The long depression: a discussion

Issue: 155

Nick Moore

In the previous issue of International Socialism there was an interesting and balanced review by Dave Sewell of Michael Roberts’s book The Long Depression in which Roberts argues that the global economy remains in the throes of a long depression.

While there are some things that Roberts treats particularly well: his identification of the long depression; his theory that investment follows profit and his analysis of the continuing rise of debt within the system, both from large corporations and households, in my view there are other issues that he treats too formally. This is particularly evident in his treatment of cycles.

Roberts starts with the proposition that crises are endemic to capitalism and that the explanation lies in Karl Marx’s law of profitability. He then identifies five cycles: the inventory cycle discerned by Joseph Kitchen; the business, or Juglar, cycle of boom and slump; the construction, or Kuznets, cycle of major plant, infrastructure and housing; the rate of profit cycle and finally the controversial Kondratiev cycle. These are all shown graphically as cycles within cycles, occurring very regularly, with different periods. The inventory cycle has the shortest period and the Kondratiev cycle has the longest. All the cycles come together at a low point in 2018 and then all rise together after that!

The profit cycle is a product of Marx’s law of the tendency of the rate of profit to fall. Roberts explains the cyclical nature of the falling rate of profit as the outcome of the tendency’s interaction with counteracting tendencies. This is a point well made by Ben Fine and Laurence Harris in their 1979 book Rereading Capital. Connected to this is the business cycle, which is based on the overall motions of investment, employment and output in the capitalist economy and not just profitability.

The problem is in the formality with which Roberts has fixed the cycles. So, for example, he fails to take account of the effect of Keynesian-type government intervention, whether fiscal or monetary, on the shape of the cycle. It can be argued that government expenditure on arms in the 1950s and 1960s played the role of a counteracting tendency by allowing value to leak from the system. The effect on the post-war economy, identified by Mike Kidron in his book Capitalism and Theory, was to slow down the rate of growth of the organic composition of capital which in turn slowed the fall in the rate of profit and thus contributed to a lengthening of the post-war boom into what is now known as capitalism’s Golden Age.

Roberts, in his book and in his blog, is very good at pointing out the weaknesses of Keynesian explanations for the crisis. He argues convincingly that what drives investment is profit and profitability, not “effective demand” and that profits lead to investment rather than investment leading to profits as Keynesian theory argues. However, in his desire to slay the Keynesians he goes too far and does not give due weight to the way that Keynesian-style government intervention can alter the shape and depth of a crisis without changing the essential crisis-prone nature of capitalism.

This points to a more general problem with Roberts’s book, the way that he deals with, or more accurately doesn’t deal with, modifications to the operation of the law of value. He treats government funded activity, like the NHS and education, as being outside of the capitalist system because in these industries “investment does not follow profit”. An alternative approach would be to view these industries as part of capitalism—and their workers as indirectly productive of surplus value for capital—and then examine the ways in which the operation of the law of value is modified by the operation of the state sector.

The problem becomes more acute when Roberts is looking at the state capitalist economies. Roberts’s view is that they are outside of the capitalist system. But it would be more realistic to follow Tony Cliff’s line of argument in State Capitalism in Russia that the state capitalist countries represented a partial negation of the law of value on the basis of the operation of the law of value at the level of global capitalism.

Roberts’s strength and originality lie with his use of data and his willingness to make forecasts and predictions based on this data. While acknowledging that it would be fiendishly complicated to incorporate all the modifications to the law of value in his empirical analysis, without them we will only get an incomplete, although valuable, picture of what Karl Marx called “the most important law in political economy”, the falling rate of profit and its ­counteracting tendencies.

Nick Moore is a long-standing member of the SWP living in North London. He is a teacher of mathematics at a sixth form college.