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The great recession

Marxist Analysis · 2026-05-13

Core Argument

The article argues that the early 2000s recession is not a cyclical downturn of the usual sort but the beginning of a long-term structural crisis of capitalism, driven by a fundamental collapse in profitability. Michael Roberts contends that falling profit rates — not external shocks, terrorist attacks, or policy errors — are the root cause. The boom of the 1990s was built on a fragile foundation: profitability peaked in 1997 and declined thereafter, yet the expansion was sustained artificially through a series of speculative credit bubbles. The recession is therefore the necessary correction of these accumulated distortions. Roberts further claims that the structural shift from productive to financial accumulation has made the system more unstable than in previous eras, and that the scale of the bubbles — in equities, technology, property, and the dollar — means the coming depression will rival the 1930s.

Theoretical Grounding

The analysis is grounded in the Marxist law of the tendency of the rate of profit to fall, though Roberts deploys it with a focus on the profit share of turnover and the mass of profits rather than the more technical rate of profit on capital advanced. This is consistent with the tradition of Marxist crisis theory developed by writers such as Henryk Grossmann and, more recently, by Roberts himself in his later work on long waves and profitability cycles. The article also draws on Marx's analysis of the contradictory effects of new technology: innovation raises productivity but, through competition, drives down prices and squeezes profits across the system as a whole. The distinction between productive and fictitious capital is central — Roberts argues that the growing weight of the financial sector relative to production represents a pathological development, not a sign of capitalist maturity. The critique of the "New Economy" thesis is a direct application of Marx's value theory against vulgar bourgeois economics.

Conjunctural Relevance

The article was written in July 2001, before the September 11 attacks, and updated to incorporate their economic effects. It correctly identifies the US as the epicentre of the crisis and names specific data points: US profit share falling from 13% to 8% of turnover, a 25% year-on-year drop in corporate profits by Q3 2001, and the OECD's growth forecast of 1% for 2002. Roberts identifies four bubbles — hi-tech investment, stock markets, property, and the dollar — and warns that the property bubble has not yet burst. This is a strikingly prescient observation, given the 2008 housing crash. The article also notes the shift in the composition of US corporate profits: financial services rising from 5% to 25% of total profits between 1975 and 2000, while technology's share remained static. The conjuncture is defined by the exhaustion of productive investment as an engine of growth and the increasing dependence of the system on credit and financial speculation.

Where the Argument Continues

This article is an early statement of themes Roberts develops at length in his later work, particularly The Great Recession: A Marxist View (2009) and The Long Depression (2016). The argument about the structural shift from productive to financial accumulation is deepened in subsequent IDOM articles on the 2008 crash, the eurozone crisis, and the COVID-19 recession. The claim that the crisis would be "longer and deeper than most people imagine" is revisited repeatedly as Roberts tracks the failure of the post-2008 recovery to restore profitability to pre-crisis levels. The article's identification of the dollar as a bubble is taken up in later analyses of currency wars and the declining hegemony of the US dollar. Readers should also consult the World Economic Outlook reports from the RCI's theoretical journal for the ongoing empirical tracking of profitability data.

Connections

  • Marx, Capital Volume III — the law of the tendency of the rate of profit to fall and the theory of crisis.
  • Henryk Grossmann, The Law of Accumulation and Breakdown of the Capitalist System — the classical Marxist statement on profitability and crisis.
  • Michael Roberts, The Long Depression — the developed version of the argument first sketched here.
  • Andrew Kliman, The Failure of Capitalist Production — a rigorous empirical defence of the falling rate of profit explanation for the 2008 crisis.
  • IDOM articles on the 2008 crash and the eurozone crisis — for the continuation of the analysis into the next phase of the crisis.
  • Against the Stream episodes on profitability and crisis — for accessible presentations of the same data.

Key Quotes

  1. "The single most important feature of economic development in the US over the past few years has been the steep drop in profits. Profitability started to fall at the pinnacle of the economic boom in 1997."

  2. "As Marx would have explained, under capitalism, new technology may boost the productivity of labour, but it does not necessarily lead to increased profitability for all who invest in the capitalist market."

  3. "The great recession of 2001 onwards is a product of the desperate efforts of capitalists and their banks to keep the boom going even though profitability was falling. That has produced a huge credit bubble that is now bursting."

  4. "Never before in the history of capitalism have stock markets been more important. When the crash of 1929 began, the value of shares in the US stock market had reached 81% of annual production. In March 2000, the US stock market was valued at 183% of annual output."

  5. "Corporate America is no longer General Motors but more like the Bank of America. Increasingly, US companies have made their profits not from making things or even providing services, but from investing in other companies and hoping their share prices rise."

  6. "The bottom line throughout 300 years of capitalism is that economic expansion, no matter how handled, is, at the end of the day, like a balloon. When production has filled warehouses with unsold goods, when credit is at its limit, when the consumer is mired in debt... the balloon bursts or is rapidly deflated."