Michael Roberts: A Marxist Theory of Crisis in the Contemporary World

As a worker and long time union activist, I want to encourage working class people who are seeking answers to the many issues we are facing in our daily lives, to read Michael Roberts' answers to important questions in this interview. I think that workers often retreat from a subject when we feel we don't fully understand it or it appear's too complex; a result of class oppression in my view. I know I did. But one doesn't have to understand every detail, every aspect of a subject to recognise that its main premise is fundamentally sound. One doesn't have to be an "angler" to catch fish. If we understood everything about a subject the moment we opened the page there'd be no need to read on. It's like taking up hiking; we don't start with a trek up Kilimanjaro. 

Michael Roberts, a Marxist economist I have know for a long time, touches on some important subjects that are important to all workers. The issue of China for example and economic questions like finance capital, investment, crypto currency or what causes recessions or slumps. I think it is important to develop some understanding of China's incredible rise and how this has occurred.

I am not an expert in economic theory, Marxist or otherwise,  and there is a need for "experts" in any subject if we want to fully understand them. We never stop learning in a way. But I do grasp the general process that is at the heart of Marx's explanation of the capitalist system of production that Michael touches on here and, and that enables me to see things more clearly. It's an explanation that corresponds with objective reality, my life as a worker, a seller of labor power not a buyer of it. There is powerful propaganda in society that denies class oppression or that workers are exploited at all. Roberts says of the tech worker, "knowledge workers are just as much part of the proletariat as manual workers doing physical tasks." They are learning that truth at a rapid pace. The workplace is the best teacher. Read on, and if you hit an obstacle, put it aside, you can return to it later. Learning is a process. Richard Mellor

A Marxist Theory of Crisis in the Contemporary World

This is an English translation of an interview published in Chinese by the Chinese Academy of Social Sciences in 2025 in World Socialist Research.

1. Michael Roberts, thank you for your time! Could you briefly tell us when you got to know and accept Marxism and what impact did your previous job in the City of London have?

If you have a Marxist insight into the workings of finance capital, you are much less likely to assume that all will be well with financial investment. One lesson for workers that I learnt and this applies to China too: stay out of financial markets. Even better, workers’ pension funds should not rely on stock market investing as these funds continually lose workers’ contributions by doing so. But it works the other way too. A close understanding of the workings of the financial beast can help us explain better the fragilities and speculations of the system.   

2. What do you think is the core idea of Marxism? What’s the relationship between historical materialism and the critique of political economy? 

The core ideas of Marxism can be reduced to two key concepts. 

First, the history of human organisation since primitive times is the history of class struggle. The materialist conception of history is that change for better or worse is driven by the material interests of classes and, in particular, by the ruling class (feudal lords, capitalist companies) and the working class. While individuals can play key roles at moments in history (decisions and actions by kings or by revolutionary leaders), in the final analysis, change depends on economics and classes. As Marx said: “men make their own history, but they do not make it as they please; they do not make it under self-selected circumstances, but under circumstances existing already, given and transmitted from the past.” 

The second core idea is the law of value under capitalism. Capitalism is a system of production for the profit of the owners of the means of production, who exploit those who own nothing but their ability to work for the owners. Labour creates all the things and services that we use and need, but the value of that labour is appropriated by the owners of the means of production as ‘surplus value’ over and above what labour receives for its work. That surplus value is accumulated as capital. Our social needs then depend on the decisions of capitalists on whether it is profitable or not. This explanation of the workings of the modern economy is denied by the apologists for capitalism – but it is compellingly clear. 

3. The theory of crisis is an important part of Marx’s critique of political economy. There have been many debates among Marxists on how to understand Marx’s theory of crisis. What do you think of Marx’s theory of crisis, and the relationship between overproduction, underconsumption, and the tendency of the rate of profit to fall? 

Yes, a theory of crises under capitalism is very important. The apologists for capitalism deny that there are any endemic crises in capitalist production – ie regular and recurring slumps in production, investment and employment. For them, such crises are either random events, one-offs or the result of bad decisions, speculations or negligence. The apologists deny that crises are inherent in the capitalist system of production for profit. But Marx’s law of value reveals why regular crises are endemic. Capitalist production only takes place if profits are made and Marx shows that a contradiction arises between the drive for more production and profitability of that production (ie profits relative to capital invested). Capitalists compete against each other to gain market share and a bigger cut in the profits appropriated from workers. In order to gain an advantage, they resort to using labour-saving technology to reduce costs and increase the productivity of labour. But Marx argued that profit only comes from labour going to work, so if investment is increasingly in machines etc relative to labour, productivity may rise but at the expense of a tendency for profitability to fall. Eventually, profitability may fall so much that it causes a fall in total profits. Then capitalists stop investing, close down production and lay off workers. Unemployment rises alongside unsold goods and services. This is a slump. It can only be rectified by getting profitability rising again and that requires removing unnecessary workers, weak companies and keeping wages down. Then the whole process can start again. Slumps are a necessary ‘cleansing’ process for capital to recover. Marx outlines his theory of crises most clearly in Capital Volume 3, Chapters 13-15. 

