Optimism and pessimism

What is the nature of capitalist crises? Paul B Smith weighs up two contending views

This article discusses a debate between two Marxists, Hillel Ticktin and Michael Roberts, which took place in Glasgow earlier this year.1 It was organised by the Labour Party Socialist Network.

Roberts works as an economist in the City of London. This gives him the advantage of observing the operations of finance capitalism from the inside. A few years ago, Roberts wrote a book on the ongoing depression, which he has now updated, and he has a lively, popular blog.2

In contrast, Ticktin taught socialist theory and movements at Glasgow University. He was the founding editor of Critique - a journal of socialist theory3. He has written books on the former USSR and the politics of race in South Africa.4 He has also edited books on the crisis, and the ideas of Trotsky.5 Within Critique, he has published articles on political economy, Marxism, decline, finance capital, socialism, consciousness and the crisis.

Roberts and Ticktin have some things in common. Both contribute regularly to the Weekly Worker and attend Communist Universityevery August. Both are highly critical of bourgeois economics. There are, however, important differences between them - not least the role that the tendency of the rate of profit to fall plays in a crisis.6

At one point during the debate, Roberts attempted a summary of these differences. He stated that he is an optimist regarding the future of capitalism and a pessimist regarding the ability of the working class to bring socialism into being. He described Ticktin in the opposite way - a pessimist about the future of capitalism and an optimist regarding the working class’s ability to end it. Ticktin smiled at these remarks. Are these characterisations true? If so why?

Pure ideology

Both thinkers thought we are living through another great depression. They agreed that it is longer and deeper than the two previous ones of 1873-93 and 1929-39.They stated that bourgeois economics has nothing to say to explain or predict how these changes came about. As Ticktin put it, bourgeois economics is “pure ideology”.

Roberts began his talk by ridiculing the arrogant ignorance of a range of different bourgeois economists including a Nobel prize-winner, Robert Lucas. Not only did these ‘experts’ not consider a crisis likely: many thought it was impossible. Some believed the problem of depressions had been solved forever. Ticktin recalled the embarrassment economists felt when the queen visited the London School of Economics in 2007. She asked them why they had failed to predict the collapse of the banks. They answered it was too complicated.

A notable difference between the two was evident early on. This was not just Roberts’ confident presentation of his ideas and Ticktin’s careful response. It was the notion that Marxist explanations of crisis are necessarily superior to bourgeois ones. Roberts assumed his interpretation based on Marx’s law of the tendency of the rate of profit to fall is the only possible explanation of crises.

Ticktin disagreed with this. He pointed out that Marxists had not done much better than their bourgeois opponents. He cited the Hungarian Stalinist economist, Eugen Varga (1879-1964). Varga had argued that, after 1945, the state would ensure that there would be no more crises of capitalism. Capitalism would be inherently stable from there on. Ticktin then mentioned anti-Stalinist Marxists, such as Ernest Mandel (1923-95) and Tony Cliff (1917-2000), who did not do much better. They predicted an immediate crisis after World War II. This never happened - global capitalism remained relatively stable until the late 1960s and early 70s.

The reason Ticktin gave for the failure of Marxist theory was that Stalinism had destroyed the possibility of a healthy left. The role Stalinism played in the defeat of the working class after the October 1917 revolution is responsible for the absence of a left today. This includes a Marxist left. As a consequence, Marxists have difficulty understanding the nature and future of the crisis in the present. Nonetheless Ticktin was optimistic that, the further people moved away from a preoccupation with the former USSR (and national regimes modelled on it), the more likely they would be to be attracted to the idea of socialism as an alternative to a crisis-ridden capitalism. It follows that the conditions for a satisfactory theory of crisis could also emerge.

The debate therefore addressed this absence of a coherent understanding of crisis. Roberts gave a quick outline of what Marx had thought, contrasting him with Keynes. He criticised Keynes for having a “technical” approach, believing that crises were caused by a lack of demand - workers just did not have enough to spend. When demand collapsed, profits and investment went down. A crisis could therefore be solved by lowering interest rates to zero and using the state to invest in the infrastructure. According to Keynes, there was nothing wrong with the engine of capitalism that could not be repaired.

