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Boom to Slump

Marxist Analysis · 2026-05-13

Core Argument

The article argues that the apparent stock market boom of 2006 is a misleading surface phenomenon masking a deeper crisis in capitalist profitability. Michael Roberts claims that the recovery from the 2001 recession has been the weakest in capitalist history, and that the underlying Marxist rate of profit in the US — as distinct from bourgeois measures of profit margins and profit shares — has still not surpassed its 1997 peak. The central thesis is that capitalism is in the early stages of a profit downwave, and that a serious global slump is shaping up by the end of the decade. The boom is being sustained by fictitious capital, rising exploitation of American workers, and a housing bubble that has already peaked — all of which are unsustainable.

Theoretical Grounding

The analysis is grounded in Marx's law of the tendency of the rate of profit to fall (TRPF), which Roberts distinguishes sharply from bourgeois measures of profitability. Where mainstream economists celebrate rising profit shares and profit margins, Roberts insists on measuring profit relative to the total capital advanced — constant capital (plant and equipment) and variable capital (labour power). The article deploys the concept of fictitious capital to characterise the diversion of surplus-value into stock market speculation and property rather than productive investment. It also draws on the Marxist theory of cyclical crises, identifying a 9–10 year cycle of boom and slump (1980–82, 1990–92, 2001) and situating the current conjuncture as the fifth year of a weak expansion within a longer downwave. The analysis sits firmly within the tradition of Marxist crisis theory associated with the work of Henryk Grossmann and later developed by writers such as Andrew Kliman and Michael Roberts himself — a tradition that insists on the centrality of profitability to understanding capitalist breakdown.

Conjunctural Relevance

The article is written in November 2006, at the peak of the pre-2008 euphoria. Roberts identifies several specific conjunctural features:

  • The Dow Jones index has reached 12,000 but has taken six and a half years to recover from the dot-com crash — meaning zero real return for investors who bought in 2000, and a negative return once inflation is adjusted.
  • US corporate profits as a share of national output are at record highs, while the wage share is at all-time lows — indicating a massive increase in the rate of exploitation.
  • The US housing market peaked in mid-2005 and prices are now falling for the first time in 15 years, cutting off the main source of working-class consumption (borrowing against rising house values).
  • American workers already work 20% more hours than French workers, limiting the scope for further increases in absolute surplus-value.
  • Profit growth is concentrated in the finance sector, not in productive manufacturing — a sign of fictitious capital accumulation.
  • Roberts predicts that US economic growth will fall below the 2% rate needed to sustain employment, that unemployment will rise, and that the housing slump will not bottom out until 2010.

The article is prescient: it anticipates the 2008 global financial crisis with remarkable precision, identifying the housing bubble, the overextension of fictitious capital, and the underlying profitability problem as the key drivers.

Where the Argument Continues

This article is an early statement of what became Roberts's sustained body of work on the long downturn. The argument is developed in his subsequent books, particularly The Great Recession: A Marxist View (2009) and The Long Depression (2016). Within the IDOM corpus, the argument is extended in later articles tracking profitability through the 2008 crash and the post-2009 recovery. The claim that the rate of profit had not surpassed its 1997 peak is revisited and refined in later pieces using updated data. The 9–10 year cycle thesis is tested against the 2008 crash (which came two years later than Roberts's 2006 prediction, but was far more severe than the mild recession he anticipated). The article's analysis of fictitious capital and housing bubbles is developed further in IDOM pieces on the 2008 subprime crisis and the subsequent sovereign debt crisis in the Eurozone.

Connections

  • Andrew Kliman, The Failure of Capitalist Production (2012) — the most rigorous defence of the TRPF as an explanation for the 2008 crisis, using similar empirical methods to Roberts.
  • Henryk Grossmann, The Law of Accumulation and Breakdown of the Capitalist System (1929) — the foundational text on breakdown theory that Roberts's work continues.
  • Michael Roberts, The Long Depression (2016) — the fullest statement of the argument that capitalism has been in a secular profitability crisis since the late 1990s.
  • IDOM articles by Roberts from 2005–2007 — including "Dr Pangloss Rules?" (October 2006) and "USA: the Statistics That Shock" (May 2006), which provide the empirical groundwork for the claims made here.
  • Against the Stream episodes from 2007–2008 — which track the housing crash and the unfolding financial crisis in real time.

Key Quotes

  1. "As far as I can calculate, the rate of profit in the US under the Marxist definition is still below where it was at its peak in 1997. It has recovered from a low in 2001, but it has still not surpassed 1997. If that is right, then the argument that capitalism is still in the early stages of profit downwave holds."

  2. "The most productive sectors of the economy, manufacturing and industry, have not recorded such mega results. The banks and finance houses have ripped off most of the profit."

  3. "Surplus-value extracted from the output of workers will not be re-invested in new technology and equipment to create more value but instead will go into what Marx called 'fictitious capital', namely speculation in the stock market or property, or will be invested abroad in exploiting workers in China, India etc."

  4. "The cycles of boom and slump in capitalism have not disappeared. They seem to operate on a 9-10 year cycle."

  5. "The US housing slump will probably not reach its bottom until 2010, if previous real estate cycles in the US are anything to rely on. Also, I expect profitability will be heading to a new low by then. Everything is shaping up for a very serious slump in world capitalism by the end of this decade at the latest."

  6. "This is as good as it is going to get for capitalism."