The Failure of Capitalist Production: Underlying Causes of the Great Recession
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The recent financial crisis and Great Recession have been analysed endlessly in the mainstream and academia, but this is the first book to conclude, on the basis of in-depth analyses of official US data, that Marx’s crisis theory can explain these events.
Marx believed that the rate of profit has a tendency to fall, leading to economic crises and recessions. Many economists, Marxists among them, have dismissed this theory out of hand, but Andrew Kliman’s careful data analysis shows that the rate of profit did indeed decline after the post-World War II boom and that free-market policies failed to reverse the decline. The fall in profitability led to sluggish investment and economic growth, mounting debt problems, desperate attempts of governments to fight these problems by piling up even more debt – and ultimately to the Great Recession.
Kliman's conclusion is simple but shocking: short of socialist transformation, the only way to escape the ‘new normal’ of a stagnant, crisis-prone economy is to restore profitability through full-scale destruction of existing wealth, something not seen since the Depression of the 1930s.
the rate of profit does not have a determinate secular trend throughout the entire history of capitalism, and efforts to deduce or predict such a trend are futile. For instance, arguments that the rate of profit must trend downward in the long run, because technical progress leads to falling profit, overlook the fact that profit is only one determinant of the rate of profit. An equally important determinant of the rate of profit is the capital value that is advanced, the magnitude of which
substantial fall in inflation,” but in recent testimony before the Financial Crisis Inquiry Commission, Bernanke confirmed that fear of serious deflation was a main cause of the Fed’s easy-money policy: “The Federal Open Market Committee brought short-term interest rates to a very low level during and following the 2001 recession, in response to persistent sluggishness in the labor market and what at the time was perceived as a potential risk of deflation” (Bernanke 2010). Of course, the Fed has
rather than its servants. Divergent Trends in Profitability Although the rates of profit we considered above, which employ historical-cost valuation, did not rebound after the early 1980s, current-cost “rates of profit” did recover to some extent. Yet Figure 6.2 shows that one can conclude that the recovery was nearly complete only if one cherry picks troughs and peaks, and that there was very little recovery after 1984 in the property-income “rate of profit.”7 More than 99 percent of the
Production publication (U.S. Department of Commerce, Bureau of Economic Analysis 2003, M–30, Table B), on the resale value of 5-year-old used cars and computer equipment. Not surprisingly, whereas 5-year-old used cars were worth almost one-third of what new cars were worth, 5-year-old used personal computers and printers were worth less than 14 percent of new ones. Table 7.1 Rapid Depreciation of Computer Equipment Prepackaged software Custom software Own-account software Nuclear fuel
rebound since the Kliman T02570 01 text 8 10/10/2011 09:17 introduction 9 early 1980s, and I even wrote that “profitability has been propped up by means of a decline in real wages for most [U.S.] workers” (Kliman 2009: 51), which I believed to be an unambiguous fact. Methodology and theory greatly influence the kinds of questions one asks and the data one regards as significant, but they have no influence over the data themselves. In other words, this book is an empirical analysis, not a