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Interview with Fred Moseley on the crisis by Connessioni


In this very interesting interview by the editorial board of Connessioni (March 2012) Fred Moseley notably expresses himself on the role and place of the mechanism of devalorisation of fixed capital in Marx’s understanding of the unfolding of economic crises. Fred Moseley explicitly claims the analysis of this important representative of the Communist Left that is Paul Mattick.


1 – What are the causes of the current economic crisis in the US? Is this crisis linked to the crisis of the 1970s?

That is a big question, that I will try to answer all-too-briefly. Yes, I think this crisis is definitely linked to the crisis of the 1970s. This crisis is a continuation of the 70s crisis and the result of actions taken by capitalists to resolve the 70s crisis. The crisis of the 70s was clearly a profitability crisis. The rate of profit in the US declined by 50% from the early postwar levels (and a similar trend in all capitalist countries).

The important thing to realize is that capitalists responded to this very significant decline in the rate of profit by doing whatever they could to restore the rate of profit back up to its higher levels. The actions included widespread wage cuts, especially benefit cuts, “speedup” in the workplace, globalization and outsourcing production to low-wage areas of the world. All these familiar phenomena of recent decades are the results of capitalist attempts to restore the rate of profit. US workers are working harder today than they did 40 years ago, but their wages have not increased and their benefits have been cut.

In spite of all this pain and suffering by workers, the rate of profit has been only partially restored; only about half of the previous decline has been recovered. So business investment has remained at a low rate in recent decades. [Note of the editor: this means that the partially restored profits have not been reinvested in a productive way.]

In depressions of the past, the rate of profit was restored primarily by widespread bankruptcies, which devalued capital for the surviving firms. In the current depression, the US government (and most other governments; all except the Germans!) is doing all it can to avoid bankruptcies and a deeper depression, and have been at least somewhat successful in postponing a worse depression (which amounts to “kicking the can down the road”). But this limited success in avoiding bankruptcies also has meant that there has been very little devaluation of capital and thus very little restoration of the rate of profit by this usual means. Instead, the recovery of the rate of profit (such as it has been) has come by increasing the intensity of exploitation of workers.

An important consequence of this decades-long stagnation of wages is that workers became more and more in debt in order to buy a house or a car or even basic necessities. The ratio of household debt to disposable income increased from 50% in 1980 to 130% in 2007, reaching unprecedented levels (this household debt ratio was 30% in 1929). US capitalism was being kept afloat by ever-increasing levels of debt for both households and firms. Eventually, the household debt bubble burst, and the crisis of US capitalism has entered a new more serious phase. As Marx emphasized, increasing debt can prolong an expansion, but it also makes the eventual depression worse.

So in this long-run sense, the current crisis was due to the prior decline of the rate profit in the early postwar period and also to the measures taken by capitalists to restore the rate of profit. The profitability crisis remains and has been only partially resolved, and now we have a serious household debt crisis on top of that. As Marx said many times, attempts to solve one contradiction in capitalism lead to other contradictions.


2 – Are we facing today a global crisis or a shift of hegemony between the US and Europe to China?

I think both things are happening. It is certainly a global crisis; and usually in a crisis, changes in the international balance of power are accelerated. There would have been a long gradual shift of hegemony without a crisis, but the crisis intensifies the process. The US owes China $1 trillion, and the EU is begging China to please loan them a trillion. While the US and UE struggle (unsuccessfully) to keep themselves out of depression, China is using its surplus-value to buy up land and minerals and industrial capacity all over the world. If there is no revolution (see below), which country do you think is going to come out of this crisis on top?

Of course, the question remains – to what extent will China be affected by the global crisis and have a depression of its own? China’s growth rate has slowed down (from 10% to 8%!), but is still the highest in the world by far (the US is 2% and the EU is negative).

Some specialists on the Chinese economy argue that China’s rapid growth has been financed by very rapid increases of debt (especially in recent years), which will eventually burst, as in western capitalism. However, the Chinese banking system is almost entirely publicly-owned, and it is not clear whether the losses on banks will lead to a banking crisis and a deeper depression, as in the West. I don’t know the answer to these questions.


3 – Can the development of financialization to be read as an emblem of a capitalism that can no longer find a possible mechanism of accumulation?

Yes, capitalist firms do not want to invest in expansion, because the rate of profit is too low, so they invest in financial securities instead. But that displacement of investment makes the profitability problem worse, because financial capital does not by itself produce surplus-value. Therefore, a larger portion of the total capital is invested as unproductive capital, which reduces the rate of profit for capital as a whole. Financial capital is a parasite, and the parasite is devouring the host.


4 – For a long time, Marxist theory was not considered to be a crisis theory; what for you is the importance of crisis theory in Marxist theory?

I have always considered Marx’s theory a crisis theory, above all else. After Marx discovered the relation between crises and revolution as the result of the Revolution of 1848 and its counter-revolution, his main theoretical objective was to demonstrate that crises are inherent and inevitable in capitalism. Therefore, if we want to eliminate crises, we have to eliminate capitalism; that is, we have to make a socialist revolution. The relation between crises and revolution is of course more complicated than that, as Marx himself realized – a crisis might not always result in a revolution, and sometimes the revolutionary movement might be fascist rather than socialist. But surely a general social and economic crisis (i.e. when the economy is breaking down, as is happening today) is a necessary condition for a socialist revolutionary movement. We just have to make it happen.


5 – Do you think there is now an autonomization of value or exchange value that remains central in the current capitalist mode of production?

