A Marxist Theory of Crisis in the Contemporary World
By Michael Roberts
The following article is abridged from an interview published by the Chinese Academy of Social Sciences in 2025 in World Socialist Research.
What do you think is the core idea of Marxism? What’s the relationship between historical materialism and the critique of political economy?
The core ideas of Marxism can be reduced to two key concepts:
First, the history of human organisation since primitive times is the history of class struggle. The materialist conception of history is that change for better or worse is driven by the material interests of classes and, in particular, by the ruling class (feudal lords, capitalist companies) and the working class. While individuals can play key roles at moments in history (decisions and actions by kings or by revolutionary leaders), in the final analysis, change depends on economics and classes. As Marx said: “men make their own history, but they do not make it as they please; they do not make it under self-selected circumstances, but under circumstances existing already, given and transmitted from the past.”
The second core idea is the law of value under capitalism. Capitalism is a system of production for the profit of the owners of the means of production, who exploit those who own nothing but their ability to work for the owners. Labour creates all the things and services that we use and need, but the value of that labour is appropriated by the owners of the means of production as ‘surplus value’ over and above what labour receives for its work. That surplus value is accumulated as capital. Our social needs then depend on the decisions of capitalists on whether it is profitable or not. This explanation of the workings of the modern economy is denied by the apologists for capitalism – but it is compellingly clear.
The theory of crisis is an important part of Marx’s critique of political economy. There have been many debates among Marxists on how to understand Marx’s theory of crisis. What do you think of Marx’s theory of crisis, and the relationship between overproduction, under consumption, and the tendency of the rate of profit to fall?
Yes, a theory of crises under capitalism is very important. The apologists for capitalism deny that there are any endemic crises in capitalist production – ie regular and recurring slumps in production, investment and employment. For them, such crises are either random events, one-offs or the result of bad decisions, speculations or negligence. The apologists deny that crises are inherent in the capitalist system of production for profit. But Marx’s law of value reveals why regular crises are endemic. Capitalist production only takes place if profits are made and Marx shows that a contradiction arises between the drive for more production and profitability of that production (ie profits relative to capital invested). Capitalists compete against each other to gain market share and a bigger cut in the profits appropriated from workers. In order to gain an advantage, they resort to using labour-saving technology to reduce costs and increase the productivity of labour. But Marx argued that profit only comes from labour going to work, so if investment is increasingly in machines etc relative to labour, productivity may rise but at the expense of a tendency for profitability to fall. Eventually, profitability may fall so much that it causes a fall in total profits. Then capitalists stop investing, close down production and lay off workers. Unemployment rises alongside unsold goods and services. This is a slump. It can only be rectified by getting profitability rising again and that requires removing unnecessary workers, weak companies and keeping wages down. Then the whole process can start again. Slumps are a necessary ‘cleansing’ process for capital to recover. Marx outlines his theory of crises most clearly in Capital Volume 3, Chapters 13-15.
However, many Marxists do not accept that the law of tendency of the rate of profit to fall as explained in these chapters is relevant to crises in capitalism. Instead they consider two other main theories. The first is that there is ‘under consumption’. This is when workers cannot buy back all the goods and services produced by the capitalists because they do not have enough money. Both Marx and Engels disputed this under consumption theory, pointing out that workers will never have enough money to buy back all the output being sold, precisely because wages do not contain all the value created and realised as the capitalists have appropriated any surplus value (the difference between the value of commodities sold and wages going to the workers; in other words, profits). The point is that capitalists do not need to sell all their commodities to workers; much of sales is to other capitalists (eg steel is sold to auto manufacturers to make cars etc).
