The Long Depression: Michael Roberts

I came across his blog first and then later his books. Michael Roberts is a former London financial sector economist with 30 years experience looking at economic trends. In his work, he takes a marxist view of modern economics and has some rather dire predictions in regards to the economy. It is easy to chicken little the economy. CNBC can always find someone to tell us that the sky is falling and that things are bad and that if we don’t do “XYZ” that things will come crashing down. In the main stream it is hard to find anyone actually talking about economics from a Marxist perspective. “Communism doesn’t work” has been the economic credo since 1989 and no one is interested in a system that proved to be so bad for the USSR. Michael Roberts is different. Not only is he a Marxist economist but he has real world data to back up his claims that the only people who can save the economy is We the People.

The Long Depression 

Michael Roberts explains in his theory that we are currently in one of the longest depressions of the last 200 years and that rather than a normal business cycle recession that ends in under a year, this is a much longer and more economically unstable Long Depression. The Long Depression is demarcated by flat growth, some short spurts of growth and then a plateau. This has led to things we know are a problem: no wage or income growth and a concentration of wealth at the top. In his blog posts, he lambasts the regulators and banks that didn’t see the financial crisis coming or chose not to do anything about it and argues that for all the reassuring words, the economy just isn’t improving in real terms leading him to conclude that we are in a Long Depression.

QE and Austerity Don’t Work

In order for the economy to actually grow, you need private investment to improve. In the past Keynesian economists have argued that in order for the economy to improve you need government spending and plenty of it. In the UK and the US, that’s exactly what central bankers did with Quantitative Easing or QE. In Europe they went towards Austerity and are now moving more towards QE. According to Michael Roberts and many other analysts, QE has led to new credit bubbles in the stock market and real estate. Roberts argues that thanks to how capitalism works, neither are a viable solution. Until private return on capital (the foundation of the capitalist system) improves, there can be no hope for the greater economy. But even that seems far fetched.

We’re in Debt

The big problem in this whole equation is debt. Not just governmental either. Corporate and household debt is at an all time and when your growth is predicated on more debt, you’re not really growing. According to Mr. Roberts, you’re just staying in place if not moving backwards. A capitalist economy cannot function with investment in production, getting a return, taking profit and reinvesting in more production. That cycle seems to be broken and cannot seem to function with tons of new debt. The solution thus far has been to issue yet more debt in order to prop the economy up. The best way to move things forward without more debt? Deleverage corporate debt. The way to do that? Long, difficult, unpopular, austerity where companies and government don’t hire and don’t invest and instead focus on reducing debt and deficits.

If neither of those solutions sound appealing to you…..

“The remedy under capitalism is probably another slump within the next few years in order to cleanse the system of zombie companies, debt, and old means of production. This would raise profitability and allow the winners to invest with bigger market share. If course this would all be at the expense of labour with renewed unemployment etc. There is an alternative; governments coming to power in major economies pledged to introduce a plan for investment, employment and production based on common ownership and democratic control. Otherwise it is another slump eventually.”

He argues that our current capitalist system simply isn’t sustainable and that we need to create a system that helps people by their ability rather than simply producing profit for private owners to land and the means of production. He is not a fan of neo-liberal economics whatever (as you can imagine) calling it “an ideology or set of policies adopted by the strategists of capital in the late 1970s to reverse the fall in profitability that most capitalist economies were suffering from the mid-1960s onward. Those policies aimed to reduce the share of value going to labour and raise the share of profit going to the owners of capital. It aimed at crushing trade union rights, raising unemployment and worsening working conditions and breaking down barriers to the movement of capital globally at the expense of most weaker emerging economies.

Can we save the economy through The Commons? Can we save the economy by making the means of production work for us all?

Michael Roberts argues that we can.

You can pick up his new book on Amazon when it comes out.