In the preceding chapters, we examined whether the capitalist economy experiences cycles considerably longer than the industrial cycles of approximately ten years. As we saw, it has been proposed by various economists — both bourgeois and Marxists — over the last 100 years that, in addition to the 10-year industrial cycles and shorter inventory cycles, there also exists a long cycle of approximately 50 years’ duration.
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A Critique of Crisis Theory 
How do China and Russia buying a lot of gold to protect themselves against US sanctions fit into this? Are they non-cyclical factors that lengthen the economic cycle by increasing demand for gold, or does it not matter?
Also, why do capitalists keep investing in AI if it yields no profits? Don’t they invest in sectors that are above the average profit rate? So why keep investing in AI if it’s not profitable?
Dear Mr. Williams, thank you for your insightful and extensive comments on my first comment, it clarified a lot of things for me; it was an honor, if you don’t mind me saying so, as I have (quietly) read your work with great admiration for years. I’m sure you know your own analytics better than me but rest assured your work does have an impact.
There’s quite a lot in this particular article, and that is say something given your other recent pieces have been quite good, I think its the clearest exposition on your theory regarding the material basis for the Kondratiev wave and its general laws. I had been exposed to theories that the K-Wave had its basis in technological change or long-term infrastructure but had found them somewhat unsatisfying, there are places in capital where Marx builds scenarios assuming no technological change to show how capital can expand without it. Not withstanding Schumpeter’s contention that prior to himself economists had failed to integrate technological change, invention and quality improvements into their economic models while focusing on market competition and price (not sure how he got this impression from Marx!) sometimes it is necessary to abstract away real world/potential technological change in thought experiments in order to move ourselves away from facile technological determinism. Even a related but less technologically-determined interpretation that sees K-Waves as being rooted in the build up and over investment in long term infrastructure and equipment (the late 18/19th c. canal and railroad manias are good examples) logically suggests that K-Waves can be avoided through reasonable and more balanced investment in infrastructure. Of course, in many ways, the State has displaced the market in providing the basic foundations of public infrastructure, which is why the periods of canal/railroad mania had particular draw for people looking to explain the K-wave as these infrastructure projects consumed enormous quantities of capital and were largely done on a capitalist basis with a mind towards capitalist profit and serving the market directly. As anyone who’s read about the history of railroads in Europe and America knows things did not turnout as the capitalists imagined in their fevered frenzy! Rail was difficult to apply principles of free market competition to, competing rail companies created duplication and integration problems in rail networks, customers found themselves squeezed by predatory pricing that they often couldn’t ameliorate by just buying a train ticket from a different rail company, rail company failures led to lines either being taken over or bailed out at state expense or agglomerated or with failing rail companies/lines being agglomerated into large monopolies. Even in countries like the United States where rail passenger and freight travel remains in private hands, these companies have ended up becoming so regulated that one might describe them as de facto rather than de jure state-monopolies. Much like “ma bell”, or AT&T, US rail has become so regulated in its function that it functions much in the same manner as an SOE, seeking less to maximize profit for itself than to serve the needs of the broader public, state interests, or the business community at large. And, of course, the US effort to maintain an antiquated (even from the perspective of the wider capitalist class!) private stake in the provision of rail infrastructure and service has led to the US having almost certainly the worst passenger rail in any developed country. The maintenance of this fiction meant that the struggle of railway worker unions for 2 weeks of sick time became a crisis not simply for the railway companies, or the US economy as a whole, but for the US state apparatus and the Democratic Party as railway strikes cannot be carried out by law and therefore, the wage and other employer demands become a matter to be resolved at the level of the federal bourgeois state directly.
Since rail and canal-mania the provision of socially necessary infrastructure for public use has fallen increasingly onto the State, to some extent that has always been its role and a self-justifying raison d’être but the further away one gets from the failed-states of late feudalism, and let’s not forget one of the prime concerns of aristocrats in the pre-French Rev era was avoiding taxes for basic social maintenance, the closer we get to basic infrastructure maintenance falling into the lap of the state. Already, by the mid-19th century British liberals (no friend to the proletariat!) had concluded that basic services like water, roads, gas, and even military-production had to be in the hands of the State or these uniquely-monopolizable services with inelastic demand would be exploited and all of society including the industrial capitalists would end up paying the cost for the permission of maximal private profit in these spheres. They had reasoned themselves into the correct conclusion that to allow a free-market in these realms would actually destroy/harm the wider and more important free market elsewhere. If we look at the much maligned (on the Left at least) automobile we see that the State did not largely repeat the mistake of railroad mania and bore the costs of building the bridges, laying and maintaining the roads etc.