However, many Marxists do not accept that the law of tendency of the rate of profit to fall as explained in these chapters is relevant to crises in capitalism. Instead they consider two other main theories. The first is that there is ‘underconsumption’. This is when workers cannot buy back all the goods and services produced by the capitalists because they do not have enough money. Both Marx and Engels disputed this underconsumption theory, pointing out that workers will never have enough money to buy back all the output being sold, precisely because wages do not contain all the value created and realised as the capitalists have appropriated any surplus value (the difference between the value of commodities sold and wages going to the workers; in other words, profits). The point is that capitalists do not need to sell all their commodities to workers; much of sales is to other capitalists (eg steel is sold to auto manufacturers to make cars etc). 

The other alternative theory is that of ‘overproduction’. Capitalists just keep producing to accumulate more profits without considering whether they can sell their production on the market. They overproduce relative to demand. The problem with this explanation of crises is that it does not explain when production becomes ‘too much production’. It may never happen, or it could happen at any moment. There is no logic to this theory. Put it this way, if supply is in line with demand, can there still be a crisis of investment and production in capitalism? Marx would say yes, because the profitability of what is being produced is what decides whether capitalists invest or not. Indeed, this is how crises unfold. Profitability falls, then total profits and then capitalists try to sell more to cover falling profits. But that means ‘overproduction’, forcing capitalists to lower prices and/or cut production. Overproduction is the result of the overaccumulation of capital ie falling profitablity of capital invested, not the other way round.

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4. In 2020, you published the book Engels 200 – His Contribution to Political Economy, in which you systematically introduced Engels’ research on political economy and his contribution to Marxist political economy. However, there is a view that the crisis caused by the rate of profit to fall is actually Engels’ viewpoint, and he exaggerated or even tampered with Marx’s discussion on the tendency of the rate of profit to fall when editing volume 3 of Capital. What do you think of this viewpoint?

This view has been expressed by several Marxists (in particular, the German Marxist scholar, Michael Heinrich) who claim that they have read unpublished papers by Marx that apparently show Engels changing Marx’s words to make the law of the tendency of the rate of profit to fall appear more important. These Marxists also claim that Marx actually abandoned the law in the 1870s and so it should not be considered relevant to Marxist economics and crisis theory.

But other scholars have shown clearly that Engels did not engage in any significant distortion of Marx’s text as in Chapters 13-15 of Volume 3 where the law of profitability is spelt out. And there is no evidence that Marx dropped the law in the 1870s – on the contrary, he conducts further work on it. For example, in the 1870s, Marx spent considerable time looking at the rate of profit with various mathematical formulas. When Engels came to edit Capital Volume 3, he excluded Marx’s mathematical work on the rate of profit, even though it would have confirmed that Marx still held to his law. All this is explained in my book, Marx 200 and in my book Engels 200, with all the references.

The Marxists who push this have also bent Marx’s law of value into a theory of money ie. value is not created by labour in production, but instead is only realised in selling commodities produced on the market. So no sale, then no value. This was not Marx’s view. Value is the result of the effort of human labour in production; how much of that value is eventually realised depends on sale in the market. But there is no value at all without human labour production. Behind this revised theory is an attempt to replace profitability as the ultimate cause of crises with a theory of monetary or credit instability, similar to the view of mainstream economists like Keynes.

5. From your point of view, what are the main differences between Marxist political economy and other schools of economics (like neoclassical economics, Keynesianism, etc.)? Can we regard the theory of crisis as an important difference or even essential difference between Marxist political economy and mainstream Western economics?

The key difference above all is that other schools of economics, even the most radical ‘heterodox’ schools that do not accept that markets are perfect, do not agree with Marx’s law of value. They do not accept that the key contradiction of capitalist production is production for profit, not social need and that increased production eventually comes into conflct with increased profitability and that is what leads to booms and slumps, ie crises. The mainstream neoclassical school deny crises can happen in properly run markets or in markets that are not interfered with by governments, monopolies or trade unions. Heterodox economists deny the role of profit in crises and look to either a ‘lack of demand’ (Keynes); or financial instability (Minsky) or monopolies (Sweezy, Stiglitz) or bad regulation.

And this is a crucial difference, because all these schools are suggesting that capitalist production can be modified or corrected to make capitalism work better. Keynes said more government spending or monetary injections will do the trick; heterodox Minsky said: regulate the banks and finaancial institutions, then capitalism will be stable. These reformist approaches are theoretally and empirically wrong. Marx’s theory of crisis shows that capitalism cannot be reformed in that way. Crises are endemic to capitalism because ultimately they are caused by falling profitability. The only way to end crises is to replace capitalism with a planned economy under common ownership ie no capitalists. 

6. In your research, what impacts does the financialization of capitalism have on the real economy and the working class? 

One of the features of the last 50 years in modern economies in the Global North has been the rise of the financial sectors, not just banks but hedge funds, investment funds, insurance funds, private equity, cryptocurrencies etc. Increasingly, capitalists have switched their investment of accrued profits into financial assets and speculation rather than into investment into new technology and productive sectors. This is the phenomenon of ‘financialisation’. 

However, some Marxists and others have been so enamoured by this development that they have started to claim that capitalism has changed its spots. It is no longer a system of production for profit through the exploitation of labour in factories, offices etc, but now it is just a financial monetary system where money makes more money. This means that workers have lost their role as producers of value in capitalism. Now capitalists can get value just from monetary tricks. Capitalism has become finance capital, which rules over producer capital.

