capital expenditures. Surges in financial risk-taking usually precede economic downturns. As business losses accumulate, and delinquencies and defaults rise, banks are less willing or able to lend. This dynamic feeds on itself.”  So the Fed must act with new monetary easing: “The Fed will decide whether to activate its countercyclical capital buffer in November. This mechanism enables the Fed to require the nation’s largest banks to increase capital buffers against the time when economic stresses emerge.”

Over in Japan, it is the same story.  The Bank of Japan’s chief Kuroda called for a mix of steps to boost economic growth. He returned to what used to be called the three arrows of Abenomics: monetary easing, flexible fiscal spending and structural reforms to raise the country’s long-term growth potential. Kuroda is still convinced that central banks can save the day, even if governments should also help with fiscal stimulus measures. “We are equipped with unconventional tool kits, so there is no need to be too pessimistic about the effectiveness of monetary policy.  Kuroda hinted at further easing as early as this month.

But as I have discussed in detail before, monetary policy easing has failed to restore pre-2007 growth rates and is now unable to stop the oncoming recession.  Indeed, interest rates globally are at record lows and even negative in many major economies, and yet the world economy is still slowing to a stop.

At the recent IMF-World Bank meeting, former governor of the Bank of England during the Great Recession, Mervyn King reckoned that the “world economy is sleepwalking into a new financial crisis because mainstream economics and official institutions have still not changed their complacent and faulty ideas before the last crash.  By sticking to the new orthodoxy of monetary policy and pretending that we have made the banking system safe, we are sleepwalking towards that crisis.” King went on: resistance to new thinking meant a repeat of the chaos of the 2008-09 period was looming.”  This was rich of King, who before 2007 has remarked at how well the world economy was doing – ‘a nice decade’ he called it. He too was stuck in the ‘old thinking’ then.

Echoing my own view of what I call The Long Depression, King said the world economy was stuck in a ‘low growth trap’ and that the recovery from the slump of 2008-09 was weaker than that after the Great Depression. “Following the Great Inflation, the Great Stability and the Great Recession, we have entered the Great Stagnation.” King supported the view regularly expressed by Keynesian former US Treasury secretary Larry Summers of the concept of secular stagnation, a permanent period of low growth in which ultra-low interest rates are ineffective.

If monetary policy is now useless despite the vain hopes of Powell at the Fed or Kuroda at the BoJ, what is to be done?  King claims the problem was “a distorted pattern of demand and output” ie excessive investment in China and Germany and insufficient investment elsewhere.  There has to be a global shift in savings and investment.  But apart from the obvious question of how such a shift could possibly be achieved without international cooperation, it is not a ‘global imbalance’ that is the problem.  There has been such an imbalance for decades.  The US, UK etc have regularly run current account deficits while Germany, Japan and China have run surpluses.  And yet economic growth has still taken place. The cause of regular and recurring crises can be found in the arguments of Gavyn Davies, not Mervyn King.

Everywhere, whether among mainstream economists or official institutions, the cry now is for ‘fiscal stimulus’. For example, Laurence Boone and Marco Buti, OECD economists call for Right here, right now: The quest for a more balanced policy mix.while monetary policy is widely recognised as facing increasing constraints, fiscal policy and structural reforms need to play a stronger role. In particular, fiscal policy could become more supportive, notably in the euro area. Undertaking the right type of public investment now – in infrastructure, education or to mitigate climate change – would both stimulate our economies and contribute to making them stronger and more sustainable.”

Just as Keynes claimed it would be necessary in the 1930s Great Depression, now, as the Long Depression enters its tenth year, the answer is for higher government spending, tax cuts and budget deficits (and don’t worry about rising government debt any longer). But just as fiscal stimulus did not work in the 1930s (instead it took a world war and governments taking control of savings and investment), so it will not work this time either.  And that is assuming that politicians will even try it.

Fiscal stimulus and government ‘management of the economy’ is the touchstone of Keynesian and post-Keynesian thinking, including so-called Modern Monetary Theory (MMT).   The only real difference between Keynesian and MMT stimulus is the latter think it can be done without issuing bonds to fund it: ‘printing money’ is just fine.

