Marxist Theories of Crisis and the Current Economic Crisis

Abstract

This paper uses data from the US economy and finds that among Marxist theories of crisis the marxian law of the falling rate of profit as a result of the increasing composition of capital explains the crisis of the 1970s and the end of the “golden age” of capital accumulation. Despite the dramatic increase in the rate of surplus value and the limited fall in the capital-output ratio profitability has not recovered sufficiently during the neoliberal period due to the survival of lagging capitals and the increasing use of unproductive labor. Financialization is one of the effects of low profitability. In the recent years financial bubbles the associated wealth effects and the significant increase in the debt of all domestic sectors raised aggregate demand and provided the stimulus for the anemic growth of the period. The break of the bubbles implies the return to the weak fundamentals of the real economy and possibly a deep and prolonged period of stagnation and crisis.

Keywords:

• marxist
• crisis
• rate of profit
• neoliberalism

JEL classification:

• B51
• E11

Notes

 1 See also Cockshott et al. (1995) and Maniatis (1996, 2005) for a discussion and simplification of this empirical methodology.

 2 Alternatively, it is gross domestic income less indirect taxes, consumption of fixed capital and wages of government employees.

 3 Data on total employees and production and non-supervisory workers by sector is provided by the US Bureau of Labor Statistics (BLS), Employment, Hours and Earnings from the Current Employment Statistics (National).

 4 We omit here commodity and money circulation expenses other than the wages of unproductive labor, the most significant part of them being the intermediate inputs of the trade sector (Shaikh and Tonak 1994; Shaikh 1999, p. 128). In this paper we estimate the rate of surplus value until the year 2000 due to a change in the classification system of economic sectors in the US statistics from the SIC to NAICS. Preliminary estimates for the whole period based on the integration of the two systems give similar results to those reported below.

 5 It is not entirely correct to describe the late 1960s as a crisis period per se. The rate of profit starts falling in 1966 (and the private economy rate of profit exhibits a falling trend since 1948, see Figure 2) but the crisis becomes evident later on as the mass of profits starts to stagnate.

 6 These percentages are calculated in the same way as in Mohun (2006, p. 348). If y = xz, then Δy = x′ Δz + z′ Δx where x′ = (x1 + x2)/2 and z′ = (z1 + z2)/2 with 1 and 2 indicating the first and the last year of the period over which the change is measured.

 7 Productivity growth was falling consistently decade after decade after the 1960s in both the EU and Japan, and the G-7 countries combined, rebounding somewhat only in the first part of the 2000s in the US.

 8 Since unproductive labor activities (mostly supervisory and circulation labor) are not easily mechanized this burden on the total mass of surplus value is likely to continue to exist.

 9 The rate of profit for the private economy shows a similar behavior when proprietors’ income is subtracted from the net operating surplus starting with 18.6% in 1948, reaching a maximum value of 23.2% in 1965, falling to 13.6% in 1980 and then rising to 18.3% at the end of the period in 2007.

10 See BEA NIPA, Table 1.13, line 7 (domestic corporate profits) and line 63 (corporate profits from the rest of the world).

11 This concerns the mass of profits only, in order to gauge profitability correctly we should compare the mass of profits with total (domestic and outside the US borders) stock of capital, but we do not have data for the capital stock of US corporations abroad.

12 Data for total and sectoral debt are taken from the Federal Reserve, Flow of Funds Account (FoF) (2009).