Marxist Crisis Theory and the Rate of Profit in the U.S. Economy during 1975-2008

The cyclical fall in the rate of profit reveals the basic mechanism of the cyclical fluctuation of the economy. A new synthesis of the Marxist crisis theory necessitates calculating the rate of profit as well as considering factors such as capital-labor relations, realization of value, the organic composition of capital, and money and credit. Empirical studies suggest that the U.S. profit rate in real economy showed no signs of effective recovery during 1975-2008. The shrinking profit share caused by growing employment of non-production workers turns out to be the major factor contributing to the cyclical fall in the rate of profit, which in turn may be traced to the reorganization of the production process before the 1990s and the growing flexibility of employment relations after the 1990s. With long-term stagnation of the rate of profit, a new, financialised model of accumulation that heavily depends on increasing liquidity in the economy took shape in the United States, making the U.S. economy more fragile. The current crisis is but a natural result of the intrinsic contradiction between the Fed’s efforts to encourage financialised accumulation and to maintain the dollar as a legitimate quasi international reserve currency.