The other alternative theory is that of ‘overproduction’. Capitalists just keep producing to accumulate more profits without considering whether they can sell their production on the market. They overproduce relative to demand. The problem with this explanation of crises is that it does not explain when production becomes ‘too much production’. It may never happen, or it could happen at any moment. There is no logic to this theory. Put it this way, if supply is in line with demand, can there still be a crisis of investment and production in capitalism? Marx would say yes, because the profitability of what is being produced is what decides whether capitalists invest or not. Indeed, this is how crises unfold. Profitability falls, then total profits and then capitalists try to sell more to cover falling profits. But that means ‘overproduction’, forcing capitalists to lower prices and/or cut production. Overproduction is the result of the over accumulation of capital ie falling profitability of capital invested, not the other way round.
Some Marxists have bent Marx’s law of value into a theory of money ie. value is not created by labour in production, but instead is only realised in selling commodities produced on the market. So no sale, then no value. This was not Marx’s view. Value is the result of the effort of human labour in production; how much of that value is eventually realised depends on sale in the market. But there is no value at all without human labour production. Behind this revised theory is an attempt to replace profitability as the ultimate cause of crises with a theory of monetary or credit instability, similar to the view of mainstream economists like Keynes.
From your point of view, what are the main differences between Marxist political economy and other schools of economics (like neoclassical economics, Keynesianism, etc.)? Can we regard the theory of crisis as an important difference or even essential difference between Marxist political economy and mainstream Western economics?
The key difference above all is that other schools of economics, even the most radical ‘heterodox’ schools that do not accept that markets are perfect, do not agree with Marx’s law of value. They do not accept that the key contradiction of capitalist production is production for profit, not social need and that increased production eventually comes into conflict with increased profitability and that is what leads to booms and slumps, ie crises. The mainstream neoclassical school deny crises can happen in properly run markets or in markets that are not interfered with by governments, monopolies or trade unions. Heterodox economists deny the role of profit in crises and look to either a ‘lack of demand’ (Keynes); or financial instability (Minsky) or monopolies (Sweezy, Stiglitz) or bad regulation.
And this is a crucial difference, because all these schools are suggesting that capitalist production can be modified or corrected to make capitalism work better. Keynes said more government spending or monetary injections will do the trick; heterodox Minsky said: regulate the banks and financial institutions, then capitalism will be stable. These reformist approaches are theoretically and empirically wrong. Marx’s theory of crisis shows that capitalism cannot be reformed in that way. Crises are endemic to capitalism because ultimately they are caused by falling profitability. The only way to end crises is to replace capitalism with a planned economy under common ownership ie no capitalists.
In your research, what impacts does the financialization of capitalism have on the real economy and the working class?
One of the features of the last 50 years in modern economies in the Global North has been the rise of the financial sectors, not just banks but hedge funds, investment funds, insurance funds, private equity, cryptocurrencies etc. Increasingly, capitalists have switched their investment of accrued profits into financial assets and speculation rather than into investment into new technology and productive sectors. This is the phenomenon of ‘financialization’.
However, some Marxists and others have been so enamoured by this development that they have started to claim that capitalism has changed its spots. It is no longer a system of production for profit through the exploitation of labour in factories, offices etc, but now it is just a financial monetary system where money makes more money. This means that workers have lost their role as producers of value in capitalism. Now capitalists can get value just from monetary tricks. Capitalism has become finance capital, which rules over producer capital.
This is nonsense. Although financial profits in some economies like the US and the UK are large, say up to 25% of total profits, the vast majority of profits are still made by selling goods and services produced by workers. And that is especially the case in the so-called Global South where manufacturing has become predominant, not finance. Globally, the working class has never been larger and still most capitalist accumulation comes from the labour of working people in production. The leopard of capitalism has not changed its spots.
What do you think of the current crisis of capitalism in the global economic system, especially the financial crisis in recent years? What insights can Marxist political economy provide for us to understand the crisis of capitalism?
