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Internet revolution a new paradigm or another bubble

Marxist Analysis · 2026-05-13

Core Argument

Roberts argues that the internet revolution of the late 1990s and early 2000s represents not a "new paradigm" that has transcended capitalism's crisis tendencies, but rather a classic speculative investment bubble driven by overaccumulation and destined to burst. The central claim is that the internet, despite being a genuine technological leap forward comparable to the railroad or automobile, cannot save capitalism from its inherent contradictions. On the contrary, the very features celebrated by bourgeois commentators — falling costs, intense competition, and massive investment — are precisely the mechanisms that will destroy profitability and precipitate a slump. The article insists that the "new economy" thesis is a recurrent ideological illusion, not a structural transformation of the mode of production.

Theoretical Grounding

The analysis is grounded in Marx's law of the tendency of the rate of profit to fall (TRPF), though Roberts deploys it with a specific emphasis on how rapid technological adoption compresses the time in which extra surplus value can be captured. The argument draws on the classical Marxist distinction between productive and fictitious capital: internet companies are valued on the stock market at sums wildly disproportionate to their actual ability to generate surplus value, making them a form of fictitious capital awaiting a violent correction. Roberts also mobilises the Marxist theory of crisis as rooted in overaccumulation — too much capital chasing too little surplus value — rather than in subjective factors like "confidence" or "expectations." The historical comparisons (canals 1835-36, railways 1869-73, automobiles 1920s) place the argument within the tradition of Marxist analysis of long waves and technological revolutions, associated with thinkers like Ernest Mandel, though Roberts is more sceptical than Mandel about the capacity of new technologies to sustain prolonged upswings.

Conjunctural Relevance

The article was written in July 2005, which places it in a specific and revealing conjuncture. The dot-com crash of 2000-2001 had already occurred, yet Roberts is writing after that crash, not predicting it. This is crucial: the article is not a warning about an imminent bubble but an analysis of why the "new paradigm" ideology persisted even after the first wave of internet speculation had collapsed. Roberts is intervening in a moment when capitalist commentators were already declaring the crisis over and reasserting the transformative power of the internet. The data he cites — 80% of US investment going into IT sectors by 1999, internet companies worth $100bn on sales of $1bn — are retrospective evidence of the bubble's irrationality, not predictions. The conjunctural relevance lies in Roberts's insistence that the underlying contradictions of the internet boom were not resolved by the 2001 crash but merely displaced, and that a deeper crisis was still to come. This proved prescient: the 2008 global financial crisis, rooted in a different bubble (housing and derivatives), confirmed the broader pattern of financialised overaccumulation that Roberts identifies.

Where the Argument Continues

The article leaves several questions open. First, it does not develop a detailed analysis of how the internet, as a general-purpose technology, might reshape the labour process and the extraction of relative surplus value — a theme taken up in later IDOM articles on platform capitalism and the gig economy. Second, the argument about the internet's deflationary impact on profitability is asserted rather than demonstrated with time-series data on profit rates; Roberts's later work, particularly his blog The Next Recession and his book The Long Depression, provides the empirical backbone that this article lacks. Third, the article gestures towards the geopolitical consequences of overinvestment (World War I following the railroad crash, World War II following the Great Depression) but does not develop this into a systematic analysis of how technological bubbles relate to imperialist rivalry. This thread is picked up in later IDOM articles on the geopolitical tensions between the US and China over technology and 5G. The article also does not address the role of central banks and monetary policy in inflating asset bubbles — a theme central to later Marxist analyses of quantitative easing and the post-2008 "zombie economy."

Connections

This article should be read alongside:

  • Marx, Capital Volume III, Part III — the foundational text on the TRPF and the counteracting tendencies.
  • Ernest Mandel, Late Capitalism — for the theory of long waves and technological revolutions under capitalism.
  • Robert Brenner, The Economics of Global Turbulence — for a non-Marxist but structurally similar account of overcapacity and falling profitability in the post-war period.
  • Michael Roberts, The Long Depression (2016) — for the empirical substantiation of the argument made here.
  • IDOM articles on the 2008 crash (e.g., "The Great Recession: A Marxist Analysis") — for the continuation of the argument into the next crisis.
  • Against the Stream episodes on financialisation and fictitious capital — for the theoretical elaboration of the bubble mechanism.

Key Quotes

  1. "The internet revolution is a great technical leap forward. But under capitalism, it is being exploited by more and more precious investment capital being thrown into this tiny sector of the economy at the expense of all the rest."

  2. "Internet companies do not make any profit. They remain a huge cost to the rest of the economy. But investment in the new technology has become a necessity to compete. This necessity has leapt well beyond the ability to garner surplus value from the investment."

  3. "Intense competition means that very quickly the profitable advantages gained by the first company to use the new technology quickly disappear. The eventual outcome is that everybody uses the new technology and nobody gains extra profit as a result."

  4. "The optimists of capitalism believe that the internet revolution is really a low-price low-cost boom that will last decades. The reality is that it is just another speculative financial market bubble that will turn into a deflationary bust."

  5. "When everybody agrees, you know it won't last much longer."

  6. "The technological marvel of the internet will not save capitalism from crisis, just as the railroad did not in 1880s and the automobile did not in the 1930s. Indeed, for some very good reasons, it will exacerbate the inevitable slump in capitalist prosperity."