Skip to content

World of worry

Marxist Analysis · 2026-05-13

Core Argument

The article argues that the apparent economic recovery of 2004–2005 is fundamentally fragile and unsustainable because it rests not on a genuine expansion of productive investment and employment, but on a massive credit bubble sustained by unprecedented global imbalances. Roberts claims that the underlying profitability of US capitalism is already being squeezed by rising costs (oil, wages, investment) and intensifying competition, and that the props holding up the recovery — tax cuts, near-zero interest rates, foreign financing of the US trade deficit — are exhausted. The central thesis is that the world capitalist economy is heading toward a new downturn, not a sustained boom, and that the "worry" of investors reflects a correct intuition that the foundations are rotten.

Theoretical Grounding

The analysis is grounded in the Marxist theory of crisis, specifically the tendency of the rate of profit to fall and the distinction between productive and unproductive labour. Roberts identifies the real source of the 2001–2003 profit recovery as the ruthless cutting of labour and investment — a classic restructuring of capital through devalorisation and increased exploitation — rather than any genuine expansion of the productive forces. He then traces how this profit recovery is being eroded: rising employment and investment drive up costs, while competition from low-wage China prevents price increases, squeezing profit margins.

The article also deploys the Marxist concept of fictitious capital — credit and financial expansion not backed by productive value creation. The US credit bubble, low interest rates, and the recycling of trade surpluses into US government bonds are analysed as a temporary postponement of the underlying contradictions, not their resolution. The argument sits firmly in the tradition of Marx's analysis of the credit system in Volume III of Capital, where credit can delay but not abolish the crisis tendencies of capitalism.

Roberts also draws on the Marxist theory of imperialism, noting how the US uses its dollar hegemony to force the rest of the world to finance its deficits — a form of tribute that cannot last indefinitely. The collapse of Stalinism, low commodity prices, and the IT boom are identified as temporary, conjunctural factors that boosted profitability in the 1990s but have now exhausted themselves.

Conjunctural Relevance

The article was written in July 2005, at a moment when the US economy appeared to be growing strongly (4.5% annualised), Japan was recovering, and China was booming at 9–10%. Yet Roberts identifies several specific, concrete vulnerabilities:

  • Employment: Bush was on track to be the first president since Hoover to end a term with fewer jobs than at the start — a devastating political and economic indicator.
  • Credit bubble: US interest rates had been driven to 1%, with money supply growing at over 20% per year. Households were borrowing to consume, not to invest.
  • Trade deficit: The US current account deficit reached nearly 6% of GDP, financed by Japan, China, and Europe buying US bonds at near-zero yields — a relationship Roberts calls "perpetuating this imbalance."
  • Oil prices: Surging demand from China, combined with supply disruption from the Iraq War, drove oil prices sharply higher, acting as a tax on consumption and a cost squeeze on industry.
  • Profit squeeze: After 30% annual profit growth in 2003, Roberts predicts a "sharp decline in profit growth" as costs rise and pricing power remains weak.

The article is prescient: the US housing bubble peaked in 2006, the subprime crisis began in 2007, and the Great Recession followed in 2008. Roberts correctly identifies the credit bubble, the exhaustion of the 1990s boom factors, and the fragility of global imbalances as the key contradictions that would erupt.

Where the Argument Continues

This article is an early statement of a theme Roberts would develop extensively over the following decade. The argument continues in:

  • Later IDOM articles by Michael Roberts: His regular economic analyses on marxist.com track the unfolding of the 2008 crisis, the "Great Recession," and the subsequent "long depression" — the period of slow growth, low investment, and repeated financial crises that followed. The 2005 article is a precursor to his later work on the secular stagnation of profitability.
  • Roberts' book The Great Recession (2009): A full-length Marxist analysis of the 2008 crisis, expanding on the theoretical framework sketched here.
  • Roberts' blog The Next Recession: Continues the same analytical method — tracking profitability, investment, credit, and global imbalances — through the 2010s and into the COVID-19 crisis.
  • Against the Stream episodes: Roberts' regular contributions to the RCI's video and podcast output often revisit these themes, particularly the relationship between fictitious capital and the real economy.

The article leaves open the precise timing and trigger of the crisis — Roberts hedges, noting that the bubble "may go on expanding for a little while longer" — but the theoretical framework is already fully formed.

Connections

  • Marx, Capital Volume III, Part V ("Division of Profit into Interest and Profit of Enterprise"): The analysis of credit, fictitious capital, and the role of the banking system in postponing crisis.
  • Marx, Capital Volume III, Part III ("The Law of the Tendency of the Rate of Profit to Fall"): The underlying theoretical framework for the profit squeeze argument.
  • Henryk Grossman, The Law of Accumulation and Breakdown of the Capitalist System: The classic Marxist work on crisis as the necessary outcome of capital accumulation, against reformist and Keynesian accounts.
  • Paul Mattick, Marx and Keynes: On the limits of state intervention and credit expansion in resolving capitalist crises.
  • Andrew Kliman, The Failure of Capitalist Production: A more recent empirical defence of the law of the tendency of the rate of profit to fall, using US data to show that the 2008 crisis was rooted in falling profitability, not financial accident.
  • Other IDOM articles by Michael Roberts: Particularly his analyses of the 2008 crash, the Eurozone crisis, and the long depression — all of which extend the argument first made here.

Key Quotes

  1. "Even this improvement from the recession of 2001 had only been possible through a massive increase in credit not backed by productive investment."

  2. "So in effect, the rest of the world has given the US its savings to finance the spending of Americans. The whole great credit bubble has gone on inflating."

  3. "From the depths of recession in 2001, American and European businesses have raised their profits massively. They've done so by ruthlessly cutting their workforces to the bare minimum."

  4. "All the factors that helped capitalism in the 1990s are no longer around. The credit boost is coming to an end. House prices are beginning to flag everywhere. The cost of government is rising dramatically for capitalism in this era of American imperialist adventure."

  5. "The huge rise in oil prices and the slowdown in American spending could put pay to that hope over the next six months or so. And if trade growth does slow down, the competition for markets will intensify, put further pressure on profits and so stifle investment."

  6. "It's another example of how capitalism never develops the productive forces of the world in a planned or balanced way."