Marx, on the other hand, argued that crises are characterised by overproduction. There are three causes of this. The first is similar to Keynes. Capitalist expansion requires wages to be held down and workers cannot buy what is being produced. The second is what Marx called disproportionality. Overproduction is caused by a disproportionate investment in producer, as opposed to consumer, goods. This is the result of a lack of planning and causes crashes.

Roberts rejected these two alternatives - he thought they did not explain crises sufficiently well. According to Roberts, the only real way to understand them is to look at the nature of capitalism itself. Capitalism is based on making profits - money making more money. The aim of exploitation is to make more money than you invest. The essence of the system is to make profit. Crises therefore take place when profit is not delivered or realised.

Roberts argued that there is a contradiction between the drive to make labour more productive and the aim of getting more profits, which means there is a tendency for profits to fall over time. Capitalists increasingly invest in machines rather than living labour. As they make losses, they lay off workers. As profits fall, there is less investment. Less investment means less employment. A slump happens - no-one can buy and no-one can sell. This means wiping out constant capital in the form of machinery (and variable in the form of wages), so that investment can start again. This is what Schumpeter called “creative destruction”. The difference between a slump and a depression is that in a slump the fall in profits is not as wholescale or prolonged as in a depression. This theory can be proved with empirical data and statistics.

Limited theory

Ticktin agreed that during a crisis all the three aspects Roberts mentioned - underconsumption, disproportionality and falling profits - are present. Nonetheless, he argued that the tendency for the rate of profit to fall is not the only form of explanation.

Certainly Marxists can emphasise one aspect of Marx’s writings on crisis as superior to all others. They can pit either one of the aspects against the other two (as Roberts and underconsumptionists have done); or they can uphold two of the aspects against the other one. According to Ticktin, neither approach provides the foundation for a sufficient understanding.

Why did Ticktin think Roberts’ approach was limited? For two reasons. The first was that it gave a technical account. The focus was mostly on profitability and productivity. By doing so, it lost sight of the political and historical character of crises. Secondly, it excluded the influence of the class struggle on the development of capitalism as whole. The class struggle became an afterthought.

Roberts mentioned the class struggle as something that does not disappear during crises, but becomes more difficult. In his final contribution he predicted there will be no confident working class until the present depression ends and there is a recovery. He thought that presently there are only a few groups of workers with any confidence in collective struggle. He gave the railway workers in the UK as an example. I guess this confirms his description of himself as a pessimist concerning the potential of workers to form a class capable of taking power. He did not discuss the role of the state or politics in this process.

Ticktin’s contributions were different. After a short exposition of reasons why he thought it is impossible to provide sufficient data to prove that profits are falling, he gave an historical and political account of crises. Rather than attack the bases of Roberts’ interpretation directly, he challenged a latent assumption within it that the contemporary crisis involves the extent of ‘creative destruction’ Marx described in Capital.

Ticktin mentioned Hilferding and Lenin’s use of Marx’s categories to theorise finance capitalism, imperialism and world wars. These were attempts to explain the ways the capitalist class had responded to crises. Ticktin also integrated crises within the perspective he has developed in Critique: capitalism and the law of value is in decline. The growth of monopoly forms part of the empirical confirmation of this perspective and Ticktin spent some time discussing monopoly to prove this point.

Ticktin argued that, after the crisis of 1873-93, imperialism played a crucial role in raising the rate of profit through the export of capital abroad. Imperialism and war have been important to the survival of capitalism ever since. Moreover, the kind of devastation that took place in crises before 1873 was not repeated in 1929-39. A world war was needed to destroy the forces of production, clearing the way for the process of accumulation to start afresh.

However, the capitalist class is not destroying these forces today - it realises it must live with the working class. If it went for mass unemployment in the form it did in the last depression, it would not survive. The period after World War II saw a vast increase in state expenditure on arms, which guaranteed a period of relative stability. The reduction in arms expenditure from 1986-97 coincided with state guarantees to the stock exchange after the crash of 1987.

Ticktin was at pains to stress that crises and their recovery in the 20th and 21st century involve workers’ resistance to the destruction of productive forces. These are political, not technical, issues. To understand them fully, a socialist analysis needs to take into account the objective strength of the working class. Policies of full employment and the welfare state made workers more powerful and led to mass strikes. The turn to finance capital as a means of weakening workers’ collective struggles through cuts and privatisation began to fail by the end of the century. This saw crashes of the Long Term Capital Management Fund (1998) and East Asian economies (1997). Arms expenditure on imperialist wars in the Middle East delayed the beginning of the present depression until the crashes of 2007.