This is nonsense. Although financial profits in some economies like the US and the UK are large, say up to 25% of total profits, the vast majority of profits are still made by selling goods and services produced by workers. And that is especially the case in the so-called Global South where manufacturing has become predominant, not finance. Globally, the working class has never been larger and still most capitalist accumulation comes from the labour of working people in production. The leopard of capitalism has not changed its spots.

7. What do you think of the current crisis of capitalism in the global economic system, especially the financial crisis in recent years? What insights can Marxist political economy provide for us to understand the crisis of capitalism? 

This is a big subject. In the 21st century we have had the two biggest slumps in the history of capitalism, 2008-9 and 2020. There is every reason to expect that another slump will take place before the end of this decade. That may be triggered by a new financial crash as in 2008. This time that crash may not start in the banks as such but be engendered by rising corporate debt and the cost of servicing that debt. Already, there are around 20% of companies in Europe, Japan and the US that are called ‘zombies’ ie they are like the living dead because they do not make enough profits to cover even the cost of servicing their existing debt and so must keep borrowing.These companies are in serious risk of going bust and bringing down even profitable companies in a ricochet effect. 

8. You think that since the end of the Great Recession in 2009, the major capitalist economies have been in a Long Depression. Is there any difference between the Long Depression and previous long depressions in the history of capitalism? What strategies should China adopt in response to the global impact of the Long Depression?

I define a depression as opposed to a recession or slump as a period where after a slump, the previous trend of growth in output, investment and above all profitability, is much lower than before the slump. And this lower trend can last for decades. In that sense, the Long Depression of the 2010s onwards that I have identified is similar to the depression of the late 19th century (1873-97) and the Great Depression of 1929-42. As of 2025, the current depression is continuing as the pandemic slump of 2020 did not lead to a significant rise in profitability and so investment growth and real GDP growth remain even weaker than in the 2010s. 

China has avoided all these crises in capitalism. That’s because China has an economy dominated by a large state sector and planning by the government, so that any instability in its capitalist sector can be overcome and investment and production can carry on relatively uninterrupted. If the capitalist economies of the West head into another slump, then trade and investment into China will be hit, but China now has a massive domestic base and it has invested heavily into new technologies and continues to direct and plan that investment mainly through the state sector. China needs to expand the state sector and planning to reduce the instability in its capitalist sector, particularly exposed by its plunging real estate sector (mostly capitalist based).

9. Digital currency and blockchain technology have been hot topics in the field of financial technology in recent years, and they have had a profound impact on the global economy and financial system. What is your opinion of these financial innovations and digital finance？Will they lead to a more serious global economic crisis？ 

Cryptocurrencies, as they are called, like bitcoin, are just another form of speculative financial asset like gold or paintings. They are not alternative forms of money that could replace state issued currencies (fiat money) like the dollar or yuan. Digital currencies in general already exist in one form ie you pay your bills by card, phone or bank transfer without any paper money involved. The possible new development would be a central bank digital currency that bypasses commercial banks. So far, that development has made limited progress. In the meantime, cryptocurrencies are yet another form of what Marx called ‘fictitious capital’ that adds yet more risk of a financial crash down the road. 

10. Given the increasing popularity of artificial intelligence and automation, how to apply Marxism to analyze the impact of technological progress on production modes and social relations?In your research, what is the correlation between technological progress and economic growth?

This is complicated. Artificial intelligence (AI) is just a new form of technology aimed at replacing human labour and increasing the productivity of labour and so raising the rate of exploitation on labour by capital. New technology can lead to huge job losses, especially for those in industries and occupations it replaces, but it can also, over time, create new industries and employment. Consider the industrial revolution, the electricity revolution, the auto industry, computer revolution. Technology has always been key to economic growth by raising the productivity of labour, especially when the size of the labour force stops rising – as in China today. 

It is argued that AI is a completely new development that will replace human labour altogether because it can supersede human intelligence. The evidence for this is doubtful. Much of AI is just a fast processing of existing human knowledge and cannot replace the imaginative nature of human intelligence. Also, AI will take some time, even decades, to diffuse its productivity-enhancing effects through economies. In my view, it is not a ‘game changer’ that can save capitalism. 

11. Technofeudalism is a view that has emerged in recent years to describe the changes of society caused by cloud technology, that is, tech giants and large platform enterprises possess the data and power like feudal lords, while ordinary users serve these digital overlords as unpaid data producers like serfs, and the new form of rent replaces profit as the main form of accumulation. Do you agree with using technofeudalism to define the current stage of western society? 

Technofeudalism as a concept suggests that capitalist production, ie production for a profit through the exploitation of labour, has been replaced by a feudalism where digital monopolies just extract rents. But where do these rents come from? Marx pointed out that rent, interest and profits all come from the same source: the surplus value appropriated from the value created by human labour power. It is just wrong to argue that companies selling cloud technology are not producing commodities for sale and profit just like any capitalist process. The bulk of Amazon’s profits come from distribution and transport of things; the bulk of Facebook’s profits come from advertising; the bulk of Google’s too. The bulk of Microsoft and Apple profits are from selling computer hardware and software. This is not feudalism but straightforward capitalism. Capitalism is not dead and to suggest that it is a dangerous idea for workers because it means labour may not see its enemy as capital as a whole, but just a small part of capital, so that there is no need to replace capitalism but just ‘feudal monopoly’ capitalism.

