By MICHAEL ROBERTS*
A new book analyzes long cycles and economic growth with more recent data and seeks to identify these long cycles in capitalism
I have long been sympathetic to the concept of long cycles in capitalist production and accumulation. The idea is that capitalist production moves in cycles, not just booms and busts every 8-10 years or so, but that there are also longer periods of generally faster accumulation and growth in output, that is, periods of relative prosperity followed by periods of relatively slower accumulation and growth, with more busts. These longer cycles or waves last about 50-60 years, including both boom and bust phases.
If such cycles exist and can be supported by empirical evidence, they would provide an important indicator of the state of the world capitalist economy.
For example, if capitalist economies are in a long boom of production, investment and profitability, as they were after World War II until the 1960s, then the prospects for radical or revolutionary change were slim: capitalism was working.
On the other hand, if the world economy had entered a decline in production, accumulation and profitability, this would create new class tensions that could bring about radical changes (e.g. from the late 1960s to the early 1980s, with the overthrow of military dictatorships across southern Europe).
The most famous analysis of long cycles is attributed to Nicolai Kondratiev, a Russian economist from the early 20th century. He argued that such long cycles existed in all probability and sought to demonstrate this empirically, based primarily on movements in commodity prices, which in turn depended on long-term investment in infrastructure and markets. Nicolai Kondratiev argued that such cycles were “endogenous,” that is, they were internal to or driven by the economic forces of capitalism.
Nicolai Kondratiev was heavily criticized for his “mechanistic” approach – his most famous critic was Leon Trotsky, who, while recognizing the compelling features of Nicolai Kondratiev’s claims, rejected that such cycles, if they existed, were economically endogenous, arguing that political and social forces such as wars and revolutions were important factors contributing to any significant change in the direction of capitalist development.
Later, a close follower of Leon Trotsky, the Belgian Marxist economist Ernest Mandel also advocated long cycles or waves. But he argued curiously that although the booms and recessions in long cycles were due to economic changes (i.e. endogenous), recessions only ended because of political events (war, revolution, etc.) and not because of economic changes.
I mention this because a new book has just been published that analyzes long cycles and economic growth with the most recent data and seeks to identify these long cycles in capitalism. The authors are the Greek Marxist economists Nikolaos Chatzarakis, from New School for Social Research of New York; Persefoni Tsaliki Aristotle of the University of Thessaloniki and Lefteris Tsoulfidis of the University of Macedonia.
In your book, Economic growth and long cycles, the authors critically evaluate existing conventional growth models and offer an alternative approach to economic growth theory based on what they call classical political economy, but which is essentially a Marxist approach. They argue that capitalist development takes the form of “long periods of expansion systematically characterized by accelerated growth rates and other periods of similar longevity during which growth slows and sometimes becomes negative.”
Your model shows that “economic growth is a turbulent process, but not erratic and indeterminate”, in which two distinct patterns become apparent: the long-run tendency of capitalism to grow and the cyclical nature of that growth. The cause of the long cycles ultimately depends on the long-run tendency of the rate of profit to fall “which gives rise to the cyclical nature of capitalist growth.” It is the evolution of surplus value and the rate of surplus value that ultimately shapes the evolution of the capitalist economy, as opposed to conventional theories based on investment, consumption or productivity.
His growth model combines the three basic laws of Marxist economic theory: the law of value; the general law of accumulation (together with the schemes of extended reproduction); and the law of profitability. This combination of the three basic laws is something that I have also emphasized in my own work on crises (namely, the one I have called Marx 200).
When combined, the empirical results closely follow the real evolution of the capitalist economy over long cycles. Based on these laws, they construct a model of economic growth and long cycles consisting of five differential equations based on: the evolution of the rate of profit, investment in constant (fixed) and variable capital, technological change and the depreciation of capital.
The authors found that there were five long waves or K-cycles spanning 187 years of capitalist development in the United States and the United Kingdom, from 1834 to 2021.
These ripples coincide with Anwar Shaikh's earlier work (in his book Capitalism (2016) and earlier in 1992). I also built a model of long waves or cycles in my book, The Long Depression, although the dates of my cycles differed from those of the authors, since in my chronology the period of declining profitability in the 1970s is the downward phase of a fourth K cycle, thus entering a fifth K cycle from 1982 to now. For more information on the differences between my view and that of the authors, see this.
The authors’ empirical evidence links their cycles to long-term changes in the path of the rate of profit. “During the upstream stage of the long cycle, profitability is rising and firms have no compelling reason to risk their good performance by introducing radical innovations. On the other hand, in the downturn of the long cycle, profitability is stagnant or even falling, and the outlook is bleak, challenging the very survival of the firm. In these circumstances, the pressure to innovate is high, as capitalists, on the one hand, face the abyss of bankruptcy; on the other hand, having a greater chance of survival forces them to take the risk of becoming more innovation-prone and, therefore, opting for the path of innovation.”
Thus, the authors claim that their analysis of long cycles integrates Joseph Schumpeter's view of innovations and theories of social structures of accumulation (SSA) into a single, unified theory in which the “cause of causes” is the evolution of the rate of profit. It is the long-term cumulative effect of the rate on investment and on the mass of real net profits that, beyond a point, creates the conditions for the manifestation of the economic crisis and the change in the phase of economic activity.
The authors argue that “For Marx, crises in capitalism have intrinsic causes and are therefore not conjectures; in this sense, they are inevitable.” The evolution of the American economy follows the theoretical scheme of Nicolai Kondratiev and the movement of the rate of profit inevitably shaped it during the post-World War II period.
The technical aspects of the model are detailed in a chapter covering secular and cyclical patterns in the evolution of capitalism, in which profitability governs capitalists' decisions to expand or contract, shaping both the trend and cyclical patterns of system behavior.
The authors interestingly argue that the growth rate of the rate of surplus value becomes the key explanatory variable of the upward and downward shifts of the rate of profit for two reasons: first, it formulates the degree and level of disproportions between the consumption and investment departments, and second, it defines the system's capacity to generate sufficient new surplus value at each stage of the accumulation process. “In doing so, the rate of surplus value becomes the main variable determining the rate of capital accumulation and, as far as we know from the literature, this specific role has not been adequately explored.” In fact, this is a new vision.
As the authors rightly emphasize, a declining rate of profit is not “in itself” capable of generating crises. Indeed, if the fall in the rate of profit is slow enough, the economy can continue to expand for many years. What is needed is an underlying cause that transforms crises from “possibility” into “reality” (see my article, Trends, Triggers, and Tulips). Such a cause is offered by Marx in the trajectory of the mass of realized surplus value (profits). As the rate of profit declines, there is a point at which mass or real net profits stagnate and even fall thereafter. This is what can be called the “Marx moment” or the point of “overaccumulation.” At this turning point, capitalists refrain from investing and the system falls into a spiral of crisis.
The authors provide us with new evidence for the existence of long cycles and, in doing so, offer us an important indicator of the long-term “health” of capitalism in the 21st century. According to the authors’ analysis, the fifth K cycle is expected to end by the end of this decade (see table above).
*Michael Roberts is an economist. Author, among other books, of The great recession: a marxist view (Lulu Press) [https://amzn.to/3ZUjFFj]
Translation: Eleutério FS Prado.
Originally published in The next recession blog.
Reference
Nikolaos Chatzarakis, Persefoni Tsaliki & Lefteris Tsoulfidis. Economic Growth and Long Cycles: A Classical Political Economy Approach. Routledge. 1st edition (June 3, 2024), 286 pages. [https://amzn.to/3DQF2jO]
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