Its a World Con

Marxist Analysis · 2026-05-13

Core Argument

The article argues that the wave of corporate fraud and bankruptcy in 2001–2002 — culminating in WorldCom — was not a case of a few bad apples in an otherwise healthy system. Rather, it was the necessary exposure of the fictitious foundations of the late-1990s boom. The central thesis is that the "New Economy" was built on an illusion: trillions of dollars of investment in hi-tech and telecommunications that could never yield the promised profits. When the tide of the boom receded, the fraud, over-investment, and outright theft that had sustained the appearance of profitability were laid bare. The article claims this is not a temporary crisis of confidence but a structural crisis of overaccumulation — too much capital has been invested relative to the surplus value that can be extracted — and that further collapses are inevitable.

Theoretical Grounding

The analysis is rooted in Marx's theory of crisis, specifically the tendency of the rate of profit to fall and the related concept of overaccumulation. The article treats the stock market bubble and the accounting frauds not as external shocks or moral failings, but as symptoms of a deeper contradiction: capital has been accumulated on a scale that cannot be valorised. The "New Economy" hype is understood as an ideological cover for this overaccumulation — a way to attract fictitious capital into sectors where real profitability was absent. The article also draws on the Marxist distinction between productive and unproductive labour, implicitly arguing that the hi-tech and telecom sectors, despite their revolutionary rhetoric, were not generating the surplus value necessary to sustain the capital advanced. The critique of the state's role — bailing out failing corporations with taxpayer money — reflects the classical Marxist analysis of the capitalist state as a committee for managing the common affairs of the bourgeoisie, stepping in when private profit requires socialised risk.

Conjunctural Relevance

The article was written in July 2002, at the tail end of the dot-com crash and in the immediate aftermath of the WorldCom scandal. It identifies a sequence of bursting bubbles: the hi-tech bubble in 2000, the broader stock market bubble in 2001, and the dollar bubble in 2002. It then predicts that the next bubble to burst would be the property market, specifically in the UK where house prices were rising at 20% annually. This prediction proved prescient — the global financial crisis of 2007–2008 was triggered by the collapse of the US housing bubble. The article also notes that the US and European governments were only sustaining demand through increased military spending (the "War on Terror"), a classic example of the state attempting to counteract the falling rate of profit through unproductive expenditure. The article's warning that "there will be more WorldComs to come" was borne out by the cascading failures of the subsequent decade.

Where the Argument Continues

The article's analysis of overaccumulation and fictitious capital is developed in Michael Roberts' later work on the long downturn and the secular stagnation of profitability in advanced capitalist economies. The theme of state bailouts as a response to crisis is taken up in subsequent IDOM articles on the 2008 financial crisis, where the same dynamic — private profit, socialised loss — is repeated on a far larger scale. The prediction of a property bubble bursting connects directly to the Marxist analysis of the 2007–2008 crash, which IDOM covered extensively. The article's critique of the "New Economy" as ideology is part of a broader Marxist tradition of debunking claims that technology has transcended the law of value — a theme that recurs in debates about the "knowledge economy" and, more recently, about artificial intelligence and automation.

Connections

This article should be read alongside Marx's discussion of fictitious capital in Volume III of Capital, particularly the chapters on credit and joint-stock capital. It also connects to the Marxist theory of crisis as developed by Henryk Grossmann and, more recently, by Michael Roberts himself in The Long Recession and The Great Recession. The analysis of corporate fraud as a symptom of overaccumulation echoes the work of Andrew Kliman on the falling rate of profit. Within the IDOM corpus, the article is a precursor to later analyses of the 2008 crash and the COVID-19 economic crisis, where similar dynamics of state intervention and fictitious capital reappear. The critique of the "New Economy" as ideology connects to Ernest Mandel's Late Capitalism, which analyses how each wave of technological innovation is accompanied by claims that the old laws of capitalist development no longer apply.

Key Quotes

1. "What could be more damning that to show that, not only does the profit system fail to provide jobs, homes and decent living conditions for most people, it can't even make a profit!"

2. "The boom of the late 1990s was based on the foundations of sand, or to be more exact on the illusion of the New Economy of the hi-tech and the internet."

3. "Corporate executives lived off the fat of the boom. But when the tide ebbed, the nasty rocks of failure, corruption and thievery were revealed."

4. "There is already too much capital, so the result will be no investment and a further deflation of demand for capital goods."

5. "Leave companies to make as much profits as they can without any regulation or control - but if they start losing money for their shareholders, get the taxpayer (the workers) to bail them out with subsidies and sackings."

6. "It won't matter that interest rates are at record lows. There is no point in borrowing money if there is nothing to invest in or no production to increase."