12. The labor theory of value is the core idea of Marxist economics. In time of automation and the digital economy, how to apply the labor theory of value to analyze modern economy? What do you think of data as a new factor of production? 

Data or knowledge comes from human activity. So knowledge has value in the same way that physical things have value for society and for capital. Knowledge is material: it requires the energy of human labour; ie. mental labour, in the same way as physical labour. Both are material and create value. So capital can appropriate surplus value from knowledge workers that it employs and does so increasingly across industries and the world. Such surplus value is embodied in patents, intellectual property rights etc. Knowledge or mental labour is just as ‘material’ as physical labour. Mental activity takes place in the synapses of the human brain and is combined with physical labour using a computer etc. So mental labour creates value just as much as physical labour. And knowledge workers are just as much part of the proletariat as manual workers doing physical tasks.

Indeed, mental labourers are being exploited increasingly by capital to appropriate surplus value (profit) .So there is no need to invent a new term for the working class such as a ‘multitude’. This implies that the working class, those who only make a living by selling their labour power and own no means of production, no longer exist. This term hides the class struggle between labour and capital, thus confusing the need to replace capitalism. 

13. Has the development of the digital capitalism widened the North-South divide? 

Yes, it is widening that divide. But that divide is widening anyway. The Global South (with the exception of China) is not catching up with the Global North however you measure it: by GDP per person; by productivity per worker; by income per person; by reducing inequality. The North-South divide is expressed in the control of an imperialist bloc of economies with relatively low population dominating the rest of the world which has the bulk of humanity.

14. What economic policies do you think president Donald Trump will adopt, and what impacts will these policies have on the global economy? 

We cannot be sure what Trump will do. But he says he is going to apply huge tariffs on US imports, particularly those coming from China. He claims his aim is to get US industry back to where it was at the expense of the rest of the world. Above all, he wants to continue the policy of previous US administrations to strangle, choke and reverse the economic progress of China, which is seen as the main threat to US hegemony. Indeed, Trump will also back further military provocations to restrict China. Domestically, he aims to cut corporate taxation so the rich and big business pay even less than now and do away with regulations on industry and global warming abatement. His Cabinet is composed completely of billionaire hedge fund and private equity managers who will seek to benefit the rich at the expense of most Americans. 

Worldwide, if Trump does follow through with these policies, then world trade will fall back and tensions between the US-led Western alliance and China will rise dangerously. Inequality of wealth and income between countries and within countries will increase and the wars in Ukraine and the Middle East will continue, with the risk of war in Asia too.

15. Will Trump’s promised economic policies, such as massive tax cuts and increased military spending, pose a threat to global economic stability by leading to higher global debt levels?

Yes, global debt is already at record highs and relative to global output. In particular, the US government is running sizeable budget deficits in order to finance the war in Ukraine and for Israel and it plans massive increases in military spending to fund further action globally. Trump wants Europe to pay more for this, but in the meantime, US public debt is hitting all-time highs and the cost of servicing that debt in interest is now surpassing government spending on education and health and other public services. 

16. Will Trump’s economic policies worsen the contradictions of the global capitalist system, leading to overproduction and the tendency of crisis?

All this is against a global background of low growth and trade, poor investment and productivity growth. The major capitalist economies, with the possible exception of the US, are stagnating or even in outright recession, especially in Europe. There is every possibility that these economies will face a serious slump by the end of this decade, which will spill over to the rest of the world, as happened in 2008 and 2020. Only China can hope to ride through that. 

17. Do Trump’s economic policies reflect the rise of economic nationalism and protectionism in the context of globalization? Will these policies worsen global economic inequality? How can developing countries respond to the inequality in the global economic system? 

Protectionism and nationalism by others is no alternative solution to Trump. Developing countries need to come together to cooperate on trade, investment and reducing inequality. But to do that, the people in these countries must get governments that stand for labour and for common ownership of resources and assets to plan each economy and in cooperation globally. Unfortunately, nearly all Global South governments do not stand for these policies. They are either controlled by despots or support big business at home and US imperialism abroad. Until these governments are changed, I do not expect much progress in higher growth, reduced inequalities, full employment and better public services.

18. You persist in writing blogs for a long time. What influence has this style of writing made on your thinking and exchange of ideas? Could you share your recent research or research plan in the future？

The aim of the blog and my books is to increase our understanding of how capitalism works, its contradictions and faultlines, with a view to replace it. I consider that Marx’s analysis of capitalism is the most compelling and so I seek to defend Marx’s views, as I see them, against alternatives, all of which come down to trying to make capitalism work (better). I aim my blog not at academics but at activists seeking to change the world for the better. That does not mean I ignore difficult or complex issues of theory or statistical evidence. On the contrary, I try to explain them more clearly. Currently, I am preparing a new book on what is happening in capitalism and in the world economy in the 2020s. It is really a follow up to my Long Depression book published in 2016. Many things have happened since and there is more to come in this decade.

‘Time is Running Out’ will be published in December 2026 by Haymarket Books. 

Opinion: Trump in China, the Summit” with no real agenda and no concrete agreements ends.

“Summit” with no real agenda and no concrete agreements ends. 

from Navdeep Singh

 

Highlights: 

 

(1) Trump introduced to historical term “Thucydides Trap”, for first time in his life, briefly reflects on it, refracts it through the prism of Sleepy Joe.

