The world economy after Iraq
Core Argument¶
The central thesis is that the US economy was already heading into a renewed recession in 2003, and that the Iraq War — far from resolving the underlying crisis — was a symptom of it. Roberts argues that the brief recovery from the 2001 recession was artificial, sustained only by a housing bubble and consumer borrowing that masked a deep and ongoing crisis of profitability. The war was not a distraction from economic weakness but an expression of it: American imperialism needed to project power precisely because the economic foundations were crumbling. The argument is that the "double-dip" recession was not a temporary blip but the return of the underlying crisis that the 2001 recession had never truly resolved.
Theoretical Grounding¶
The analysis is grounded in the Marxist theory of crisis, specifically the tendency of the rate of profit to fall as the driving force behind cyclical recessions. Roberts does not deploy the full theoretical apparatus explicitly, but the logic is clear: the collapse of the hi-tech investment bubble, the fall in corporate profitability since 1997, and the compression of profit margins to all-time lows are presented as the material basis for the downturn. The article also draws on the Marxist understanding of fictitious capital — the housing bubble is identified as a speculative expansion that temporarily props up demand but cannot resolve the underlying contradiction between production and realisation. The analysis sits firmly within the tradition of Marxist political economy that sees war not as an external shock to capitalism but as an expression of its internal contradictions, particularly the need for imperialism to secure markets and spheres of investment in a period of stagnation.
Conjunctural Relevance¶
The article is written in the immediate aftermath of the 2003 Iraq invasion, and its conjunctural specificity is precise. Roberts cites the 1.6% annual GDP growth rate for the first quarter of 2003, the 450,000 job losses in the preceding two months, and the fall in business activity to levels not seen since after 9/11. He identifies the housing bubble and mortgage refinancing as the only props keeping consumer spending afloat, and notes that US corporate profit margins were at an all-time low while prices were falling at the fastest rate since 1958. Geopolitically, the article points to the $80bn already borrowed for the war, the prospect of three times that amount for occupation and reconstruction, and the looming threat of a new Korean war. The SARS outbreak is identified as an additional shock that could tip Asia into recession precisely when the major economies could least absorb it. The WTO's own cautious forecasts — 2-3% world trade growth, below 1990s averages — are cited to show that even bourgeois institutions recognised the fragility.
Where the Argument Continues¶
The article is an early statement of themes that Roberts and the In Defence of Marxism tradition would develop extensively in subsequent years. The analysis of the housing bubble as a temporary prop for the US economy points directly to the 2007-8 financial crisis, which Roberts would later analyse in detail as the bursting of that very bubble. The argument that the Iraq War was an expression of imperialist crisis rather than a solution connects to a broader body of work on the relationship between war and capitalist stagnation. The article does not develop a full theory of the long downturn — that would come later in Roberts' work on the tendency of the rate of profit to fall and the secular stagnation thesis. The relationship between fictitious capital and productive accumulation is gestured at but not fully theorised; later articles in the Marxist.com corpus would take this up in greater depth.
Connections¶
The article connects directly to the broader Marxist analysis of the 2001 recession and its aftermath, particularly the work of Michael Roberts on profitability cycles. It should be read alongside Roberts' later analyses of the 2008 crash and the long depression that followed. The argument that war is a symptom rather than a solution to capitalist crisis connects to Lenin's theory of imperialism and the classical Marxist analysis of the First World War. The article also sits within the tradition of Marxist crisis theory that runs from Marx's own writing on the tendency of the rate of profit to fall, through the work of Henryk Grossman, and into contemporary Marxist political economy. For readers of the In Defence of Marxism corpus, this article is an early marker of the analysis that would later be developed in the wake of 2008.
Key Quotes¶
-
"US corporate profitability has been falling since 1997 and the profit margin on sales is at an all-time low. Prices being charged by companies to their buyers are falling at the fastest rate since 1958!"
-
"The key to the success of the US economy has been consumer spending. After the collapse of the great hi-tech investment binge at the start of the millennium and the following cliff-like drop of the stock market, the US economy has staggered on because American households have gone on spending like there would be no more millennia."
-
"It's because another bubble in the US economy has continued to expand. House prices have gone on rising at an average 7-10% rate... So spending has gone on, but at the expense of profits."
-
"Only Mr Greenspan with his interest rate cuts and Mr Bush with huge tax cuts and massive spending on new destroyers, tanks, aircraft and missiles stand in the way of economic recession and they will not prevail."
-
"The peace dividend is over and American households must expect to be taxed harder or watch the value of the dollar plunge, or both."
-
"The military battle in Iraq may be over, but the peace is not won for American imperialism."