Yes, very much so. The objective “laws of motion” are still the driving forces in capitalism. No one wants a crisis, and yet crises happen. Capitalists are driven by competition and greed to technological change, but technological changes displaces labor and thus causes the rate of profit to fall and crises. The only way to avoid this autonomization of the social world is to a consciously plan our economic activities, which Marx said would make the transition from prehistory to the history of full human beings. In order to stop this automaton from crashing again, and crushing us with it, we have to take control of it, and no longer let it control us and destroy us.


6 - In our opinion the considerations of Mattick in "Marx and Keynes" limits of the mixed economy, are fully confirmed in the current dynamics of capitalist crisis. What do you consider the importance of elaboration and anticipation of Paul Mattick?

I agree completely and think that Mattick is the most important economic theorist of the 20th century. Mattick was the first to rigorously extend and develop Marx’s theory to the all-important 20th century question of the effectiveness (or lack thereof) of Keynesian policies. He is the only theorist who predicted, back in the “golden age” of the 1950s and 60s, that this period of relative prosperity, like all period of prosperity in capitalism in the past, would be temporary; that the Keynesian policies that are supposed to stabilize capitalism have their intrinsic limits, and that once these limits are reached, then capitalism would fall again into another global great depression. We are now witnessing before our very eyes the awful truth of Mattick’s prediction 50 years ago. This is an unsurpassed theoretical achievement, much greater than all the bourgeois Nobel Prize winners (but of course much too subversive for a Nobel Prize).

I was fortunate enough to meet Mattick in the early 1970s in Cambridge, Massachusetts (where he was living with his wife and son Paul Jr), and we had many discussions with him about Marx’s theory and current developments. My understanding of Marx’s theory and of capitalism is very much in the Mattick tradition. My first book (The Falling Rate of Profit in the Postwar United States Economy, 1992) is dedicated to him.


7 – The disintegration increases the reserve army of labor, a mass higher numbers of unemployed and precarious workers, how do you consider this phenomenon?

This is a very important phenomenon, perhaps the most important phenomenon of all.

Even if capitalism manages to stumble along for a few more years without a more severe depression, unemployment will remain at very high levels all over the world, especially for young people, who have no future in a capitalist economy in crisis. Already, the rate of unemployment is 25% in Greece and Spain, and 11% in Europe as a whole (an underestimate?). The official estimate of the rate of unemployment in the US has decreased from 10% to 8%, but that is only because the official estimate of the labor force has not increased at all since the crisis began in 2008. If we assume a normal growth of the labor force of the US of 1% a year, then the real rate of unemployment is more like 12%. And the best-case “stumble along” scenario for the future will not reduce these depression levels of unemployment for many years to come, if ever.

Unemployed young people led the Arab Spring uprising, and unemployed and underemployed young people and students led the Occupy movement. In general I think that young people – who are much better educated than ever before and have such tremendous capabilities, but who have no future in capitalism – have the most revolutionary potential in the world today.

The following statement about Spain is from a New York Times article on May 20: “This generation is the best qualified in the country’s history, yet its members are the first since Spain’s civil war to face worse job prospects than their parents.” The same dismal prospect for young people is true in most of the rest of the world.


8 – The Occupy movement has had a major impact in Europe, what is your judgment of these movements and in your opinion are differences with the old anti-globalization movement?

I would like to learn more about the Occupy movement in Europe. I think the Occupy movement is extremely important. It obviously struck a very responsive chord all over the world, tapping into the growing resentment of the gross increases in income and wealth of the 1%, while everyone else is struggling to pay the bills, and resentment of the complete control of the government by the 1%. The Occupy movement focused everyone’s attention on economic inequality and economic injustice, and it practiced radical democracy in its decision-making processes.

Another important achievement of the Occupy movement, which is not visible on the surface, is that it has built what appears now to be lasting organizations in all the big cities of the country, and many smaller towns. These local Occupy groups meet once or twice a week (and sometimes more) for discussions, teach-ins, and other activities. They are usually organized in “working groups” that have additional meetings: bank reform (a wide spectrum), end to corporate “personhood” (which protects corporations from government regulations), strike support (not enough), home foreclosure prevention (also not enough), etc. Working groups in different cities have begun to make connections with each other.

This is a remarkable organizational structure, organized entirely “from below”. The groups are a little like the old CP cells, but much more democratic and decentralized and open ended.

Most people are serious about trying to do something to change the economy. I wonder if the same organization-building is happening in Italy and the rest of Europe.

The first Occupy National Gathering is being organized by Occupy Philadelphia for June 30-July 4 (July 4 is of course Independence Day in the US, and the Declaration of Independence was written in Philadelphia). You can read about the gathering at their website:

The gathering is described as “the movement’s disparate chapters collaborating on a massive scale.”

The most common criticism of the Occupy movement is that “they don’t have a clear vision of an alternative,” and that is generally true. But many participants are working hard to try to figure out their vision, or at least parts of it. And they are generally clear about the basic principles of the alternative: economy equality, economic justice, and economic democracy. If these basic principles continue to be taken seriously, it will likely lead in the direction of socialism. It will be the challenge of socialists (the challenge of a lifetime) to participate actively in these Occupy movements and try to persuade others to take this movement in a socialist direction.

An important shortcoming of the Occupy movement is that relations with unions and other employed workers are generally weak, with some notable exceptions (especially in New York and Oakland). The most widespread strike support activity has been the leafleting of the retail stores of the telecommunications giant Verizon in many cities (the company is very profitable, but it is demanding a wide variety of “take-backs” from workers, including especially heath care benefits; the union called off a short-lived strike last August, and negotiations have dragged on since). Much more along these lines needs to be done to build mutual support and connections. If Occupy activists are looking for something to do today, the best thing would be to support workers on strike, wherever that might be.