 

(2) “At the Hall of Prayer for Good Harvests in the Temple of Heaven, President Xi explained for President Trump and his family the concept of harmony among all beings and respect for the law of nature.” That is to say, Trump groks at the convergence between Buddhism-Confucianism, and Taoism, forcing to reflect that “at the heart of Chinese philosophy is a belief in the innate goodness of humanity. 

 

This principle is encapsulated in the ancient phrase: “Man on earth, good at birth. The same nature, varies on nurture.” This idea suggests that humans are not born in conflict with one another but are shaped by the environments and relationships around them. (

 

3) That is to say, Trump takes note that, unlike many parts of the world where religious conflict has shaped history, Chinese philosophy has fostered mutual respect, allowing these traditions to coexist and enrich one another, and that:

 

(4) “Harmony in this context is not about uniformity. It seeks to embrace diversity, weaving diverse threads into a coherent tapestry. This principle underpins Chinese social life, where the wellbeing of the collective is prioritized, and individual growth is seen as inseparable from the health of one’s relationships and community. It offers a powerful counter-narrative to Western individualism, showing that strength and progress emerge from connection, not isolation.”

 

Meanwhile, a near trillionaire gets on a plane with 11 other billionaire tycoons, takes selfies and videos at the Great Hall of the People. 12 US billionaire and soon to be trillionaire American robber barons went to Beijing to beg the Communist Party of China for deals last night. The same billionaires and politicians who call China an "evil empire" are now standing in Beijing with their beggar’s bowls and hands out. They told Africa to stay away from China. They told Europe to cut ties. They told everyone China is a massive threat. “But when their economy is about to collapse, when their factories are shutting, when their own system is failing, where do they run?”

 

“The historical unity of the ruling class is realized in the state.” — Antonio Gramsci

“It’s a big club, and you ain’t in it.” — George Carlin

Mamdani 's Rapid Capitulation to Big Capital

Richard Mellor

Afscme Local 444, retired
HEO/GED

2-20-26

It doesn’t take long does it! We have seen this so many times by now. Mamdani’s election was uplifting but this lesser evilism has finally lost any meaning and it’s experiences like this that has led over time to 100 million or more people opting out of the electoral process altogether. Many others moved right in the desperate hope that an angry con man might shake things up and we can see how that’s played out. Working people have no political voice in the US.

 

The US working class is disgusted with the two parties of capitalism and the political system in general. Workers often make the mistake of seeing the political crisis as a production of corruption or character flaws or greed in the abstract, and the Democratic Party and its allies atop organised labor do nothing of substance to alter this view. But that is not the issue. The Democratic party “aligns itself”’ with corporations a critic wrote recently, but it’s more than that. “We’re capitalist”, Nancy Pelosi reminded a rather naïve young DSA member at a Town Hall meeting. It’s not that this party aligns itself with big business, it is “their” party.

 

The election of Alexandria Ocasio-Ortez  (AOC) was an exciting event too as she defeated an incumbent Democratic Party machine member in a Congressional election but she’s crossed the line and is a rising star in the party.

 

It is not that Mamdani or AOC are rotten, or are misleading their constituents. They may or may not be. The reason they and so many others have betrayed working people is that they are reformers, they believe capitalism can be “made nice” but it can’t. “If only the bosses' would be less aggressive” many labor tops say in private, and more often than not in public; they just want the American Dream back. 

But the material base for that dream which was not a dream for everyone and a nightmare for millions has gone and is not returning. 

The DSA, which had about 6000 members, a left rump in the Democratic Party prior to Bernie Sanders and the 2016 election, had 90,000 at one point. But DSA and so many people calling themselves DSA members are simply left liberals, more like Social Democrats I would say and its leadership is still overwhelmingly linked to the Democratic Party and they brought in Labor Notes types to direct the approach to labor relations which was a major mistake.

 

The first major obstacle to Mamdani’s very mild reforms was and is the Democratic Party itself. It cannot change its spots. 

 

Political parties, like the state apparatus (government) have class content, they are not empty vessels. In the US, the Democrats, a political party that is a major global capitalist party that millions of workers have looked to to defend our rights and living standards, has failed to do so. This rhetoric can’t last forever in the face of material reality.

Mamdani had built a base of over 100,000 activists I understand. This is a significant starting point but what that base represented to Mandani was an electoral force. It was a base built to win elections and it succeeded. The gains for working people stopped there, trapped in the back hole. Like Sanders, describing themselves as socialists they have both been great recruiters for a Wall Street party that has failed working people time and time again. The Democratic Party, and its agents atop organized labor share a huge responsibility for the election of the degenerate gangster capitalist, paedophile and convicted felon that sits in the Oval Office.

The big split in the AFL-CIO back in 2005 when the Fight to Win Coalition was formed was not over any substantial economic issues, either. There was no throwing out of the Team Concept by the “radicals”  it was all about organizing new members to increase the bureaucracy’s clout with the Democratic Party providing increased support at election time.

 

So for many of us Mamdani’s experience is just another betrayal. This will lead to a split in Democratic Party at some point in the not so distant future I would think. It seems likely that voters will seek relief in the Mid-Terms and the Dems may win control of the house, after all, where else can folks go when it comes to elections. It's hard to tell, what will happen but either way, we'll be back at square one.

