I have been trying to understand Michael Roberts recent essay on the present crisis and its causes, “From Global Slump to Long Depression”.
In the essay, Roberts tries to present evidence for the case that the 2008 financial crisis was caused by a fall in the rate of profit. Roberts is part of the school that argues the law of the tendency of the rate of profit to fall (FROP) is source of crises n the mode of production. It is the smaller of the two main schools among labor theorists, but fiercely defended by its advocates as an orthodox Marxist approach.
The other approach — the underconsumptionists — to the present crisis, championed by Dumenil and Levy, is summarized by Roberts this way:
“Some Marxists have argued that the credit crunch of 2007 and the ensuing Great Recession is not a classical Marxist crisis of profitability and that Marx would have also seen the crisis as financial in cause.”
The underconsumptionist school sees the cause of the present crisis as fundamentally rooted in the increase in profits at the expense of wages. This increase in profits is said to have led to speculative excesses and bubbles that eventually led to the crash. Roberts essay is an attempt both to refute the arguments of the “underconsumptionist” school and to account for the speculative bubble.
According to Roberts,
“Marx posits the ultimate cause of capitalist crises in the capitalist production process, specifically in production for profit. He developed a theory of crises based on his law of the tendency of the rate of profit to fall over time as capitalists accumulate.”
This law does not rule out speculative bubbles like the one seen in the run up to the present crisis, however, Roberts argues, the cause of the crisis is the falling rate of profit. not the speculative bubble. Most of the back and forth between the two schools consists of publishing data pointing to evidence for or against the idea the rate of profit is falling. Depending on how the relevant data is defined and how it is measured, it seems one can arrive at either position.
To an extent, the problem here is not the one both schools point to — the cause of the 2008 crisis — but another question altogether: Why hasn’t there been a repeat of what society experienced during the Great Depression 80 years ago.
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