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The end of Boo at the Last Minute

Marxist Analysis · 2026-05-13

Core Argument

The article argues that the collapse of Boo.com in 2000 was not an isolated failure of a single overhyped startup, but the first tremor of a generalised bursting of the internet stock bubble — and that this financial correction would inevitably spill over into a broader economic crisis. The central claim is that the "new economy" boom was built on a fundamental contradiction: vast sums of fictitious capital were poured into companies that could never generate the profits necessary to justify their valuations. The bursting of the bubble, Roberts contends, would not result in a "soft landing" engineered by central banks, but in a deflationary depression, because the underlying real economy was already characterised by "profitless prosperity" — growth without commensurate profitability.

Theoretical Grounding

The analysis draws on the Marxist theory of crisis, specifically the understanding that capitalist booms driven by speculative credit expansion inevitably end when the gap between fictitious capital and real profit realisation becomes unsustainable. Roberts invokes Oscar Lange's observation that the competitive mechanism "fools" entrepreneurs into pursuing maximum profit, only to destroy profits when too many join the chase — a dynamic that echoes Marx's analysis of the tendency of the rate of profit to fall and the periodic devaluation of capital that follows overaccumulation.

The article situates the internet bubble within a longer historical pattern of speculative manias, comparing it to the automobile boom of 1900–1908, in which 262 of 485 US automobile companies failed within eight years. This places the argument in the Marxist tradition that treats financial bubbles not as aberrations but as inherent features of capitalist accumulation cycles. The distinction between "real economy" (production, employment, profit) and stock market valuation is central: Roberts insists that the latter is a measure of speculative confidence, not economic substance.

Conjunctural Relevance

The article was written in May 2000, at the very beginning of the NASDAQ collapse. Roberts correctly identifies that the NASDAQ had already fallen 33% from its peak but remained 40% higher than the previous year — a sign that the correction had further to run. He notes that US corporate borrowing relative to cash flow had reached historic levels, with "margin debt" increasing by $83bn (over 130%) between November 1999 and February 2000. The Federal Reserve had raised interest rates to 6.5%, with real rates at 3.5%, yet consumption and borrowing showed no sign of slowing.

Roberts predicts that the Fed would be forced to raise rates further, that this would "squeeze US industry to death," and that the result would be deflation rather than inflation — a contrarian position at a time when mainstream commentary worried about overheating. The article names specific companies — THUS, Baltimore Technology, Kingston Communications, Satyam Infoway — as examples of absurd overvaluation, and contrasts them with real assets like the Grosvenor Estate's London property holdings.

Where the Argument Continues

This article is an early statement of themes Michael Roberts would develop extensively over the following decades. The concept of "profitless prosperity" — growth without rising profitability — becomes a recurring analytical tool in his later work on the long downturn and the 2008 financial crisis. The prediction of deflation rather than inflation as the dominant tendency of the epoch anticipates the post-2008 environment of quantitative easing and low inflation.

The argument continues in Roberts' subsequent IDOM articles on the 2001 recession, the nature of the 2000s "jobless recovery," and his later book The Great Recession: A Marxist View (2009). The theoretical framework connecting fictitious capital, overaccumulation, and crisis is further developed in his contributions to the World in Crisis conference and the Against the Stream podcast episodes on the tendency of the rate of profit to fall.

Connections

  • Marx, Capital Volume III — the theory of fictitious capital and credit crises
  • Oscar Lange, "Marxian Economics and Modern Economic Theory" — the "fooling entrepreneurs" mechanism
  • Henryk Grossman, The Law of Accumulation and Breakdown of the Capitalist System — the theory of overaccumulation crisis
  • Michael Roberts, The Great Recession (2009) — the developed analysis of the 2008 crisis as a continuation of the same underlying dynamics
  • IDOM articles on the 2001 recession and the "jobless recovery" — the immediate sequel to this analysis
  • Against the Stream episodes on the rate of profit and the long downturn — the theoretical elaboration of the concepts introduced here

Key Quotes

  1. "The absurdity of the valuations of these 'new economy' companies can be measured by comparing a small Indian company called Satyam Infoway... The company is worth $7.3bn. But take Grosvenor Estate, the property company owned by the Duke of Westminster... It's worth less than Satyam - $5.9bn on the stock market. But which is really the more valuable and secure company?"

  2. "Far too much money has been ploughed in compared to potential profit. Indeed, most of these companies won't ever make a profit for their investors."

  3. "As the Polish Marxist economist of the 1960s, Oscar Lange, once pointed out (echoing Karl Marx): 'the system of "free competition" is a rather peculiar one. Its mechanism is one of fooling entrepreneurs. It requires the pursuit of the maximum profit in order to function, but it destroys profits when they are pursued by a larger and larger number of people'."

  4. "American companies have never borrowed so much in relation to their cash flow in the history of capitalism! Between November 1999 and February 2000, 'margin debt' as it is called increased by $83bn, or over 130%!"

  5. "Far from the US heading for inflation, as the financial experts worry, the opposite will be the case. Deflation is the real banner of this epoch. Prices are at 40-year average lows around the G7 world."

  6. "Profitless prosperity will turn into deflating depression."