The real shock is that even some Marxists consider that fiscal stimulus and more government spending is all we need to avoid a new slump.  The question of falling profitability and profits highlighted by Gavyn Davies is apparently not relevant at all.  The profitability of capital apparently plays no key role in this profit-making capitalist system.  You see profits come from investment, not vice versa.  So all we have to do is boost investment.

Take a recent article by John Weeks, a longstanding leftist (Marxist?) economist who once wrote a brilliant paper back in the 1980s (John Weeks on underconsumption) that showed Marxist crisis theory had nothing to do with a lack of effective demand caused by the underconsumption of workers. Weeks is now the coordinator of the Progressive Economy Forum, a leftist think-tank.  He now writes: “Market economies require policy management: (as) Keynes taught us.”  You see back in the Golden Age of the 1960s when economic policy-makers followed Keynes and intervened with fiscal measures to manage the economy, there was high economic growth and no crises.  It was only when Keynesian management was dropped by neo-liberal governments that crises ensued.

Weeks now argues that “capitalist economies do suffer periodically from extreme instability, the most recent example being the Great Financial Crisis of the late 2000s. These moments of extreme instability, recessions and depressions, result … from private demand “failures”; specifically, the volatility of private investment and to a lesser extent of export demand.”  Weeks correctly points out that it is the volatility in investment that causes booms and slumps, not private consumption.  But what causes the swings in investment?  Weeks offers a straight Keynesian answer: “The instability results because investments are made in anticipation of future economic conditions, which are uncertain.”  So it is uncertainty about the future – a subjective cause and nothing to do with the objective picture of the current profitability of investment.

If Weeks (and the Keynesians) are right, then indeed, “public expenditure (can) serves to compensate for the inherent instability of private demand. This is the essence of “counter-cyclical” fiscal policy, that the central government increases its spending when private demand declines, and raises taxes when private expenditures create excessive inflationary pressures. During 1950-1970 that was the policy consensus, and it coincided with the “golden age of capitalism“.

But it is not right.  First, the golden age did not come to an end because Keynesian policies were dropped; on the contrary, Keynesian policies were dropped because the Golden Age came to an end.  And that was because the profitability of capital took a serious dive from the late 1960s to the early 1980s in all the major capitalist economies. As a result, investment was volatile and economies suffered several slumps.  Far from Keynesian demand management stopping these swings, even in the 1950s and 1960s, they actually exacerbated them.  At least that was the view of the leading British Keynesian economist of the 1960s, Christopher Dow, who summed up his monumental history of the period: “The major fluctuations in the rate of growth of demand and output in the years after 1952 were thus chiefly due to government policy. This was not the intended effect; in each phase, it must be supposed, policy went further than intended, as in turn did the correction of those effects. As far as internal conditions are concerned then, budgetary and monetary policy failed to be stabilising, and must on the contrary be regarded as having been positively destabilising.” (JCR Dow, The Management of the British Economy, 1964)

Second, investment does not lead profits, but vice versa in a capitalist economy.  It is not the lack of private demand that causes a crisis; but a crisis is just that: a lack of effective demand.  But this ‘realisation’ crisis, to use Marx’s term, is the result of the profitability crisis.  That is where any proper analysis should start on the causes of crises – as now Davies and Tooze suggest.  I and others have presented both theoretical (Marxist) and empirical support for this causal connection. Keynesians may deny it, but it seems that even mainstream economists like Gavyn Davies have now woken up to this causal connection.  If this is right, then attempts to avoid a new slump using fiscal policies will not curb or reverse the fall in corporate profits and investment – and thus will not avoid a new slump.

There is already a global manufacturing recession.  The German economy as a whole is in virtual recession, according to its own central bank, the Bundesbank. China is now growing at its slowest pace in nearly 30 years.  The trigger points for a global slump are multiplying.  We have riots and protests against austerity cuts in several ‘emerging economies’ as the global slowdown hits exports and revenues: in Lebanon, in Ecuador, in Chile, in impoverished Haiti.  At the same time, the larger emerging economies are either in a slump (Argentina, Turkey) or in stagnation (Brazil, Mexico, South Africa).

