The Great Recession and Marx's Crisis Theory

Abstract

AbstractTo help understand why the Great Recession occurred, this article focuses on its underlying causes and employs Karl Marx's theory of capitalist economic crisis. It shows that U.S. corporations' rate of return on fixed asset investment fell throughout the half‐century preceding the recession, and that this fall accounts for the entire decline in their rate of capital accumulation (productive investment). The investment slowdown led to a decline in the rate of economic growth, which was a main cause of rising debt burdens, as were stimulative fiscal and monetary policies that delayed but exacerbated the effects of the underlying economic problems. The article also refutes the claim that the rate of profit could not really have fallen because massive redistribution of income from wages to profits took place, and it argues that it is unlikely that major crises of capitalism can be eliminated.