To my mind, this makes the long-range infrastructure explanation of K-waves questionable, as the typical investor isn’t exactly just itching to pile into say municipal bonds e.g. a private component to long-range basic service provision. Other speculative manias in the realm of long-range infrastructure such as telephone and electricity service provision came under intense public scrutiny and regulatory pressure rather early and never reached the same level of froth as railway mania. The collapse of Insull’s electricity empire in the Great Depression basically spelled the death knell of electricity of the effort to maintain electricity as a fully-capitalist private service and led to the provision of electricity as a regulated public good, often produced by the State itself, neoliberal efforts to reverse this sensible public judgement notwithstanding. We leave from the long-range infrastructure explanation to the technological productive explanation.
Richard Westra in his book Unleashing Usury: How Finance Opened the Door for Capitalism Then Swallowed It Whole argued that the history of capitalist long-waves has followed a certain schema:
For Westra, only the first was compatible with a true competitive open free market given that the barriers to entry in the next three naturally limit competition. Westra uses a somewhat bizarre interpretation of perfect competition to mean that no firm controls more than 1% of the market share it produces for which he holds to have been the case for British textile manufacturing. This is rather distinct from Walras who held that it’s a state of competition so extensive that there wouldn’t even be profit on the commodities traded but maybe this is how Walras is adapted to the bourgeois academy. Maybe even they cannot believe in Walras’s fantasy of capitalist production without profit. Westra only sees the first three stages of capitalist long-waves so far as being compatible with the reproduction of capitalist society. He points to the significant drop in manufacturing employment in the West as evidence that capitalist society is already dead-on-arrival. The fourth stage has failed according to Westra because the computer and technological revolutions do not employ a sufficiently large quantity of productive labor to reproduce the proletariat or satiate the thirst for investment opportunity coming from large pools of “social capital” such as 401ks and hedge funds. He doesn’t explain why that means its dead but I assume its a surplus-value realization crisis + the fact that menial service work has always paid less than factory work meaning that large swathes of the proletariat can’t afford to reproduce their labour power, much less replace themselves and then some by bringing new children into the labor force.
The sheer glut of investment into AI and the massive erection of its physical infrastructure (the US has 5000+ AI data centers and one is slated to be the size of Manhattan) shows that the US capitalist class can invest on a massive scale when it believes its on the verge of entering a golden age of super profits — in spite of continual complaining about there being “no money” to build anything of substance over the past 45 years to the contrary. The only industry that Westra sees as being able to replace the car, which was also an obsession of Sweezy’s, is if a gigantic private space industry was to spring into existence. It’s certainly going to be interesting to see how the intellectual horizons of both radical heterodox and Marxist economists change when the “super-bubble” that began with the Volcker shock finally pops. And as you pointed out the “brutal work” of eliminating debts and fictitious capital through liquidation and mass bankruptcy was not allowed to occur in 2008 or 2020. But I really think there’s no alternative this time. Although I’ve never heard it posited as a cause of K-Waves, the build up of onerous business and personal debts, fictitious capital, insurance and rent charges is a possible explanation. Michael Hudson’s work, particularly Killing The Host does a lot in this vein to explain how the ways in which the FIRE economy robs the productive economy of real vitality. I assume it’s not posited bc whatever other problems the long depression had it really wasn’t largely related to bank failures outside the US, whatever other issues/burdens debts may have posed. Then the late 60s crisis wasn’t one of bank failures either. Though I do wonder if you underrate the impact of finance in the pre-Volcker/pre-1920s era. I realize you’re speaking in terms of general trends but the UK became an entrepôt for vast quantities of unregulated finance capital in the 1960s, not many people then or now are aware of this, but bankers in Britain described it as “the big boom” with many billions in “hot money” pouring in from all over the world. What’s happening out of sight from public view has a way of manifesting itself as official policy later on. I will say that before the 1920s, much of the international investment that lending had his eye on was portfolio investment from many thousands of small-time rentiers rather than modern investment and institutional banking. That he saw this trend in the making before it fully manifested is very much to his credit. I do think you’re right though, it’s the price of everything thats just too damn high right now not just the rent or interest burdens. The explanation of a Yin-Yang between surplus-value production, value-realization and gold production really gets at what I was asking about last time with my comment on what would happen if gold mining was state-run. Your explanation of capital overproduction and labor scarcity pushing the rop down is exactly what I thought would happen. Though I also wonder if there would be some sort of disproportionality crisis though I realize this is the type of muddled 2nd International era thinking that you’re rightly skeptical of.