Even in the US, the best performing major advanced capitalist economy, growth is slowing, while investment and profits are falling.  And within that, one of America’s major companies is in deep trouble.  The grounding of the 737 Max jet after two tragic crashes has quietly lowered US growth, reduced productivity and trimmed earnings at a number of American companies. Boeing is no ordinary company. It is the largest manufacturing exporter in the US and a very large private employer. Its products cost hundreds of millions of dollars and require thousands of suppliers. It is no surprise that benching Boeing’s fastest-selling aircraft is having ripple effects throughout the economy.  Economists put the drag on growth from Boeing at around 0.25 percentage points in the second quarter while the White House Council of Economic Advisers reckoned the damage was even greater: Boeing’s troubles cut GDP from March through June by 0.4 percentage points.

Monetary and fiscal policy will be helpless in stopping any oncoming economic tsunami.

15 thoughts on “Corporate debt, fiscal stimulus and the next recession

  1. When someone gets sick … he usually dies… (not today)

    Is death the cause of the disease?… no, of course.

    We can expect that when there is a recession the profits of companies will fall … (that’s why there’s a recession and that’s why they shut down the business)…. but that’s the same as dying … and not just like being sick.

    Marx explained why companies’ profits are falling. The cause of the recession is that there is a cause for companies to lower profits … but it’s not the decline in profits that causes the recession, according to Marx.

    1. Rojas I dont agree. My reading of Marx is different from yours – see my book Marx 200. And the evidence for profits as the underlying cause of crises is provided in my paper, The profits-investment nexus as cited in my latest post, which provides yet more empirical support. To use your analogy in the opposite direction: a fall in profits causes a fall in investment which causes a recession. A recession is dying and the disease is the tendency for the rate of profit to fall, as Marx and other Marxists argue. It is you that have the thing the wrong way round.

      1. It’s possible that i’m wrong but…

        Why does a company that had profits 6 months ago have no benefits today?

        Benefits cannot be the cause of the recession because the benefits exist before the recession… …what causes the benefits to fall?

  2. Readers of this website know that I support Michael’s position on profits and investment emphatically. But Michael makes me smile. He is fighting the good fight with one hand tied behind his back. I refer to the question of circulating or fluid capital. Let me hasten to explain. It is said that final consumption is 70% of the economy. This however is a one sided interpretation. The value of total sales (called Gross Output) is much higher than final sales. It is about 1.8 times higher when we add in intermediate sales or inputs. (Actually it is more than twice as much because imputed sales inflate economy wide final sales, but this is by and by.) So what was 70% now becomes less than 40% leaving over 60% unaccounted for. (Incidentally the turnover formula yields a figure of 59% or $32-5.1/2.6)

    What can this 60% be? Well if we follow capitalist logic, correct in this case, then what is produced is either invested or consumed. That 60% must therefore represent investment or as Marx called it, productive consumption. But hold on a second, some of this 60% represents unpaid labour, profits not capital. So all of this 60% is not circulating capital only the unpaid portion is, which amounts to 44% of Gross Output. (Table 1.13 yields a surplus of $5.1 trillion for domestic industry, while GDP-by-industry tables yields Gross Output for private industries of $32.6 trillion and Final Sales of $18 trillion. $5.1 trillion is 16% of $32.6 trillion.)

    This leaves us with 44% of the economy being productively consumed and 39% being personally consumed (personal consumption expenditures). Moreover as I have shown, the volatility of productive consumption is 2.7 times that of personal consumption. This means changes to unproductive consumption has three times the impact on economic activity compared to personal consumption. And this is before we factor in changes to fixed investment.

    The capitalists instinctively recognise this. To them, particularly FED chairs past and present, the business cycle is an inventory cycle. As inventories are a proxy for circulating capital, being one of its major components, what they are saying is that the business cycle is in effect the circulating capital cycle. When it accelerates up goes production and the economy, and when it decelerates, leading to the build up of unsold stocks, down it comes. And there is only one thing that causes circulation to accelerate or decelerate and that is the movement of profits.

