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From bulls to bears

Marxist Analysis · 2026-05-13

Core Argument

The central thesis is that the stock market downturn of mid-2000 is not merely a financial correction but the surface expression of a deeper crisis in the real economy of production. Roberts argues that the apparent boom of the late 1990s — driven by massive investment in new technology and the Internet — was built on a contradiction: the very process of competitive accumulation that generated soaring profits also set in motion a falling rate of profit. The "new economy" was not an escape from the laws of motion of capital, but their most vivid contemporary illustration. The transition from bull to bear market signals the exhaustion of a particular investment cycle and the approach of a general crisis of overproduction.

Theoretical Grounding

The analysis is grounded in Marx's law of the tendency of the rate of profit to fall (TRPF), applied concretely to the US economy of the late 1990s. Roberts draws a clear distinction between the mass of profit (which can rise even as the rate falls) and the rate of profit itself — the return on each dollar of new investment. This distinction is crucial: it explains how the boom could appear so robust while its foundations were eroding.

The article situates itself within the Marxist tradition that treats financial markets as derivative of production, not autonomous from it. The stock market is described as "casino capitalism" — a sphere of fictitious capital that can temporarily decouple from underlying profitability but must eventually return to earth. This places Roberts in the lineage of Marx's analysis of credit and crisis in Volume III of Capital, and more recently in the tradition of writers like Paul Mattick and Ernest Mandel, who insisted that the "long boom" of the post-war period was not the abolition of crisis but its postponement.

Roberts also deploys a classical Marxist understanding of competition: individual capitalists are compelled to invest in labour-saving technology to undercut rivals, but this very process raises the organic composition of capital and depresses the average rate of profit. The "new economy" boom is thus not a rupture with Marx's analysis but its confirmation.

Conjunctural Relevance

The article was written in July 2000, at the precise moment the dot-com bubble was deflating. The NASDAQ had fallen from 4,500 to 3,000, and the Dow from 11,500 to just above 10,000. Roberts identifies three concrete mechanisms transmitting the crisis from the financial sphere to the real economy:

  1. Slowing profit growth: Major US companies were reporting decelerating profit expansion, and the rate of profit on new investment was falling from roughly 12% to 9%.

  2. Overcapacity in technology: Semiconductor production had risen 77% in a single year, creating a classic crisis of over-investment that would turn into a crisis of overproduction.

  3. Household wealth effects: With shares equivalent to over 20% of American household savings, a falling stock market would reduce consumption and further depress investment.

Roberts also identifies external shocks — rising oil prices, the Middle East crisis, and the fragility of Asian economies — that compound the internal contradictions. He explicitly compares the conjuncture to 1973, the year before the deepest post-war slump.

The article is prescient: the NASDAQ would eventually fall to around 1,100 by late 2002, and the US economy entered a recession in March 2001. The dot-com crash was followed by the Enron and WorldCom scandals, confirming Roberts's warning that profits derived from financial speculation rather than production were inherently fragile.

Where the Argument Continues

This article is an early statement of themes Roberts would develop extensively in subsequent work. The argument continues in several directions:

  • The long-term trajectory of the US rate of profit: Roberts's later work, including his book The Great Recession and his ongoing blog The Next Recession, traces the failure of the rate of profit to recover to pre-1970s levels despite decades of neoliberal restructuring.

  • The 2008 financial crisis: The analysis of fictitious capital and the decoupling of financial from productive accumulation is deepened in Roberts's coverage of the 2007-8 crash, where he argues that the subprime mortgage crisis was the trigger, not the cause, of a crisis rooted in falling profitability.

  • The "new economy" as ideology: The critique of claims that information technology had abolished the business cycle is revisited in later IDOM articles, particularly those debunking "secular stagnation" and "long wave" theories that mistake cyclical recovery for structural transformation.

  • The comparison to 1973: Roberts returns repeatedly to the 1973-75 slump as the benchmark for a generalised crisis of overproduction, arguing that subsequent recessions (1990-91, 2001, 2008-9) have been progressively deeper as the underlying contradictions have intensified.

Connections

This article should be read alongside:

  • Marx, Capital, Volume III, Part III: The foundational text on the TRPF and its counteracting factors.

  • Paul Mattick, Marx and Keynes: A key text in the Marxist tradition that insists on the primacy of the falling rate of profit in explaining crises, against Keynesian and underconsumptionist alternatives.

  • Ernest Mandel, Late Capitalism: Mandel's analysis of the long wave of 1945-1973 and its exhaustion provides the historical framework for Roberts's comparison to 1973.

  • Michael Roberts, The Great Recession (2009): Roberts's book-length treatment of the 2008 crisis, which extends the analysis of this article to the housing bubble and the global financial system.

  • Andrew Kliman, The Failure of Capitalist Production (2012): Kliman's empirical work on the US rate of profit provides the data that underpins Roberts's theoretical claims.

  • IDOM articles on the 2008 crash and the Eurozone crisis: These apply the same framework to later conjunctures, showing the continuity of the TRPF analysis across different phases of the crisis.

Key Quotes

  1. "And much more to the point, the rate of profit is falling. By that I mean, the return on each dollar of investment in new technology and more labour is falling from say 12c to under 9c. That means the gains from making such huge investments in the Internet and computers are not producing the extra profit at the same rate."

  2. "Since 1995, US capitalists have been engaged in the most competitive struggle to increase productivity through new technology and the Internet economy. There has been a huge growth in investment in new equipment at an unparalleled rate of 8% a year, not matched since 1965."

  3. "But as Marx explained, this cannot continue indefinitely under competitive capitalism. More and more companies have been trying to get into the new technology/Internet sector."

  4. "There has been a stupendous investment in computer technology. Production of semiconductors up 77% this year. This spells overcapacity, especially as each extra bit of investment is producing less of bit of profit - the rate of profit is falling. So far, that means a slower growth in overall profit. Soon it will mean an actual fall in profit. Then the crisis of over-investment will turn into a crisis of overproduction."

  5. "Oil prices rising, a Middle East crisis, a falling rate of profit amid an apparent boom in the world economy - it all looks much like 1973, just a year before the most widespread slump in capitalism since 1929-30."