The permanent slump – an organic crisis of capitalism¶

Marxist Analysis · 2013-11-17

Core Argument¶

The article argues that the 2008 financial crisis did not mark a temporary downturn but the onset of a permanent slump — an organic, structural crisis of capitalism from which there is no return to the "good old days" of boom and growth. The central thesis is that the current period of stagnation is not cyclical but represents a new normality: the system's normal condition is now one of inadequate demand, with brief episodes of prosperity achievable only through unsustainable credit bubbles.

The article makes this case by drawing on the convergence between Marxist analysis and the belated recognition by bourgeois economists — specifically Paul Krugman and Larry Summers — that "secular stagnation" is the likely long-term trajectory. The argument is that the capitalists have exhausted every weapon in their traditional crisis-management arsenal: interest rates cannot go lower, Keynesian stimulus is blocked by public debt, and quantitative easing has proved impotent. The only remaining "solution" — austerity — deepens the recession it purports to cure. This is presented as an insoluble contradiction: the system cannot revive accumulation without restoring profitability, yet the measures required to do so destroy the conditions for effective demand.

Theoretical Grounding¶

The analysis is grounded in the Marxist theory of crisis, specifically the contradiction between production for profit and the limited purchasing power of the working class. The article draws on the classic formulation from the Communist Manifesto — that capitalists overcome crises only "by paving the way for more extensive and more destructive crises" — and applies it to the post-1970s period.

The key theoretical move is to frame the credit expansion of the 1980s–2000s not as a sign of health but as a deferral mechanism. The massive growth in household debt (doubling in the US, tripling or quadrupling in the UK) is understood as an artificial expansion of effective demand that temporarily masked the underlying contradiction of overproduction. When the bubble burst, the deferred crisis returned with compounded force.

This sits within the Marxist tradition that emphasises the tendency of the rate of profit to fall as the underlying driver of crises, though the article does not deploy that concept explicitly. Instead, it focuses on the more immediately observable phenomenon of overaccumulation — idle cash piles alongside excess capacity and unsold commodities — and the inability of capital to find profitable outlets for investment. The argument is consistent with the work of Marxists who have analysed the 2008 crisis as the terminal phase of a long downturn beginning in the 1970s, rather than as a conventional business-cycle recession.

Conjunctural Relevance¶

The article was published in November 2013, five years after the financial crash, at a moment when mainstream discourse was shifting from "recovery" to "stagnation." The specific conjuncture it addresses:

The Summers–Krugman intervention: Larry Summers' speech at the IMF's annual research conference (2013) marked a significant moment when the "secular stagnation" hypothesis entered the mainstream. Krugman's New York Times column (17 November 2013) amplified this, explicitly asking whether "depression-like conditions are on track to persist... for decades."
The exhaustion of monetary policy: Interest rates near zero in the US, UK, and Eurozone, with central banks having already deployed quantitative easing. The article notes that QE had "done very little" to stimulate investment while fuelling asset bubbles in emerging economies.
The failure of Keynesianism in practice: The article cites François Hollande's U-turn — elected in 2012 on a platform of growth and taxing the rich, by 2013 implementing austerity — as evidence that even nominally left-wing governments cannot escape the logic of cuts. The Labour Party in Britain had similarly ruled out reversing austerity.
The Chinese stimulus as cautionary tale: The "largest Keynesian experiment in history" had produced a massive credit bubble and exacerbated global overproduction, not resolved it.
Idle cash mountains: The article cites specific figures — £700bn in the UK, $2trn in the US, €2trn in the EU — held by corporations that refuse to invest due to excess capacity.

The argument remains relevant in the 2020s, as the post-2008 pattern of low growth, low interest rates, and repeated asset bubbles has continued, punctuated by the COVID-19 crisis and the subsequent inflation surge. The "permanent slump" thesis has been vindicated by the failure of post-2008 recovery to return to pre-crisis growth trends.

Where the Argument Continues¶

This article is an early statement of a position that the RCI/IMT has developed extensively. Readers should consult:

Other articles by Adam Booth on marxist.com, particularly those analysing the long downturn, the Eurozone crisis, and the limits of quantitative easing.
The IMT's analysis of the 2008 crisis as the opening of a new epoch of capitalist instability, developed in internal documents and public articles throughout 2008–2010.
Against the Stream episodes dealing with the global economy, particularly those covering the COVID-19 recession and the post-2021 inflation crisis, which extend the "permanent slump" framework to account for new phenomena (supply chain disruption, energy price shocks, the Ukraine war).
The Marxist tradition on crisis theory: The article gestures toward but does not fully develop the law of the tendency of the rate of profit to fall. Readers should consult the IMT's theoretical materials on this question, including articles by Alan Woods and Rob Sewell that ground the current crisis in the long-term decline in profitability since the 1960s.

Connections¶

Paul Krugman, "A Permanent Slump" (New York Times, 17 November 2013) — the direct stimulus for the article.
Larry Summers, IMF research conference speech (2013) — the original articulation of "secular stagnation" from within the bourgeois establishment.
Marx and Engels, Communist Manifesto — the passage on crises as "epidemics of overproduction" that the article quotes.
Marx, Capital Volume 3 — the theory of the tendency of the rate of profit to fall, which underlies the analysis even if not explicitly named.
Ernest Mandel, Late Capitalism — the theory of "long waves" and the structural crisis of the 1970s, which provides the historical framework for understanding the post-2008 period as a second phase of the same downturn.
Andrew Kliman, The Failure of Capitalist Production — empirical work on the falling rate of profit in the US economy, which supports the article's claims about the exhaustion of accumulation.

Key Quotes¶

"What we are witnessing is not a temporary phenomena, but an organic crisis of the capitalist system."
"We have, he suggested, an economy whose normal condition is one of inadequate demand — of at least mild depression — and which only gets anywhere close to full employment when it is being buoyed by bubbles."
"For decades, the capitalists, on the one hand, attacked real wages to increase profits, whilst, on the other, allowed ordinary households to carry on consuming through the use of credit – through mortgages, credit cards, and loans. In other words, the capitalists artificially expanded the market – i.e. effective demand; the ability for people to buy – through a massive expansion of credit."
"All the methods traditionally used by the capitalists for getting out of a crisis have been used up already in trying to avoid the current crisis in the previous period. There are no more weapons in the arsenal."
"The reality is that, under capitalism, there is no alternative but austerity. And yet – as the examples of Greece, Portugal, and Spain show - austerity only leads to a deepening of the recession. This is the insoluble contradiction that the capitalists face."
"Yet the solution is staring us in the face: to take the enormous wealth that exists in society and put it to use for public need, not for profit; to nationalise the banks and the major monopolies and put them under a rational and democratic plan of production; to abolish the anarchy and chaos of competition and the market through the socialist transformation of society."