The perfect circle of success

Marxist Analysis · 2026-05-13

Core Argument

The article argues that the prevailing capitalist orthodoxy of the mid-2000s — that the advanced economies could sustain permanent prosperity through a "perfect circle" of financial intermediation, consumption-led growth, and offshored production — is a self-deluding fantasy. The central claim is that this model rests on a fundamental misreading of how capitalist value is actually produced. The "Brave New World" of finance capitalism, where the G7 economies supposedly generate wealth through lending, consumption, and services rather than production, is unsustainable because it treats the redistribution of profit as its source. The real driver of the system remains the exploitation of productive labour, and when profitability begins to falter, the entire edifice of credit, asset prices, and trade deficits will collapse.

Theoretical Grounding

The analysis is grounded in Marx's distinction between productive and unproductive labour under capitalism. Roberts draws directly on the Marxist insight that profit arises only from the unpaid labour of workers engaged in the production of tangible commodities. Finance, marketing, property development, and public services — however necessary or lucrative for individual capitalists — do not create new value; they redistribute value already extracted in production. The article situates itself within the Marxist tradition that rejects the notion that capitalism has transcended its internal contradictions through financialisation or globalisation. It explicitly counters the "platform company" thesis — the idea that corporations can profitably produce "nowhere" and sell "everywhere" — by insisting that the circuit of capital must ultimately return to the extraction of surplus value in production. The argument also invokes the tendency of the rate of profit to fall, not as a mechanical law, but as the concrete mechanism that will puncture the bubble of fictitious capital.

Conjunctural Relevance

The article is written in early 2006, at the peak of the US housing bubble and the zenith of the "Great Moderation" consensus. Roberts identifies three specific indicators that would signal the unraveling of the model: falling US house prices, declining foreign direct investment into China, and slowing Chinese export growth. At the time of writing, all three were showing early signs of strain — US house price growth was slowing, FDI into China had dipped slightly from 2004 levels — but the system was still "holding together." The article's prescience is striking: within two years, the US housing market collapsed, triggering the global financial crisis of 2007-2008. The piece correctly identifies the mechanism by which a downturn in US housing would force up interest rates, choke off the credit that sustained the trade deficit, and expose the fragility of the entire "circle." The geopolitical framing — the US as debtor-consumer, China as saver-producer — anticipates the tensions that would define the post-crisis era, including the ongoing debate over global imbalances and the limits of export-led development.

Where the Argument Continues

The article leaves several threads open. It does not fully develop the implications of the falling rate of profit for the specific conjuncture — the claim that US profitability was "beginning to decline" is stated but not empirically substantiated in depth. The analysis of China's role is limited to its function as a production platform and repository for savings; the article does not explore the internal contradictions of Chinese capitalism, the dynamics of its own overaccumulation, or the political consequences of its integration into the global system. These themes are taken up in later IDOM articles by Roberts and others, particularly in the aftermath of 2008. The concept of "fictitious capital" is implicit but not named; readers familiar with Marx's Capital Volume 3 will recognise the terrain. The article also gestures toward, but does not fully articulate, the political implications — namely, that the working class in both the G7 and the Global South is the ultimate source of value, and that the crisis of profitability will sharpen class struggle. This is developed in subsequent IDOM pieces on the crisis, austerity, and the limits of Keynesian solutions.

Connections

The article connects directly to Marx's analysis of productive and unproductive labour in Capital Volume 2 and the Theories of Surplus Value. It also echoes the work of later Marxist economists such as Ernest Mandel (Late Capitalism) and Andrew Glyn (Capitalism Unleashed) on the long downturn and the role of financialisation. The "Brave New World" thesis that Roberts critiques is associated with the work of mainstream economists like Kenneth Rogoff and Carmen Reinhart, as well as the "New Economy" ideologues of the 1990s. The article should be read alongside Roberts' later work on the global financial crisis, particularly his books The Great Recession and The Long Depression. Within the IDOM corpus, it connects to analyses of the 2008 crash, the Eurozone crisis, and the dynamics of Chinese capitalism. The reference to Mandeville's Fable of the Bees is a useful entry point for understanding the ideological function of consumption-driven growth narratives.

Key Quotes

1. "This whole view of capitalism assumes that profits are irrelevant. What is important is that the price of stocks and shares keep rising, the price of property keeps rising and that interest rates keep low, not making profits."

2. "The prices of property, shares and government debt won't go up forever because they depend on something else: profits of capitalists. This is the lifeblood of capitalism."

3. "Profits are the unpaid labour of the working class, but also they only arise from the sale of things made that people want. The marketing, advertising and distribution of goods add nothing to profit; but are just a necessary (under capitalism) cost of making a profit for individual capitalists in competition with each other."

4. "Bankers, mortgage and insurance brokers, real estate agents and financial analysts may get paid huge sums but they do not make profits for the capitalist system, even if they do for the companies they work for. In that sense too, they are unproductive."

5. "Yet the Brave New World of capitalism now suggests that it is precisely these unproductive sectors of capitalism that keep the whole system going. Buying a house in America keeps the whole world going round."

6. "What will prove this wrong is when the profitability of the capitalist system starts to fall. At present, US profitability in the whole economy is around 8.5% of annual output. That's very near the historic peak of the last 25 years of 9%. But it is now beginning to decline."