US capitalism Digging a deeper hole

Marxist Analysis · 2026-05-13

Core Argument

The article argues that the US capitalist economy in mid-2002 was not experiencing a genuine recovery from the 2000-2001 recession, but was instead entering a more dangerous phase characterised by multiple, interconnected bubbles. The central thesis is that the apparent stabilisation — driven by consumer spending, housing inflation, and government deficit spending — masked a deeper structural crisis rooted in a collapse of profitability. The author claims that the pattern of weak investment alongside excessive consumer debt has no post-war precedent, but closely resembles the US economy of 1926-29, implying that a major slump is not merely possible but structurally probable. The argument is that the US empire, like all empires before it, is heading toward financial and geopolitical ruin as its economic foundations rot.

Theoretical Grounding

The analysis is grounded in the Marxist theory of crisis, specifically the centrality of profitability to capitalist reproduction. The article explicitly states that "under capitalism, production is for profit and profits matter," and it measures profit as "the unpaid part of the value added by the workforce" — a clear reference to Marx's theory of surplus value. The argument that falling profitability leads to overaccumulation and eventual crisis draws on the Marxist tradition of crisis theory, particularly the tendency of the rate of profit to fall (TRPF), though the article does not use that exact phrase. Instead, it demonstrates the mechanism empirically: profits as a share of GDP fell from 9% in the 1960s to below 3% in 2002, while debt expanded ten times faster than income.

The article also deploys the concept of fictitious capital implicitly. The description of four bubbles — tech stocks, the broader stock market, property, and the dollar — shows how credit and speculation temporarily sustain accumulation when real profitability is exhausted. The analysis of Enron and other accounting scandals reveals how fictitious capital was disguised as real profit through "cheap accounting tricks." This connects to Marx's analysis of credit as a factor that can postpone but not abolish crises, and to later Marxist work on financialisation as a response to the falling rate of profit.

The geopolitical dimension — the comparison of the US to the Roman Empire and the claim that imperial overreach follows economic decline — draws on the Marxist theory of imperialism, particularly the idea that capitalist powers seek to resolve internal contradictions through external domination, only to deepen them.

Conjunctural Relevance

The article was written in July 2002, shortly after the Enron scandal and the bursting of the dot-com bubble, but before the full onset of the 2008 financial crisis. Its relevance lies in its accurate identification of the mechanisms that would eventually produce that crisis. The article names specific data points that proved prescient:

• US corporate profits had fallen to less than 3% of GDP, the lowest in the post-war period.
• Debt grew ten times faster than income in 2001 ($2 trillion in new debt against $179 billion in income growth).
• Telecom debt alone equalled the combined total of the Savings and Loan crisis and the junk bond crisis.
• 19 million Americans paid more than 35% of income on housing, up from 16 million a decade earlier.
• Bankruptcy rates among those 65 and older had risen 244% in ten years.
• Long-term unemployment was at a 19-year high.
• Foreign capital inflows into US markets had nearly halved, from $44 billion per month to $25 billion.

The article identifies the property market as the next bubble to burst, which it did in 2007-2008. It also warns that a dollar crash would trigger a global slump, which materialised as the 2008 financial crisis spread from the US to the world economy. The geopolitical dimension — the US as an overextended empire — connects to the wars in Afghanistan and Iraq, which were ongoing or imminent at the time of writing.

Where the Argument Continues

This article is an early statement of a recurring theme in Michael Roberts' work for In Defence of Marxism. The argument about profitability and crisis is developed more systematically in later articles, particularly those analysing the 2008 crash and its aftermath. The concept of multiple bubbles is revisited in subsequent pieces on the housing bubble, the eurozone crisis, and the long depression that followed 2008. The geopolitical analysis of US decline is taken up in articles on the rise of China, the Ukraine war, and the shifting global order. Readers should look to Roberts' later work on the rate of profit — including his book The Great Recession (2009) and subsequent articles on the profitability of US and global capital — for a more rigorous empirical treatment of the TRPF. The Against the Stream podcast episodes on the 2008 crisis and on US imperialism also continue this line of argument.

Connections

• Marx, Capital Volume III — on the tendency of the rate of profit to fall and the role of credit in postponing crises.
• Hilferding, Finance Capital — on the relationship between banks, industry, and fictitious capital.
• Baran and Sweezy, Monopoly Capital — on the tendency of surplus to rise and the need for wasteful expenditure (though the article's profit data challenges their thesis).
• Roberts, The Great Recession — for the full empirical case on profitability and crisis.
• Carchedi and Roberts, World in Crisis — for a more recent collection of Marxist analyses of the 2008 crash and its aftermath.
• IDOM articles on the 2008 financial crisis — for the development of the argument that the crisis was rooted in falling profitability, not just financial speculation.
• Paul Kennedy, The Rise and Fall of the Great Powers — cited in the article for the imperial comparison.

Key Quotes

1. "Under capitalism, production is for profit and profits matter. But US corporate profits peaked in the second quarter of 2000 at $518 billion. By the fourth quarter of 2001, they were down 44.4%."

2. "Profits are essentially the unpaid part of the value added by the workforce. And if profits are the basis for investible resources for the future, then a chronic lack of profits indicates that America is consuming its capital; eating its seed corn."

3. "This current capitalist economic cycle has no precedent in the whole post-war period. Investment spending is unusually weak and consumer spending unusually strong. Yet this pattern has at least one ominous parallel before the second world war: the US economy of 1926-29."

4. "Last year US national income grew by $179 billion. Debts, on the other hand, increased more than $2 trillion, ten times faster than income."

5. "A great empire is to the world of geopolitics what a great bubble is to the world of economics. It looks omnipotent at the outset, eventually it is a catastrophe."

6. "The bubbles of the New Economy and the stock market burst in millennium year. In 2002, the bubble of dollar supremacy is also bursting."