Monopoly and decline

Ticktin asked Roberts why he had made no reference to monopoly in his explanation. He wondered whether Roberts agreed with that section of the left that now shares a bourgeois viewpoint once associated with the neoliberal thinker, Milton Friedman (1912-2006). This is that monopolies no longer play an important role in the global economy. He referenced Anwar Shaikh, a Marxist economist. Ticktin alleged that Shaikh denies that monopolies are able to control production by restricting competition.7 In contrast, Ticktin cited empirical evidence for increasing industrial and financial concentration within the global economy. Peter Nolan, a specialist on Chinese development, has compiled the data in a recent book. Nolan argues that Chinese companies will be unable to take over the global market, because the latter is dominated by a few huge American and European transnational corporations.8

Ticktin compared monopoly - a feature of a declining capitalism - to the mature capitalism Marx described in Capital. In the latter there were a large number of competitors, leading to the bankruptcy of many firms during a crisis. Ticktin argued that monopolies avoid overproduction by managing the gap between what is actually produced and what potentially could be produced. Through managerial forms of control they avoid creative destruction and bankruptcy. They invest their surplus capital to a certain level and if there is no demand keep what is left in the bank.

Ticktin cited the $29 trillion held in the Bank of New York Mellon as evidence of the vast quantities of money withheld from circulation as productive capital. Rather than a fall in the rate of profit, monopolies control their rates of profit during a crisis, leading to the contradictory situation that money no longer functions as capital, but as sterile hoards. (I would add that monopolies believe they are ‘too big to fail’. They are secure in the belief that the state will bail them out if their profits collapse. This is further evidence that there is a tendency for capitalist production to be increasingly socialised and politicised.)

Roberts’ reply to Ticktin’s challenge was to state he does not see the causes of crisis in that way. The classical model of creative destruction is not over. Capitalism will not stagger on indefinitely until it is overthrown. Competition is real - there is never a total monopoly of a market. The process that Marx describes in Capital is happening now: the depression will come to an end, once the weak competitors are cleared out. There will then be a series of further slumps and the introduction of new technologies and forms of exploitation, as capitalism recovers. Profitability will be restored and the hoards of money will flow back into the economy as productive investment again. I guess this is why he described himself as an optimist concerning the future of capitalism.

Roberts also summarised what he thought Ticktin’s position is: ie, that imperialism and war have saved capitalism. Marx’s model of creative destruction is therefore no longer applicable. The state now plays a crucial role in keeping capitalism going. Crisis is caused by capitalists refusing to invest.

Ticktin did not argue with Roberts’ summary of his position. Rather he asked the audience to consider the situation outwith Europe and the United States. People in Brazil and South Africa have difficulty feeding themselves. How is this surplus population going to be absorbed by a fresh expansion of capital? Building socialism in one country is impossible and no solution.

Why should capitalists continue to invest in these countries? Are they going to go for policies of full employment in South Africa and Brazil? How is capital going to expand in the future? A massive investment in technology would lead to a decline in profits. How far will they go with automation? It is surprising how limited it has been so far - how slow the introduction of automation has been. He thought that the aim of the ruling class in the future will be to avoid abandoning capitalism. They will try to maintain the system at a low level with minimal levels of employment for as long as possible.

These are important questions for further debate and discussion that arose during a meeting lasting two and a half hours. It could have gone on much longer!


1. The debate took place on February 4 2017 and can be viewed at http://tinyurl.com/ydbmfqdr.

2. M Roberts The long depression Chicago 2016. Michael Roberts blogs athttps://thenextrecession.wordpress.com.

3. www.critiquejournal.net.

4. HH Ticktin Origins of the crisis in the USSR: essays on the political economy of a disintegrating system London 1992. HH Ticktin The politics of race: discrimination in South Africa London 1993.

5. HH Ticktin The ideas of Leon Trotsky London 1995; HH Ticktin (ed) Marxism and the global financial crisis London 2012.

6. I was unclear whether they had a shared understanding of the nature of crisis. Roberts talked about the difference between booms and slumps and a depression. This may reflect the distinction some people make between cyclical and systemic crises.

7. See A Shaikh Capitalism: competition, conflict, crises Oxford 2016.

8. P Nolan Is China buying the world? New Jersey 2013.