    Seeking to explain the nexus between profits and investment without referring to circulating capital is, oh so, 20th Century. In anticipation of the Historical Materialism Conference where Michael will be providing a paper on this question, and, because the BEA is releasing its latest GO and GVA on Monday, I intend to write a major article on circulating capital , looking in more detail at its volatility and the role profit plays in this. I hope that in his talk at historical materialism, Michael will address the issue of circulating capital, that core missing link connecting profits to investment.

  3. Michael, broadly agree with your analysis as I’ve written in a recent article highlighting many of the same concerns. (

    I’ve been thinking recently about the likely policy responses to a downturn, wave of defaults, and a subsequent or coinciding credit and liquidity crunch. As far as I can tell the most tempting immediate option would be significant bailouts to revalue corporate-issued debt, funded by some combination of running straight-up deficits and debt monetization. Of course, this does nothing to solve the long-term issue of the general decline in profitability and the overaccumulation of capital.

    If we see continuous unconventional monetary policy and continuous deficit expansion – both almost certain at this stage – are we not likely to see the crisis move to a run on currency in the weaker economies? We already have a version of this with concerns about both debt servicing and runaway inflation in Argentina, Turkey, Lebanon, etc.

    1. Hi Ben Yes, I just read your article by coincidence and we seem to be on the same track. And I think you are right that more QE, even MMT style merging into fiscal deficits are the only available weapons. And this will lead to currency runs for the weaker as you say. If the dollar stays strong, then debt crises in these countries will be a feature.

  4. The post war ‘Golden age’ of western capitalism came to an end in the early 60’s – personified by the destruction of Detroit – because of the rise of Asia, on the back of low wage costs in Asia. The 70’s oil shock exacerbated the economic conditions for the western democracies, not primarily any failure of profit generation by western capital, as is your thesis.

    Public sector creation of money via central banks, to facilitate continuous, sustainable utilisation of all available resources including labour (as described by MMT) is the answer, when private sector activity fails to achieve this goal.

    Neoliberal orthodoxy, not capitalism, is the problem.

    1. The use of the terms, “western democracy” (and its plural) usually evokes in me a slight case of nausea. Modern capitalism (since its inception as ‘war capitalism” between competing, state-chartered, colonizing merchant adventure corporations) has been anything but wholly western or democratic, especially during capitalism’s “golden years,” which were largely dependent on the super-exploitation of the labor and the theft of the natural resources of the colonized world, the populations of which have lived in a perpetual state of political oppression and economic austerity.

      Industrial capitalism has tried (or rather been forced to try) to rationalize this anarchic system, because, by the mid-19th century it has been plagued by serial crises based on the contradiction between its privately owned mode of production and its need to socially reproduce itself. War has proven to be its solution. MMT is simply an abbreviation of military Keynesianism. A final solution indeed.

      1. Martha, here is an interesting comment from a MMT blog:

        “And Yet Donald Trump has broken all US spending records. Over $5 trillion last fiscal year and cut taxes.
        Do as I say via the IMF and world bank not do as I do. The US will do the spending and the rest can do the exporting to the centre like all empires.
        That is the other danger. The danger that when the paradigm shift (to MMT) happens, what kind of fiscal policy will it be ?”

        My solution: if (public sector) fiscal policy is directed – ‘by public demand’ (see the recent world-wide climate protests) – to building the required pumped hydro schemes (the largest engineering projects in the world’s history), funded by CB’s overseen by a modified IMF (the funding model as described by MMT) we can achieve an economy driven by the sun and wind.

        Not military Keynesianism, but Keynesianism based on international co-operation…..which would be a fitting memorial for Keynes’ far-sighted “clearing union” concept.

      2. One embarrassing grammatical correction: The beginning of the first sentence of the above should read: “The use of the terns “western democracy” and its plural usually evoke in me….”

      3. Neil, I don’t think you understood my second paragraph, which flows from the admittedly too brief outline of modern capitalism’s primal accumulation (of uprooted labor and stolen wealth). But that’s a marxist concept,

        But open your eyes to the world around you, where the western democracies led by the US continue to reproduce throughout the world the same conditions which made possible the evolution of colonial, mercantile capitalism into modern industrial capitalism in the first place.

        Modern, western democratic, financial/monopoly capitalism IS imperialism.

