The global crisis of 1973-75 a turning point for capitalism

Marxist Analysis · 2026-05-13

Core Argument¶

The central thesis is that the 1973-75 global recession was not an accidental product of the oil shock, but the necessary expression of contradictions accumulated during the postwar boom. The article argues that the very forces which propelled capitalism's "golden age" — US hegemony, expanded world trade, massive capital accumulation, suppressed labour movements, and state stimulus — systematically turned into their opposites, producing falling profitability, overproduction, inflation, and class polarisation. This crisis marked a definitive historical turning point: the system entered a new epoch of instability and class struggle from which it has never genuinely recovered, and which continues to define the present conjuncture.

Theoretical Grounding¶

The analysis is rooted in Marx's theory of capitalist crisis, deploying several interconnected concepts:

The tendency of the rate of profit to fall: Rising organic composition of capital during the boom — more invested in machinery (constant capital) relative to wages (variable capital) — reduced the average rate of profit across advanced economies, even as the absolute mass of profits grew.
Overproduction and the contradiction between productive forces and effective demand: Capitalist accumulation outstripped market capacity, producing excess capacity — US manufacturing utilisation fell from 92% (1966) to 65% (1975).
Fictitious capital: State deficit financing, military spending, and the proliferation of unbacked dollars created inflationary pressures that were structural, not accidental.
The dialectic of necessity and accident: The oil embargo was the spark that ignited a forest already dried by accumulated contradictions — a concrete application of Engels' formulation that necessity expresses itself through accident.

The article situates itself within the Trotskyist tradition, explicitly drawing on Ted Grant's 1960 article Will There Be a Slump?, which predicted the boom's reversal at a time when much of the left had adapted to Keynesian reformism. This positions the analysis against both bourgeois apologetics (the oil shock as mere accident) and reformist illusions in managed capitalism.

Conjunctural Relevance¶

The article is explicitly framed as a historical lesson for the present moment. It draws direct parallels between 1973-75 and the current conjuncture:

Geopolitical instability: Middle East conflict, energy price shocks, and the weaponisation of resource supply.
Inflationary pressures: The article notes that capitalists today, as in the 1970s, blame workers' wages for inflation, whereas the real driver is the accumulation of fictitious capital and state-financed crisis management.
Debt overhang: Post-1970s recoveries were built on credit expansion — government, corporate, and household debt — which paved the way for 2008 and continues to weigh on the global economy.
Class struggle: The re-emergence of industrial militancy in the late 1960s (May '68, Italian Hot Autumn) is presented as the harbinger of a new wave of revolutionary upheavals, now on a higher level.

The article insists that Keynesianism and monetarism are both exhausted. The system is at an impasse, and the primary contradiction is between objective revolutionary possibilities and the absence of a revolutionary party — the "subjective factor."

Where the Argument Continues¶

The article is a condensed historical and theoretical primer, but several threads are left open or developed elsewhere in the IDOM corpus:

Ted Grant's Will There Be a Slump? (1960) is the foundational text on the postwar boom's internal contradictions. Reading it alongside this article provides the full arc of the argument.
The 2008 crisis is referenced as the deeper, wider expression of the same underlying dynamics. IDOM articles on the 2008 crash and its aftermath extend the analysis of fictitious capital and debt-driven accumulation.
The question of revolutionary leadership — the "primary contradiction" — is the central political conclusion. This is developed across IDOM's strategic writings on party-building, the critique of reformism, and analyses of contemporary workers' struggles.
Against the Stream episodes on inflation, the energy crisis, and the Middle East provide conjunctural updates that apply the same theoretical framework to current events.

Connections¶

Marx, Capital Volumes I-III: The theoretical backbone — particularly the law of the tendency of the rate of profit to fall and the theory of crisis.
Marx and Engels, Communist Manifesto: Quoted directly on the expansion of the world market and the sorcerer's apprentice dynamic of capitalist production.
Ernest Mandel, The Second Slump: A key source for the empirical data on falling profitability and excess capacity.
Robert Brenner, The Economics of Global Turbulence: Cited for data on US economic decline and the dynamics of international competition.
Ted Grant, Will There Be a Slump? (1960): The immediate precursor text within the tradition.
Trotsky, The Transitional Program: The strategic orientation toward revolutionary party-building that the article's conclusion demands.

Key Quotes¶

"When a system — whether it be in nature or in society — is pregnant with crisis, any number of secondary factors or incidents can trigger a transition or collapse. A build up of small quantitative changes leads to a qualitative transformation. Objective dynamics are reflected in-and-through seemingly random or chance events."
"The 1973-75 recession was a historic turning point for capitalism; a profound blow to the system, from which, according to all the indices, it never truly recovered."
"As far as there was a recovery after the '70s, then, it was one built on sand — paving the way for the even deeper, wider crisis of 2008."
"The issue for the capitalists, however, was that their bitter medicine looked like it could kill the patient."
"We are not in an epoch of reforms, but of counter-reforms and vicious attacks, with all the hard-fought gains of previous generations being eroded and snatched away by the capitalists and their representatives."
"That is the primary contradiction that we must overcome today: the chasm between the objective needs demanded by history, and the absence of the subjective factor — the revolutionary party."