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Wall Street a total eclipse in sight

Marxist Analysis · 2026-05-13

Core Argument

The central thesis is that the US stock market of the late 1990s constituted a speculative bubble of historic proportions, detached from any underlying reality in the productive economy, and that its inevitable collapse would trigger a general economic crisis. Roberts argues that the boom was not driven by a genuine "new productivity paradigm" — as the apologists of the time claimed — but by the expansion of cheap credit, falling interest rates, and the sheer weight of fictitious capital accumulation. The article claims that the gap between stock market valuations and actual corporate profits had become unsustainable, and that the mechanisms sustaining the bubble — low interest rates, cheap imports, rising corporate debt, and share buybacks — were already beginning to unwind. The crash, Roberts insists, would not be a mere correction but a "total eclipse" for the world economy.

Theoretical Grounding

The analysis is grounded in the Marxist theory of crisis, particularly the distinction between the real economy (production, profits, investment) and the sphere of circulation and speculation. Roberts draws implicitly on Marx's concept of fictitious capital — capital that exists only as a claim on future surplus value, with no material basis in present production. The article's central empirical move is to contrast the growth of stock market valuations with the stagnation of corporate profits, a gap that cannot be sustained indefinitely. This is a concrete application of Marx's law of the tendency of the rate of profit to fall: if the rate of profit in production is not rising, then rising asset prices represent not real accumulation but speculation, which must eventually be corrected.

The article also situates itself within the Marxist tradition's critique of bourgeois crisis theory, specifically the "new paradigm" or "new economy" arguments that claimed technological change (the internet revolution) had permanently raised productivity growth and abolished the business cycle. Roberts debunks this by comparing productivity data across periods, showing that the 1990s productivity growth was actually lower than in the "golden era" of 1950–73. This is a classic Marxist move: exposing the ideological function of claims that capitalism has transcended its internal contradictions.

The piece also implicitly deploys the concept of overaccumulation — too much capital chasing too few profitable investment opportunities — and the role of credit expansion in temporarily masking the underlying crisis. The reference to the 1929 crash is not rhetorical but analytical: the article argues that the structural conditions are comparable, and that the same logic of speculation, credit, and eventual collapse applies.

Conjunctural Relevance

The article was written in July 2005, but it is explicitly analysing the late 1990s dot-com bubble. Its conjunctural relevance at the time of writing was that the bubble had already begun to deflate — the Nasdaq peaked in March 2000 and had fallen sharply by 2002 — but Roberts is arguing that the underlying contradictions had not been resolved. The article identifies several specific mechanisms that were already turning:

  • Rising interest rates: The US Federal Reserve raised rates in June 2005, and the Bank of England and European Central Bank had stopped cutting. This was squeezing the credit that had fuelled the bubble.
  • Falling dollar: The dollar's decline was raising import prices and widening the US trade deficit, increasing cost pressures on US corporations.
  • Rising wage costs: Low unemployment had strengthened workers' bargaining power, pushing up wages faster than productivity growth, squeezing profits.
  • Corporate debt: US companies had borrowed heavily to finance investment and share buybacks, leaving them exposed to any slowdown in profit growth.

The article also names specific companies — Microsoft, General Electric, Wal-Mart, Intel, IBM — and notes that the entire internet sector had never reported profits. The reference to Paul Volcker's remark that "the fate of the world economy is now totally dependent on about 50 stocks, half of which have never reported any earnings" is a damning indictment of the bubble's fragility.

The article's broader conjunctural claim is that the US economy was the engine of global growth, and that a US crash would "take the rest of the world with it." This anticipates the 2008 global financial crisis, though Roberts is here focused on the stock market rather than the housing market and derivatives that would trigger that later crash.

Where the Argument Continues

This article is an early statement of a theme that runs through Michael Roberts' entire body of work for In Defence of Marxism: the inevitability of capitalist crises rooted in the falling rate of profit and the tendency toward overaccumulation. The argument is developed further in later articles that analyse the 2008 crash, the subsequent "Great Recession," and the long stagnation that followed. Readers should consult:

  • Roberts' later IDOM articles on the 2008 financial crisis, which apply the same framework to the collapse of Lehman Brothers and the housing bubble.
  • His work on the "long depression" after 2008, arguing that the crisis was not resolved but merely suppressed by unprecedented central bank intervention (quantitative easing, zero interest rates).
  • The broader IDOM corpus on the Marxist theory of crisis, including articles by Alan Woods and others that situate specific crises within the long-term tendency of the rate of profit to fall.

The article also connects to the Marxist tradition's analysis of financialisation — the growing dominance of finance over production — which is developed more fully in later Marxist literature, including the work of Costas Lapavitsas and others. Roberts' own later work engages with this literature, though this article does not use the term explicitly.

Connections

This article should be read alongside:

  • Marx, Capital Volume III, Part V — on interest-bearing capital and fictitious capital. The theoretical foundation for the distinction between real accumulation and speculation.
  • J.K. Galbraith, The Great Crash 1929 — cited by Roberts, this is a classic bourgeois account of the 1929 crash that nonetheless provides useful empirical material.
  • Michael Roberts, The Great Recession: A Marxist View — a later book-length treatment that extends the analysis to the 2008 crisis.
  • Alan Woods, The Crash of 2008 and the Marxist Theory of Crisis — an IDOM article that situates the 2008 crash within the longer-term tendency of the rate of profit to fall.
  • Costas Lapavitsas, Financialised Capitalism: Crisis and Financial Expropriation — a more theoretical treatment of financialisation that complements Roberts' empirical approach.

The article also connects to the broader Marxist debate on the law of the tendency of the rate of profit to fall (LTRPF), which has been a central theoretical controversy within Marxism. Roberts is a leading defender of the LTRPF as the fundamental cause of capitalist crises, and this article is an early application of that framework to a concrete historical episode.

Key Quotes

  1. "The US stock market has reached new highs. By any definition it is fantastically valued. The Dow Jones Industrial index, which measures the prices of the top stocks, was twice the level of the hourly wage earnings index in 1990. Now it is 7 times larger."

  2. "Since the end of 1996, the stock market index has risen 77%, but profits are up only 2%!"

  3. "The reality is that the stock market is a huge bubble, not based on the reality of fast rising productivity (or profits) for capitalism... but on the expansion of cheap credit."

  4. "In the golden era of capitalism between 1950-73, real GDP per working person rose 2.4% a year in the US. In the great internet revolution of the 1990s, it's been rising just 1.7% a year."

  5. "The bulls (as the optimists of the stock market are called) say that doesn't matter. They eventually will. And anyway, the great internet revolution is driving up the productivity of US industry so much that the US economy can continue growing at 4%-plus without inflation rising and without a break. It's a new 'productivity paradigm'."

  6. "Higher borrowing costs and less profit growth — that's a formula for a credit squeeze and economic slowdown. The stock market is already fearful. Worry could soon turn into panic. And if Wall St crashes, it will hit millions of Americans with much of their savings invested in speculative shares, like Mark Barton. First madness, then destruction. If the US economy spirals downwards, it will take the rest of the world with it. It will be a total eclipse."