I did want to ask about expanded reproduction and the World Wars. You argue that WWII interrupted America’s expanded reproduction, I’m not certain that is the case. GDP growth in the US was 20% a year during WWII. It seems to be a commonly held position that this was quite unlike WWI where the price level doubled and there was no real GDP growth in the US. Though one could find reasons for skepticism about this claim with WWI as the number of manufacturing workers and the type of manufacturing US workers were involved in became much closer to the leading/cutting edge.Much like one probably could argue that much of US GDP growth in WWII is not effectively measured GDP. As far as I can tell, the US GDP basically returned to where it was in 1929. The US still had significant unemployment so it can be argued it took a while for true labor scarcity to kick in. One thing that I don’t hear people talking about is quite a large number of factories were constructed by the US gov during WWII, I think something like 20% of the factories that were used in the war. Later they were sold off as a kind of proto-privitization effort but does this not count as expanded reproduction in your view? You assert that it’s likely the boom would’ve been stronger without the war. Possible. But how likely is it when wartime GDP growth was quite high and the post-WWII global growth was faster than any period in history? As you note, with some quite interesting points about the US and UK and the relative security they had that European and Japanese workers didn’t have, these countries actually grew somewhat slowly by global standards. But US growth was in line with the 19th century average of 4% and British Econ history tends to be dominated by pessimists which gives an arguably over-pessimistic result but Britain’s average in the 19th century was 2%, its post-war average of 3%, was actually the fastest sustained growth in British if we accept these figures at face-value.
You mentioned that a century long wave is posited but you see no proof of this. I’ve never heard of this but assume you’re referring to the hegemonic cycles theory I’ve seen proposed by scholars like Immanuel Wallerstein. Basically, the capitalist world system has a hegemon, first Venice, then the Netherlands, then the UK, then the US. Each hegemon has a period where its material production and trade is quite robust and healthy but when that declines it tends to finanicialize to compensate, Italian bankers lent money to the Dutch who later lent money to Britain who later lent money to the US. So an ironic aspect of this historical trend is each fading empire helps finance the ascent of their successor. This may not be what you’re referring to though, and while I think I share your skepticism if it isn’t already, its sounds like an intriguing hypothesis.
One last post since I wasn’t sure how much I’m allowed to type lol but part of me wonders if the world ever really recovered from the 1930s. I mean if you just look at the US agricultural system its total craziness because the US government pays farmers not to farm in order to prevent the 1930s overproduction which had farmers destroying their crops and milk and people questioning if the price-system was long for this world. Yet, the US gov also subsidizes the farmers to produce certain things through a bunch of different ways. When a crisis of overproduction in milk threatened to break out in the 70s the government had it made into cheese and bought 2 billion pounds of it, resulting in the famous “government cheese” of the Reagan era. The US gov has 1 billion pounds of cheese stockpiled in case of national emergency. Like cool, its good to have I guess, but was there any actual point to taking the diary off the market when high food costs was a driving factor in 1970s inflation much like it has been post-pandemic? I know you mentioned a Michael Hudson in one of your posts but I’m not sure if you meant the author of SuperImperialism or another Michael Hudson who wrote a book on the 2008 financial crisis. Anyways, there’s some interesting tidbits in that book where he talks about the IMF being more willing to finance industrial development in the Third World then to provide loans for agriculture which heavily agricultural Third World governments in the 60s often had more interest in because their economies were predominately agricultural. Then you have the US gov and agribusiness working hand-in-glove to try to swamp the world with American grain. I’m not sure there’s ever been an empire in history that has tried to flood its periphery with cheap grain from its heartland. Usually empires are interested in extracting grain and other food stuffs from their colonies, the US Banana and sugar wars in Latin America and the Pacific withstanding. Then US agriculture has special legal exemptions which allows them to pay workers less than minimum wage and its been claimed by some that US agribusiness is less mechanized than its Australian or New Zealand counterparts bc of this addiction to cheap labor. It’s hard to understand all the seemingly contradictory ways it functions. I’ve even heard a theory that SNAP is actually a subsidy to farmers in a sense and that without the guaranteed demand from SNAP that US farm prices might vary wildly in either direction just depending on seasonal conditions.
As you’ve documented on this blog extensively we’ve been devaluing the currency continually to try to avoid a repeat of the Depression when overproduction in relation to the money commodity became extremely blatant. I ran the numbers with a friend and if you use gold values then the US is actually a smaller economy than the 60s ($40~ trillion vs $30 trillion). Not sure how valid you think it is to employ such a method but I figure even if production and productive capacity has grown absolutely that the point of measuring GDP in the first place is measuring money-value and not raw output of commodities. Everyone agree that TVs for instance are cheaper than ever but no one says because TVs have gone down in raw nominal terms and relative terms that this makes the US GDP bigger because with the exception of clown world practices like computed rent, GDP is focused on measuring monetary values, not use-values, their sheer number or availability.
