The Slump (2017)

Book Review from the September 2017 issue of the Socialist Standard

'The Long Depression'. By Michael Roberts. (Haymarket Books. 2016)

There is a tendency within some flavours of Marxism that has been said to have correctly predicted 6 of the last 3 recessions. The temptation to rely on inevitable crisis and the collapse of capitalism has a silvery allure for some. This book does not join that chorus, but it does seek to make crises of capitalism subject to (at least theoretically) predictable laws.

Roberts positions himself as a heterodox within the already heterodox school of Marxian economists. He sees Marx’s examination of the tendency for the rate of profit to decline as the root cause of recessions and depressions (he defines a depression as: 'countries growing at well below their previous rate of output . . . and below their long term average' and he notes the usual definition of a recession is: “two consecutive quarters in real GDP”).

He sees a potential explanation for Kondratiev long waves in his model:

'Depressions…appear when there is a conjunction of downward phases in cycles of capitalism. Every depression has come when the cycle in clusters of innovation have matured and become “saturated”; when world production and commodity prices enter a downward phase, namely, that inflation is slowing and turns into deflation; and above all, when the cycle of profitability is in its downward phase. The conjunction of these different cycles only happens every sixty to seventy years.'

Following Marx, he defines the rate of profit as the surplus value (S) divided by variable capital, wages (V) plus constant capital, the value of machines, tools and ingredients (C). He notes that the tendency is for the organic composition of capital (the ratio of C/V) to increase: that is for machinery and tools to replace human labour, as capitalists compete to improve the productivity of the labour they employ. This then reduces surplus value, leading to a withdrawal of investment.

'The continual process of an upward cycle in profitability –as the rate of surplus value rises faster than the organic composition, in turn replaced by a downward cycle as the law as such gains ascendancy –explains the cyclical nature of capitalist accumulation'.

The problem with this approach is that it lacks explanatory power for why crises involve stranded capital. In his chapter on the rate of profit, Marx discusses how the falling rate of profit is compatible with ongoing growth in the mass of profits (due to expansion, investment, etc.) This is before he identifies the counteracting tendencies (increasing intensity of exploitation; depressing wages below the value of labour power; cheapening elements of constant capital; relative overpopulation; foreign trade; and the increase of stock capital). Roberts does address these counteracting tendencies, but sees crisis arising out of them temporarily being overwhelmed by the rising organic composition of capital.

If it were a falling rate of profit alone, merger and expansion would be sufficient to escape and renew growth for a while longer.

The Socialist Party has tended towards the view that it is disproportionate investment and expansion of production that causes crises and slumps. There are strict conditions to enable capital expansion, accumulation and reproduction going on, requiring all the different branches of industry to broadly grow together. Since each capital is seeking to grow at the fastest possible pace, driven largely by the expectation of profit, it becomes inevitable that one sector over-invests and has its reproduction choked by relative under-investment either in consumption or in key components.

This view of crisis means they are not governed by an underlying regular process, but by an ever increasingly likelihood of accident and happenstance. Even a state-run economy could not overcome these tendencies, since even if it were possible to plan every commodity exchange in such a way as to provide growth: accidents, happenstance and misjudgement would still mean inevitable crises.

Roberts provides a wealth of empirical data showing long run trends towards a declining general rate of profit. He has debated with Paul Mattick Jr. whether official statistics can meaningfully be mapped onto Marx's categories ( Link -- this is worth reading in itself). We agree that they cannot least because of the level of misrepresentation and manipulation that goes into formulating them.

At the least though, if the measures show distinct trends, that is useful for trying to read the developments of the economy. His tables showing all the US recessions since the mid 19th century provide a salutary reminder of how frequent and endemic they are: indeed, we would agree that they are not just inevitable, but essential to capitalism’s ongoing existence, as they are followed by the clearing of bad investments and creation of new room for growth in the economy.

Where we would certainly agree with Roberts is that the only way within capitalism, ultimately, to exit a crisis is the destruction of the value of capital; and, further, that capitalism will eventually find new scope to grow (although at what human cost in misery?) unless the working class take a conscious political choice to abolish capitalism: that is the only way in which it will collapse.

Pik Smeet