Book Review: The Long Depression: How It Happened, Why It Happened, and What Happens Next by Michael Roberts

Abstract

Michael Roberts The Long Depression: How It Happened, Why It Happened, and What Happens Next, Chicago, IL: Haymarket Books, 2016; $19 There was a cheer on social media when Iceland put 26 of their top bankers in prison for crimes ranging from insider trading to fraud, money laundering, misleading markets, breach of duties and lying to the authorities, as the Great Recession has been associated with the greed of the bankers. The Independent wondered why we can't do the same in the United Kingdom (Birrrell 2015). The authorities in the United Kingdom were in no mood to listen to such questions as they were busy filling the coffers of banks by offering them monies at near zero interest rates for in their opinion it is the lack of greed that has been delaying the recovery. These contradictory prognoses confuse only the uninitiated. For whenever there is a recession or depression, there is neither a consensus on the causes nor how to get out of it among the experts. The reason is simple; these experts are looking for explanations in the wrong places. They are to be found not in the mind of this greedy banker or that exploitative CEO or in the lack of effective demand caused by an unpredictable shock, but rather in the law of motion of capital--that is, in the tendency of the rate of profit to fall. This is the point that Michael Roberts convincingly establishes in The Long Depression. As the recession persisted, experts compared it with the Great Depression of 1929-1940, and called it 'The Great Recession' as this was the longest among the 18 recessions that have been identified by the National Bureau of Economic Research (NBER) since the end of World War II (WWII). In its intensity and length, this recession is to be compared with the Great Depression of late 19th century (1874-1897) and the Great Depression of mid-20th century (1929-1940). In Roberts' view, one can only say the economy has recovered if a pre-crisis level/long-run trend of growth is restored. To put it concretely, that means 3% per annum growth is restored in advanced countries. Roberts predicts we may have to wait until 2018 to reach that level. Marx had proposed that the tendential law of falling rate of profit thanks to the increasing organic composition of capital (c/v), will lead to the ultimate breakdown of capitalism. Being a tendency, there are also counter tendencies and Marx mentioned five of them: (1) the increasing intensity of exploitation, which could increase the surplus value; (2) the relative cheapening of the elements of constant capital; (3) the deviation of the wage rate from the value of labour power; (4) the existence and increase of a relative surplus population; and (5) the cheapening of consumption and capital goods through imports. Marx had neither the time nor the facilities to examine the data related to these tendencies to clinch the argument. Michel Roberts and a number of researchers of Marxist persuasion were able to test these tendencies and find that the propositions have stood the test of time and help us to predict economic events like recession/depression. On the causes of the first great depression of 1884-1897 and the second one of 1929-1940, the author finds that the rate of profit was falling and the organic composition of capital was rising. Recovery from the second great depression occurred only after enough capital was destroyed so that the remaining capital's profitability began to rise once war production began with the break out of the Second World War. However, from the mid 1960s, we have again seen a fall in profitability as the organic composition of capital has risen thanks to increased mechanization and investment in new industries. The response to this crisis was to have anti-labour reforms, privatization, cuts in government services and pensions, a lowering of taxes on the corporate sector, and the deregulation of the financial sector. …