Could all this craziness with the US ag be related to the need to keep rent and housing prices high? Marx talks about the relationship between agriculture, food prices and ground rent. If it follows that rent for housing is in competition with agriculture, mining, and forestry for land-use then falling food prices might mean lower rents. Engels talked about cheap grain having a depressive effect on rents by proxy I think a fall in housing rents in Europe is documented in the late 19th/early 20th century due to the inflow of cheap grain from elsewhere. Maybe the only time in the history of capitalism that rents as a share of gdp have fallen outside of possibly the Great Depression? In the post-war era, I think you could argue it was more a case of income growth exceeding whatever growth there was in housing costs (if there was much).
I keep thinking about Stalin’s general crisis of capitalism hypothesis and how it ties into imperialism as capitalism in decay. Maybe how one views this also depends on perspective, most bourgeois economists deny the existence of monopoly because even the marginalists as regressive as they are recognize that monopoly pricing is predatory — that’s perhaps the only form of exploitation they’ve left open for themselves theoretically. For Lenin, monopoly was capitalism in decay. For Schumpeter it was dynamism but he admitted that it came at the expense of non-monopoly market actors, he just held that the technical advances that monopoly makes possible through the pursuit of super-profits is worth it. Outside Schumpeter, there are just a handful of actually pro-monopoly economists, it appears to be a clique mainly centered around Michael Lind and Robert Atkinson. At a certain point, as you said, crisis theory bleeds into breakdown theory but the how is probably more important than the question of “will” here. I think some pretty logical breakdown theories are already posited but how that plays out in reality idk.
A pretty logical breakdown theory for instance is that of total automation but as you pointed out the depression of wages makes even technical regression possible. That may sound pretty far-fetched to the average person but Dave Eggers wrote that in the 2000s Bangladeshi shipyards were less mechanized than British shipyards which used steam driven devices to move ships, Bangladeshi ship workers actually just pulled the ships with big ropes that hundreds pulled on. Sounds insane but when labor is just too damn cheap thats the type of absurdity you end up with. Its not even that absurd, part of the reason that Japanese cars were better than US cars outside of poor management and design is Japanese car production was *less* mechanized so there was more potential for quality control in the production process. In peoples heads its only ever one way but I remember reading an article about a Mercedes factory from about 2013 the US where management bragged they were taking out machines from the process and adding humans and also they claimed that you couldn’t work at the plant without a college degree. A situation that I imagine was only viewed as sustainable in light of the high unemployment of that era but most people think it only works one way with technological progress. “We don’t drive horses and buggies anymore, do we?”
So I dunno its an interesting counter to the idea that we’re only going to see more and more automation and no one in 2050 will be a factory worker we’ll all just lay in bed sipping coffee on zoom calls. Now that I think about it the peak of US factory employment was 1979 at 20 million workers, a historically bad economy by post-war standards with high unemployment by post-war standards. So the potential for that decline to really reverse is there but it’s hard to say if it will play out. 2008 was worse for factory employment than the Great Depression according to one paper I read and the gains in factory employment under Joe Brandon were niggardly. The trillions being put into AI right now is basically a private-sector Manhattan project but machines don’t use money a popular X post pointed out that lack of return on AI is empirically proving labor theory of value (though I think Cockshott did a good job of this in his research). Why didnt we see real growth in factory employment after 08? Low interest rates plus a lot of unemployed people? Too much “foreign competition”? Or was the prospect of making boatloads of money off tech and flipping homes on low interest loans just so juicy it sucked all the air out of the room. I do think your thesis that the post-crisis rise in money pools resetting things on a more cash basis plus purging fictious capital and sending investors to look at investing in industry as a kind of safe haven is liable to be right. This is of course presuming market functions as the mechanism for an industrial jobs boom. At a certain point, it’s possible that the US state will realize that seeking to counter Russia or China on the battlefield is impossible withoeut a powerful underlying industrial economy. The magical thinking on this from the ruling elite is unbelievable. The entire collective West whose nominal GDP exceeds Russia by a factor of at least 20 cannot produce enough shells to keep up in Ukraine. Britain had one (Chinese run) steel plant that was set to shut-down before the state intervened to keep it from closing at this very same time the UK military is authoring white papers on how it can fight in a hot war russia and china simultaneously. Russia’s underlying productive economy is much stronger than it seems on paper because of the Soviet legacy. I think you said you don’t really trust PPP as a metric but the GDP PPP of Russia exceeds Japan at this moment.