 

Sanders has betrayed the millions of young people that looked to him for change back in 2016 repeatedly herding them in to the Democratic Party, supporting the war criminal Hillary Clinton in 2016 and Jo Biden in 2020, the man that laid waste to Gaza and denied US workers the right to strike defending the rail bosses' profits. This left many in despair, some dropping out of politics altogether. Mamdani had the numbers too. In the past 10 years opportunity after opportunity has been wasted.

 

Sanders, AOC, Mamdani have had mass popular support. Mamdani’s hundreds of thousands of supporters could have been channeled in to building community committees throughout the districts that can take up community defense, crime, educating the young people and organizing direct action activity like occupations of slumlords property, fighting for squatters rights, for new housing, and against the capital management companies that are the biggest landlords in the country today. This rather than just numbers at the ballot box. 

Reaching out to other cities and generalising the struggle against the billionaires who used every tool in their arsenal to defeat Mamdani is a necessity if we are serious about changing the balance of class focus in society.

 

Winning elections is fine, but not in order to put Democrats in power. While we must defend the right to vote as we won it from them, we must also be clear that we have won precious little through the ballot box. The legislation workers won in the 1930’s was a result of the mass occupations of industry and the rise of industrial unionism (CIO), and in the period that followed, a response due to the Black Revolt that shook the US to its foundations and embarrassed it in the eyes of the people of the world. Politicians merely codified what US workers had already won in the streets, workplaces and education institutions of America.

The reality is and has been that the time is right for significant change in US society. How to combat the capitalist offensive, in its most brutal form through the state’s security apparatus was revealed in the heroic defense of their communities and their neighbors by the people of Minneapolis. Make no bones about it, the lull in the offensive there and the undermining of the Trump Administration over the past period is a direct result of that battle.

 

In the end days of the capitalist system and as US, capitalism, the world’s most powerful and violent nation, faces serious competition in the global stage particularly from China, there is no room for even the mild reform platform that put Zohran Mamdani  the mayor’s seat of one of the world’s most important citiy and major financial center. 

 

The struggle for a democratic socialist society means taking in to public ownership the dominant corporations that control the political and economic life of the nation. This has to include the financial industry, health care, transportation, the production of life’s necessities and electorally building a political party of our own based on our organizations, our communities and workers from outside our borders, our international allies.

These should be our goals and building a mass movement that can win them is the key.

Mamdani Reverses Campaign Promise to Expand Rental Assistance

A rental voucher program costs more than $1 billion. The mayor’s decision to curtail its expansion reflects the clash between his ideology and the realities of managing the city.

Reprinted from the New York Times

·       

Mayor Zohran Mamdani, who faces a budget deficit, said expanding a costly rental voucher program might not be feasible.Credit...Kent J. Edwards for The New York Times

By Sally Goldenberg and Mihir Zaveri

Feb. 12, 2026

Expanding a New York City program to help struggling tenants pay rent seemed like an obvious campaign promise for Zohran Mamdani, who staked his insurgent candidacy last year on making life more affordable in the five boroughs.

Now, confronting a grim fiscal picture in his second month as mayor, Mr. Mamdani no longer intends to back the growth of the $1 billion-plus initiative known as CityFHEPS, despite a plan passed by the City Council and upheld in court.

The reversal marks the clearest example yet of the clash between the ideology of his democratic socialist campaign and the tough realities of managing a sprawling, costly bureaucracy.

During a recent news conference, as the mayor lamented a looming budget deficit that on Wednesday he pegged at $7 billion over two years, he suggested the program’s full expansion may be too expensive.  Read the full NYT  article here.

 

Michael Roberts: Kevin Warsh – Wall Street’s man

Kevin Warsh – Wall Street’s man

by Michael Roberts

Kevin Warsh, President Trump’s nominee to replace Jay Powell as Chair of the Federal Reserve next May, is the epitomy of a Wall Street, hedge fund insider.  Educated at Stanford University and currently a fellow of its graduate school, he is also a member of the secretive Bilderberg Group set up in the 1950s to work out strategy for the preservation of ‘Western democracy’ as the Cold War with the Soviet Union intensified. He is married to the heiress of the Estee Lauder company.  As a young man he first worked at Morgan Stanley, the American investment bank (actually at the same time as I did, although I never met him).

A good Republican, he became an adviser to the Bush administration on financial markets. He was heavily involved in the 2008 financial crash, becoming the liaison between the Federal Reserve under Ben Bernanke and the Wall Street banks.  He advocated that the crashing investment banks should be turned into proper ‘banks’ so that they could receive Fed loans to bail them out.  In this way, he helped save his former employer Morgan Stanley from going the same way as Bear Stearns or Lehman Bros.

So Warsh was the link man for the Fed in ensuring the banks were bailed out of the disaster of their own making.  “He brought a lot of real experience, he knew these people on Wall Street — he knew the difference between when they were arguing their book and when they were bringing us good information — and that was very, very valuable,” said Don Kohn, the former Fed vice-chair.  The then chair of Goldman Sachs, Lloyd Blankfein, the man who claimed he was “doing God’s work” at Goldman Sachs, loved Warsh. “Kevin was unflappable at chaotic moments,”Warsh’s mentor is the billionaire hedge fund boss, Stanley Druckmiller, who also promoted current Treasury Secretary Scott Bessent.  Druckmiller maintains regular contact with both Bessent and Warsh. Indeed, Warsh has worked as a partner in Druckmiller’s operations since 2011.