        The endless wars, deranged comic fascism, and austerities of neoliberalism simply are the product of this latest (and hopefully the last) stage in the destructive devolution of the imperial system.

        Or maybe starry-eyed capitalist mmt evangelists will stage the fall of the empire. I’d suspend by disbelief for that. Good luck.

    2. “Neoliberal orthodoxy, not capitalism, is the problem”

      So before “neo-liberal orthodoxy” became the ideological currency, capitalism was just a swell system, a once and future system that– brought the world colonialism, two world wars, the Great Depression, coups, systematized racism, death squads, police attacks on workers’ organizations, etc etc ad infinitum, ad nauseum.

      “But that’s all a distortion. Not REAL capitalism as mediated by MMT,” says our MMTer, parroting exactly what the laissez-faire defender of the neo-liberal orthodoxy will say in confronting the exact same concrete history of capitalism. “It’s not the fault of laissez-faire. That’s all the result of distorting the efficiency of the market.”

      What the neo-liberal and the MMTer share is their liberal philosophy of the abstract that capitulates to the world of the concrete.

  5. Michael:

    Long-time reader here. It looks to me like Sanders has a real shot at winning the Democratic nomination and the presidency in the US in 2020. However, as you have amply discussed, Keynesianism is incorrect–the problem is profitability. I have a sort of understanding of how/why, in practical terms, Keynesianism will fail to address the crisis of profitability but I wanted to ask you, if you’d be willing to help me grasp it better:

    My thinking is that if there is a redistribution of money from the big bourgeoisie to the working class and the petty bourgeoisie, this will actually *exacerbate* a crisis, since the only way for a capitalist economy to keep from “seizing up” is if the rate of profit keeps above a certain level (or the mass of profits doesn’t fall, at least). If the amount of money the big bourgeoisie have to re-invest is further diminished by social-democratic redistributions, then it seems to me that will only deepen the hole the big bourgeoisie are in, since in order for the economy to get out of the crisis.

    Does that, in very rough terms, make sense? Have we seen anything like this before–or, on the other hand, something that disproves it or shows it to be more complicated than that?

    Thanks for your writing, I definitely grasp Marxist political economy much more deeply than before I started reading, though I still have never made it very far into Capital.

    1. Steven – I think you are right. For example the reason social democracy was superseded by neoliberal policies in the 1970s was because a more equal society with fuller employment and better public services could no longer be afforded because profitability was in serious decline. So with profitability again in trouble now, a programme of redistribution of income and wealth will come directly into conflict with the willingness and ability of the big bourgeois to pay up. The class conflict would intensify and such a administration would face an investment strike and serious pressure.

      1. ’ A program of redistribution of income and wealth will come directly into conflict with the willingness and ability of the big bourgeois to pay up. ’’
        Exactly. Non-monopolistic companies (the majority) are and will be in losses, in decreasing profit rate and even negative (it is possible that in the Golden Age they were also in losses, at least since the 60s according to their data and graphs), and Monopolistic companies (FAANGS, etc.) have no interest in paying more taxes for Social Democratic and Keynesian programs. Therefore, there will be no Keynesian program in the long recession that comes. The Faggg and other Dow Jones corporations walk in the opposite direction to the State, against the State, of any State. And they have much more interest in seizing markets and public products and services: for example, with Haven, the Amazon society, J.P. Morgan and W. Buffet to dominate the US health. And the rest of privatizations that will continue to happen in the World-System. In addition, a political project is Bernie Sanders and his Democratic Party BEFORE holding positions (charges with the corresponding official subsidies to the party and their succulent personal salaries in Congress, Federal States and municipalities) and a different, worse and real political outcome, will be B. Sanders AFTER coming to power. Syriza, Podemos, H. Schimdt, F. Miterrand, Blair, Felipe González, ALL social democracy since the 80s, have already shown that this is what happens with a social democratic party in a regressive and reactionary phase (the step back from the socialist impulse of the 20th century): only more and more regression happens. It will only be a softer, slower and nicer regression than if the power is occupied by a D.Trump populist right, Boris Jhonson, Bolsonaro, Marie LePEN, etc … It only changes the speed of the regression.

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