This is a big subject. In the 21st century we have had the two biggest slumps in the history of capitalism, 2008-9 and 2020. There is every reason to expect that another slump will take place before the end of this decade. That may be triggered by a new financial crash as in 2008. This time that crash may not start in the banks as such but be engendered by rising corporate debt and the cost of servicing that debt. Already, there are around 20% of companies in Europe, Japan and the US that are called ‘zombies’ ie they are like the living dead because they do not make enough profits to cover even the cost of servicing their existing debt and so must keep borrowing. These companies are in serious risk of going bust and bringing down even profitable companies in a ricochet effect.
You think that since the end of the Great Recession in 2009, the major capitalist economies have been in a Long Depression. Is there any difference between the Long Depression and previous long depressions in the history of capitalism? What strategies should China adopt in response to the global impact of the Long Depression?
I define a depression as opposed to a recession or slump as a period where after a slump, the previous trend of growth in output, investment and above all profitability, is much lower than before the slump. And this lower trend can last for decades. In that sense, the Long Depression of the 2010s onwards that I have identified is similar to the depression of the late 19th century (1873-97) and the Great Depression of 1929-42. As of 2025, the current depression is continuing as the pandemic slump of 2020 did not lead to a significant rise in profitability and so investment growth and real GDP growth remain even weaker than in the 2010s.
China has avoided all these crises in capitalism. That’s because China has an economy dominated by a large state sector and planning by the government, so that any instability in its capitalist sector can be overcome and investment and production can carry on relatively uninterrupted. If the capitalist economies of the West head into another slump, then trade and investment into China will be hit, but China now has a massive domestic base and it has invested heavily into new technologies and continues to direct and plan that investment mainly through the state sector. China needs to expand the state sector and planning to reduce the instability in its capitalist sector, particularly exposed by its plunging real estate sector (mostly capitalist based).
Technofeudalism is a view that has emerged in recent years to describe the changes of society caused by cloud technology, that is, tech giants and large platform enterprises possess the data and power like feudal lords, while ordinary users serve these digital overlords as unpaid data producers like serfs, and the new form of rent replaces profit as the main form of accumulation. Do you agree with using technofeudalism to define the current stage of western society?
Technofeudalism as a concept suggests that capitalist production, ie production for a profit through the exploitation of labour, has been replaced by a feudalism where digital monopolies just extract rents. But where do these rents come from? Marx pointed out that rent, interest and profits all come from the same source: the surplus value appropriated from the value created by human labour power. It is just wrong to argue that companies selling cloud technology are not producing commodities for sale and profit just like any capitalist process. The bulk of Amazon’s profits come from distribution and transport of things; the bulk of Facebook’s profits come from advertising; the bulk of Google’s too. The bulk of Microsoft and Apple profits are from selling computer hardware and software. This is not feudalism but straightforward capitalism. Capitalism is not dead and to suggest that it is a dangerous idea for workers because it means labour may not see its enemy as capital as a whole, but just a small part of capital, so that there is no need to replace capitalism but just ‘feudal monopoly’ capitalism.
The labor theory of value is the core idea of Marxist economics. In time of automation and the digital economy, how to apply the labor theory of value to analyze modern economy? What do you think of data as a new factor of production?
Data or knowledge comes from human activity. So knowledge has value in the same way that physical things have value for society and for capital. Knowledge is material: it requires the energy of human labour; ie. mental labour, in the same way as physical labour. Both are material and create value. So capital can appropriate surplus value from knowledge workers that it employs and does so increasingly across industries and the world. Such surplus value is embodied in patents, intellectual property rights etc. Knowledge or mental labour is just as ‘material’ as physical labour. Mental activity takes place in the synapses of the human brain and is combined with physical labour using a computer etc. So mental labour creates value just as much as physical labour. And knowledge workers are just as much part of the proletariat as manual workers doing physical tasks.
Indeed, mental labourers are being exploited increasingly by capital to appropriate surplus value (profit) .So there is no need to invent a new term for the working class such as a ‘multitude’. This implies that the working class, those who only make a living by selling their labour power and own no means of production, no longer exist. This term hides the class struggle between labour and capital, thus confusing the need to replace capitalism.