Capitalism and Anwar Shaikh

 by Michael Roberts

The most important book on Marxist economics this year will be Anwar Shaikh’s Capitalism – competition, conflict, crises.

As one of the world’s leading Marxist economists, Anwar Shaikh, has taught at The New School for Social Research for more than 30 years, authored three books and six-dozen articles.  This is his most ambitious work.  As Shaikh says, it is an attempt to derive economic theory from the real world and then apply it to real problems.  Shaikh applies Marxist categories and theory to all the major economic issues, including those that are supposed to be the province of mainstream economics, like supply and demand, relative prices in goods and services, interest rates, financial asset prices and technological change.

Shaikh says that his “approach is very different from both orthodox economics and the dominant heterodox tradition.”  He starts from “Perfect firms, perfect individuals, perfect knowledge, perfectly selfish behavior, rational expectations, etc.” as in the classical (neoclassical) tradition, and then “various imperfections are introduced into the story to justify individual observed patterns” although there “cannot be a general theory of imperfections”.

The book is a product of 15 years work, so it has taken longer to gestate than Marx took from 1855 to 1867 to deliver Capital Volume one.  But it covers a lot.  All theory is compared to actual data in every chapter, as well as to neoclassical and Keynesian/post-Keynesian arguments. A theory of ‘real competition’ is developed and applied to explain empirical relative prices, profit margins and profit rates, interest rates, bond and stock prices, exchange rates and trade balances.  Demand and supply are both shown to depend on profitability and interact in a way that is neither Say’s Law nor Keynesian, but based on Marx’s theory of value.  A classical theory of inflation is developed and applied to various countries.  A theory of crises is developed and integrated into macrodynamics.  That’s a heap of things.

It’s not possible to cover all the aspects of the book in this short review post.  But readers can follow in detail Shaikh’s arguments through a series of 21 video lectures that cover each chapter of the book.  These can be quite technical in part, but are worth the effort of concentration.  See Lecture 15 in particular for an overall summary of capitalism – this lecture is essential viewing for all interested in Marxian economics. There are also short interviews with Shaikh on the main message of his book.
In this post, I want to focus on what Shaikh has to say about crises under capitalism and in particular how we can identify at what stage capitalism is currently going through.

Shaikh reckons that on the surface, the last crisis, the Great Recession, looks like a crisis of excessive financialization. But this fails to identify the real cause of the crisis.  Keynesians and Post Keynesians argue that the cause of the current crisis is inequality and unemployment, so there is a need to maintain a stable wage share and to use fiscal and monetary policy to maintain full employment. But Shaikh argues that such policies would not work because, at least in the US, the post-Keynesians have got the causes of the crisis wrong, the cause of which is the movement in profitability – the dominant factor under capitalism.

The crisis was preceded by a long fall in the rate of profit. The neoliberal attack on labour from 1980s suppressed wage growth and reduced the wage share in order to stabilize the rate of profit.  The enormous fall in the interest rate in the 1980s that fuelled credit expansion and massive debt finance also served to raise the net (or enterprise) rate of profit.  So Keynesian fiscal policy by itself may pump up employment, but it will not restore growth.  For growth, it is necessary to raise the net rate of profit and interest rates are already at lows (even negative).

Shaikh emphasises that it is profit under capitalism that drives growth and there are cyclical fluctuations in profitability.  These are expressed in business and fixed capital cycles inherent in capitalist production.  Crises are normal in capitalism.  The history of market systems reveals recurrent patterns of booms and busts over centuries, emanating precisely from the developed world.  The key crises under capitalism are ‘depressions’, such as that of the 1840s, the “Long Depression” 1873-1893, the “Great Depression” of the 1930s, the “Stagflation Crises” of the 1970s and the Great Global Crisis now.

Shaikh revives the concept of long waves in capitalist production, something first identified by the Russian economist Kondratiev and which Shaikh first cited in a paper in 1992 (shaikh92w).  According to Shaikh, Kondratiev’s main point is that business cycles are recurrent and “organically inherent” in the capitalist system.  They are also inherently nonlinear and turbulent: “the process of real dynamics is of a piece. But it is not linear: it does not take the form of a simple, rising line. To the contrary, its movement is irregular, with spurts and fluctuations”.

Kondratieff believed that Depressions were linked to Long Waves: “during the period of downward waves of the long cycle, years of depression predominate, while during the period of rising waves of a long cycle, it is years of upswing that predominate”.  In a paper that Shaikh presented in 2014 (Profitability-Long-Waves-Crises (2)), he brings up to date his analysis on this, which is also developed in Capitalism. 

Shaikh reckons Kondratiev’s long waves have continued to operate, especially clear when measured by the gold dollar price: the key value measure in modern capitalism. He reckons that prices of commodities became a poor indicator of Kondratiev cycles in the post-war period of the 20^th century and now looks to the gold price.  In my analysis, first outlined in my book, The Great Recession, I find that the movement of interest rates also provides a very good proxy indicator of Kondratiev waves because it follows the movement in production prices.

Readers of my blog and other papers will recognise that Shaikh’s position is similar to my own on the causes of capitalist crises, the nature and existence of depressions, and the role of Kondratiev and profit cycles.


In my view, it is no accident that both of us made reasonably early (and independent) predictions of the Great Recession of 2008-9.  Shaikh made his in 2003; I did so in 2005, when I said: “There has not been such a coincidence of cycles since 1991. And this time (unlike 1991), it will be accompanied by the downwave in profitability within the downwave in Kondratiev prices cycle. It is all at the bottom of the hill in 2009-2010! That suggests we can expect a very severe economic slump of a degree not seen since 1980-2 or more”  (The Great Recession).

I shall return to other aspects of Shaikh’s book in future posts.