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The tipping point

Marxist Analysis · 2001-09-11

Core Argument

The central thesis is that the terrorist attacks of 11 September 2001 acted as the "tipping point" that pushed an already-crisis-bound US economy into full-blown recession. Roberts argues that the attacks did not cause the economic downturn but rather exposed and accelerated a pre-existing crisis rooted in the collapse of the late-1990s speculative bubble. The article insists that the "New Economy" myth — the claim that information technology had abolished the business cycle — was already disintegrating before the planes hit. The destruction of over $5 trillion in NASDAQ wealth, record corporate debt levels, and the exhaustion of consumer spending capacity had already placed US capitalism on an unsustainable trajectory. The attacks merely shattered the residual confidence that had been propping up an otherwise rotten edifice.

Theoretical Grounding

The analysis draws on the Marxist theory of crisis, particularly the understanding that capitalist booms contain within themselves the seeds of their own destruction through overaccumulation and the build-up of fictitious capital. Roberts implicitly deploys the concept of the tendency of the rate of profit to fall, though he does not name it explicitly. The "flood of red ink" that wiped out six years of accumulated profits on the NASDAQ is presented not as an external shock but as the internal logic of a system that had become detached from real value creation.

The article also engages with the Marxist critique of "vulgar Keynesianism" — the notion that war spending or central bank intervention can resolve a structural crisis. Roberts dismisses the idea that a "war footing" can revive the US economy, arguing that military Keynesianism cannot repair the damage done to balance sheets during the 1990s boom. This places the analysis within the tradition of Marx's critique of the falling rate of profit and the inevitability of periodic crises under capitalism, as opposed to the reformist notion that state intervention can manage or prevent them.

The piece also reflects the Trotskyist tradition's insistence on the interconnection between economics and geopolitics. The attacks are not treated as an isolated act of terrorism but as a product of US and NATO imperialist policy in the Middle East, Asia, and Africa — a point that situates the analysis within the Marxist theory of imperialism.

Conjunctural Relevance

The article is written in July 2005, nearly four years after the attacks, and is explicitly retrospective. Its conjunctural relevance lies in its dissection of the immediate aftermath of 9/11 and the subsequent trajectory of US capitalism. Roberts notes that the US economy was already "tottering" before the attacks, with the NASDAQ having lost two-thirds of its peak value, the German Neuer Markt down 90%, and the Japanese Nikkei down close to 75%. Corporate profits and spending were declining, unemployment was rising, and consumer debt was at record levels.

The article identifies the key mechanism of the crisis as the destruction of consumer and investor confidence. Roberts cites Stephen Roach of Morgan Stanley, who described the attacks as "the transforming event of this economic cycle." The piece argues that the US consumer — already burdened by depleted savings, record debt, negative wealth effects, and rising unemployment — could not sustain the spending that had been propping up the economy. The attacks, by shattering confidence, removed the last prop.

Roberts also anticipates the shift from disinflation to deflation, a prediction that proved prescient given the deflationary pressures that characterised the early 2000s. The article's geopolitical analysis — that the "war on terror" would prove unwinnable and would heighten investor anxiety — also resonates with the subsequent quagmires in Afghanistan and Iraq.

Where the Argument Continues

This article is an early contribution to Michael Roberts' long-running analysis of the crisis-ridden trajectory of US and global capitalism. The argument about the 2001 recession as a "tipping point" is developed further in Roberts' subsequent work on the 2008 financial crisis, particularly in his book The Great Recession (2009) and his regular blog posts on Marxist economics. The critique of the "New Economy" myth and the exposure of fictitious capital accumulation is a recurring theme in Roberts' writing, and readers should consult his later analyses of the 2008 crash and the COVID-19 pandemic for a fuller picture.

The article also connects to the broader Marxist tradition's analysis of the relationship between war and capitalist crisis. Lenin's Imperialism, the Highest Stage of Capitalism and Trotsky's writings on the interwar period provide the theoretical backdrop. The piece implicitly engages with the debate between those who see war as a temporary solution to capitalist crisis (the Keynesian view) and those who see it as exacerbating underlying contradictions (the Marxist view).

Connections

  • Michael Roberts, The Great Recession (2009) — develops the analysis of the 2001 recession as a precursor to the 2008 crash.
  • Michael Roberts, The Long Depression (2016) — extends the argument about the secular stagnation of advanced capitalism.
  • Lenin, Imperialism, the Highest Stage of Capitalism (1917) — provides the theoretical framework for understanding US imperialism and its contradictions.
  • Trotsky, The War and the International (1914) — analyses the relationship between war and capitalist crisis.
  • Ernest Mandel, Late Capitalism (1972) — offers a Marxist theory of long waves and structural crises that informs Roberts' periodisation.
  • In Defence of Marxism articles on the 2008 financial crisis — available on marxist.com, these develop the analysis of fictitious capital and the tendency of the rate of profit to fall.

Key Quotes

  1. "Even as the hijacked airlines flew mercilessly toward their targets, a flood of red ink had already wiped out over six years of total accumulated profits of all companies listed on the NASDAQ exchange."

  2. "The great new capitalist myth of the 'New Economy', supposedly freeing capitalism from eternal boom and slump by the new technology, has been exposed."

  3. "What was built up in the US during the past few years was a grossly unreasonable confidence in non-existing 'new paradigm' miracles. It was upon this pad of 'new paradigm' mush that American capitalists and their investors constructed their hopes for the future."

  4. "The difference between now and other crisis events is not just the severity of the event itself. This time there is an underlying weakness in the capitalist economy. Long before the planes cracked the glass and steel of the Trade Centre towers, the US economy was headed for trouble."

  5. "As a leading capitalist economist, Stephen Roach of Morgan Stanley, put it: 'the negative shock to consumer confidence could well be the transforming event of this economic cycle. It takes the fundamentals of an already weakened US economy from bad to worse.'"

  6. "No amount of military action can repair the decade-long damage done to America's balance sheets. During the 1960s and 1970s, the industrial economies experienced rising inflation... During the 1980s and 1990s, disinflation... In the 2000s, it will be deflation."