Warsh had been a Federal Reserve governor but resigned after the financial crash bailout when Obama took over the presidency and Fed chair Bernanke began to pursue a policy of ‘quantitative easing’ (QE), where the Fed pumped billions into the banking system to support it and keep interest rates low.  Warsh was opposed to QE. He was a good ‘Austrian school’, free market man.  So he saw the Fed monetary pump as causing “misallocations of capital in the economy and the misallocation of responsibility in our government.”  Warsh has long believed that central banks were addicted to ‘printing money’  and thus encouraged “recklessly large public sector deficits”. He wanted no excessive funding for the economy and no excessive government spending.  Quoting Chris Giles of the FT here, he thinks the Fed governors “should stick to their knitting on inflation and not get distracted by environmental concerns or the distribution of income.”  Reducing inequalities is not on Warsh’s agenda.

As a monetarist a la Milton Friedman, he then claimed that QE would lead to runaway inflation.  As we now know, it did not.  As I have shown in other posts, the monetarist theory of inflation is faulty because it assumes that money drives supply, when it is the opposite; and it fails to account for ‘hoarding’ or increased money supply being used by the financial sector for speculation and not for lending onto the wider economy.  That is what happened after the financial crash in 2008-9 and explains the near-zero inflation during the Long Depression of the 2010s.

But now in 2026, after the inflationary spike following the end of the pandemic slump, Warsh is not worried about the Fed lowering its policy interest rate and causing inflation because this time AI is going to save the day by boosting productivity so much that it will be a “significant deflationary force”. As his mentor Druckenmiller put it “Kevin right now very much believes you can have growth without inflation.”

The interesting contradiction is that Warsh still wants to stop the Fed expanding the money supply as that is inflationary, in his view. So if the Fed reduces its balance sheet further (which it did for a while under Powell) that could raise government bond yields – unless, of course, the government makes significant cuts in spending and inflation subsides.  Everything will depend on that AI productivity boost.

As Mohamed El-Erian, now an FT columnist and former head of the giant Pimco bond fund, said about Warsh: “I feel he’s much more of a known quantity and I am comfortable with most of his views.”  It seems that financial markets agree: the dollar made a sharp recovery against gold on the news that Warsh had been nominated – as he is one of their own.

Michael Roberts: Debt and the cockroaches

 

Debt and the cockroaches

by Michael Roberts

Let the Financial Times sum it up: “US stocks ride AI hype and trade truce to 6-month winning streak S&P 500 and Nasdaq post longest runs of monthly gains in years.” The FT points out that US stocks have hit their longest monthly winning streak in four years as AI hype, declining interest rates and Donald Trump’s move to dial back his trade war led the way. The S&P 500 rose in October for a sixth consecutive month of gains, and reached its 36th all-time high this year last Tuesday.  It is the best run for the index since August 2021.

Any concerns about an AI bubble in the making, and signs of weakness in the US labour market have been eclipsed by a torrent of bullish spending announcements and strong earnings from Silicon Valley tech groups.  And then the one-year deal between China and the US to postpone export controls on rare earths and chips added more to bullish sentiment. The Federal Reserve also delivered its second rate cut of the year on Wednesday. The Fed rate cut followed an explosion of mergers and acquisitions across corporate America, with more than $80bn worth of deals struck on last Monday.

The tech giants delivered their quarterly earnings results.  Amazon shares rose 12 per cent on Friday, adding almost $300bn to its market value after the company’s cloud business reported its strongest quarterly growth in nearly three years.  Meta sold $30bn of bonds to finance AI projects and the bond sale drew about $125bn of orders — the grade corporate bond. largest-ever demand in dollar terms for a US investment. Nvidia became the first company to reach a capitalisation of $5tn and Apple topped $4tn for the first time.  “Yes, this is a bull market that’s run a long way . . . but at the moment the tech firms just keep on delivering,” said John Bilton, head of global multi asset strategy at JPMorgan Asset Management. “The fact everyone is telling me [tech] is a bubble makes me think it’s got further to go.”  

Investment advisors were ecstatic: “There’s a greater consensus that the impact of AI is going to be real and transformational, earnings season is turning out well, we are at the beginning of a Fed rate cutting cycle, and there’s optimism that there could be a reasonable [US trade] deal with China,” said Venu Krishna, head of US equities strategy at Barclays.  All the doom mongers have egg on their faces.  The US economy is not in a slump, inflation is not out of control and Trump has made a trade truce with China. So everything is hunky dory in the best of all possible worlds. 

But is all really so well?  The stock market boom has taken the ratio of stock market prices to corporate earnings to new highs. The P/E ratio, as it is called, is now some 40% above its historic average and surpassing the ratio reached during the so-called ‘dot.com bubble of 2000. That bubble burst with a fall of 40% in the P/E ratio.

In previous posts, I have pointed out that the US success story is almost totally due to the expansion of AI investment by the tech giants, which continue to rack up big profits.  But the rest of the US corporate economy is in the doldrums.  In the corporate sector, earnings are still rising, but at a slower pace, up over 18% yoy at the end of 2024, but in in Q3 2025, rising at 10.7% – still good but on a downward trend.

Source: FactSet

The rate of profit, although up from the depths of the pandemic slump, is still low historically, while profit growth is slowing in the non-financial sector.

Source: BEA

Even the Magnificent Seven are forecasting a fall in earnings growth, mainly because of heavy AI spending. At Meta and Amazon, profits are supposed to grind down to nearly nothing. As for working people, the market for labour has been weakening. Net new jobs are disappearing.

And once people lose their jobs, it is increasingly difficult to get another.

No wonder the euphoria in the stock markets is not mirrored in the labour market.  American consumers have never been so depressed by their situation.

But the only joker in the economic pack of cards, according to investors and corporate strategists, is the public sector.  The US government is still running huge annual budget deficits and thus driving up the level of government debt, and so increasing the cost of servicing that debt.

Apparently, this is the reason for low investment in productive assets: government bond issuance is rising so fast that it is ‘crowding out’ credit for the private sector to invest in productive assets.  This is nonsense.  There are now many studies that show that interest costs are not the first worry for companies.  The main question for firms is: what return in profits will there be from new investments? 

The reason that public sector debt has risen so much in the 21st century was the bailing out of the finance and private sector during the global financial crash of 2008-9, the euro debt crisis through to 2012, and the fiscal support necessary for people to get through the pandemic slump of 2020. Those were the periods when government debt ratios rocketed.  In the periods in between, policies of austerity (particularly in cutting welfare benefits and investment in infrastructure), along with a some recovery in growth, kept debt ratios more or less stable.  Meanwhile, cuts in personal income taxes (particularly for higher income groups) and corporate profits taxes meant that government tax revenues as a share of GDP remained flat at around 35% of GDP, while government spending to GDP rose (IMF). 

Source: OECD

Debt does matter, but the debt that matters in a capitalist economy is not so much public debt, but corporate debt.  The latest estimates are that in the major economies, some 30%-plus of companies have so much debt that they do not earn enough profits to service that debt.  

Source: Bloomberg

Despite most central banks cutting short-term interest rates, borrowing rates for corporations have not fallen so much. The big cash-rich companies do not need to borrow and if they do, they can get the best rates.  The AI companies are still able to fund their huge capital investments from existing cash reserves and earnings from successful core businesses, although that cash is being drained fast.  But other companies are dependent on the banking sector to keep bailing them out.

And here is the risk. In the US, smaller regional banks got into deep trouble in March 2023, when start-up tech companies started to take out their deposits to keep going and the banks could not meet their obligations.  And last month, JPMorgan CEO Jamie Dimon delivered a cryptic warning to the financial system. Referring to the bankruptcies of auto parts supplier First Brands and subprime auto lender Tricolor Holdings, Dimon said: “When you see one cockroach, there’s probably more.  Everyone should be forewarned on this one.” JPMorgan lost $170 million on Tricolor. Fifth Third Bancorp and Barclays also lost $178 million and $147 million. Some US regional banks were also back in the wars. First Citizens Bancshares and South State lost $82 million and $32 million, respectively. 

And just as in March 2023, European banks are in the mix.  Back then, it was the mighty Swiss bank Credit Suisse that went under. This time, European banks BNP Paribas and HSBC each called out specific write-downs of $100 million or more in loan exposure. And just as in March 2023, it appears that fraud is involved. Apparently, $2.3 billion in so-called ‘factoring deals’ have “simply vanished” from First Brands accounts.

That’s the risk to the commercial banks. But increasingly, the big banks are not lending directly to companies, particularly smaller ones, but instead providing ‘liquidity’ to non-bank lenders, so-called ‘private credit’ companies. Non-bank financial institutions now account for over 10 per cent of all US bank loans. While direct on-balance-sheet funding by banks has declined sharply since 2012, the use of credit lines to non-banks has expanded significantly, now representing approximately 3% of GDP. Having grown from $500 billion in 2020 to almost $1.3 trillion today, private credit is an increasingly important source of financing for companies. 

Much of this private credit lending is now used for household mortgages – shades of 2007.

As this private credit is not on bank balance sheets, it is not regulated.  That could mean that there may not be enough capital in the credit companies to meet any losses if the companies they lend to go bust. Then the private credit companies could also go bust or need a big bailout by the commercial banks – a classic ricochet through the financial system – and perhaps onto the ‘real economy’.

Such ‘systemic risk’, as it is called, is dismissed by most financial strategists.  Goldman Sachs recently went out of its way to argue that there was no risk from non-bank private credit companies going belly up. On the other hand, Bank of England governor Andrew Bailey raised “alarm bells” over risky lending in the private credit markets following the collapse of First Brands and Tricolor.  And he drew a direct parallel with practices before the 2008 financial crisis.  

Referring to how ‘repackaged’ financial products have in the past obscured the risk of the underlying assets, Bailey said: “We certainly are beginning to see, for instance, what used to be called slicing and dicing and tranching of loan structures going on, and if you were involved before the financial crisis then alarm bells start going off at that point. Tricolor and First Brands both made use of asset-backed debt, with the subprime lender bundling up car loans into bonds and the car parts manufacturer tapping specialist funds to provide credit against its invoices.” Bailey’s comments follow a warning last month from the IMF that US and European banks’ $4.5tn exposure to hedge funds, private credit groups and other non-bank financial institutions could “amplify any downturn and transmit stress to the wider financial system”.

So the stock market may be booming and the AI hype is still exploding, but the rest of the economy is not so buoyant; and there appear to be cockroaches eating into the clean running of the world of debt.  Watch that space.