Current Business Cycle Expansion in the U S

Current Business Cycle Expansion in the U. S. Erdogan Bakir

Marx’s Crisis Theory in a Business Cycle Context Crotty describes it as follows: • The over-heated expansion erupts into crisis when two conditions hold simultaneously. • First, Marx theorizes the increasing fragility, vulnerability or sensitivity of the contract-credit system in the mature expansion. As the expansion overheats the ability to fulfill contractual obligations will be increasingly threatened by any significant decline in the gross rate of profit. • Second, Marx’s analysis of the laws of motion of capitalist production relations, conducted under the conditional assumption that there are no impediments to accumulation in the sphere of circulation, generates multicausal tendencies of the gross rate of profit to fall at some point in every expansion. • The integration of these two phenomena is Marx’s theory of crisis.

Crisis in Marx’s Own Words “The rate of profit falls. . The fixed charges - interest, rent, - which were based on the anticipation of a constant rate of profit and exploitation of labour, remain the same and in part cannot be paid. Hence crisis. Crisis of labour and crisis of capital. This is therefore a disturbance in the reproduction process. . . ” (Marx, TSV Vol. 2)

8% 1947 Q 1 1948 Q 1 1949 Q 1 1950 Q 1 1951 Q 1 1952 Q 1 1953 Q 1 1954 Q 1 1955 Q 1 1956 Q 1 1957 Q 1 1958 Q 1 1959 Q 1 1960 Q 1 1961 Q 1 1962 Q 1 1963 Q 1 1964 Q 1 1965 Q 1 1966 Q 1 1967 Q 1 1968 Q 1 1969 Q 1 1970 Q 1 1971 Q 1 1972 Q 1 1973 Q 1 1974 Q 1 1975 Q 1 1976 Q 1 1977 Q 1 1978 Q 1 1979 Q 1 1980 Q 1 1981 Q 1 1982 Q 1 1983 Q 1 1984 Q 1 1985 Q 1 1986 Q 1 1987 Q 1 1988 Q 1 1989 Q 1 1990 Q 1 1991 Q 1 1992 Q 1 1993 Q 1 1994 Q 1 1995 Q 1 1996 Q 1 1997 Q 1 1998 Q 1 1999 Q 1 2000 Q 1 2001 Q 1 2002 Q 1 2003 Q 1 2004 Q 1 2005 Q 1 2006 Q 1 2007 Q 1 2008 Q 1 2009 Q 1 2010 Q 1 2011 Q 1 2012 Q 1 2013 Q 1 2014 Q 1 2015 Q 1 2016 Q 1 2017 Q 1 2018 Q 1 2019 Q 1 Before-tax Profit Rate in Post-WWII Business Cycles 22% I II IV V VI VIII IX X XI 20% 18% 16% 14% 12% 10%

Before-Tax Profit Rate 21% 19% 17% 15% 13% 11% 9% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 1 Cycle 4 Cycle 9 2 3 4 Cycle 10 5 6 7 8 Cycle 11 9 10 11 12 13 14 15 16 17 18 19 20 1 2 3 4 5 6 7

20% 1947 Q 1 1948 Q 1 1949 Q 1 1950 Q 1 1951 Q 1 1952 Q 1 1953 Q 1 1954 Q 1 1955 Q 1 1956 Q 1 1957 Q 1 1958 Q 1 1959 Q 1 1960 Q 1 1961 Q 1 1962 Q 1 1963 Q 1 1964 Q 1 1965 Q 1 1966 Q 1 1967 Q 1 1968 Q 1 1969 Q 1 1970 Q 1 1971 Q 1 1972 Q 1 1973 Q 1 1974 Q 1 1975 Q 1 1976 Q 1 1977 Q 1 1978 Q 1 1979 Q 1 1980 Q 1 1981 Q 1 1982 Q 1 1983 Q 1 1984 Q 1 1985 Q 1 1986 Q 1 1987 Q 1 1988 Q 1 1989 Q 1 1990 Q 1 1991 Q 1 1992 Q 1 1993 Q 1 1994 Q 1 1995 Q 1 1996 Q 1 1997 Q 1 1998 Q 1 1999 Q 1 2000 Q 1 2001 Q 1 2002 Q 1 2003 Q 1 2004 Q 1 2005 Q 1 2006 Q 1 2007 Q 1 2008 Q 1 2009 Q 1 2010 Q 1 2011 Q 1 2012 Q 1 2013 Q 1 2014 Q 1 2015 Q 1 2016 Q 1 2017 Q 1 2018 Q 1 2019 Q 1 Profit Share in Post-WWII Business Cycles 38% I II IV V VI VIII IX X XI 36% 34% 32% 30% 28% 26% 24% 22%

Marx on the role of interest rate: “If the reproduction process has reached the flourishing stage that precedes that of over-exertion, commercial credit undergoes a very great expansion, this in turn actually forming the ‘healthy’ basis for a steady flow of returns and an expansion of production. In this situation, the rate of interest is still low, even it has risen above its minimum… The ease and regularity of returns, combined with an expanded commercial credit, ensures the supply of loan capital despite the increased demand prevents the interest level from rising. . Added to this is a great expansion of fixed capital in all forms and the opening of large numbers of new and far-reaching undertakings. Interest now rises to its average level. It reaches its maximum again as soon as the new crisis breaks out, credit suddenly dries up, payments congeal, the reproduction process is paralyzed and. . . there is an almost absolute lack of loan capital alongside a surplus of unoccupied industrial capital. ” (Marx, Capital Vol. 3)

0% 1947 Q 1 1948 Q 1 1949 Q 1 1950 Q 1 1951 Q 1 1952 Q 1 1953 Q 1 1954 Q 1 1955 Q 1 1956 Q 1 1957 Q 1 1958 Q 1 1959 Q 1 1960 Q 1 1961 Q 1 1962 Q 1 1963 Q 1 1964 Q 1 1965 Q 1 1966 Q 1 1967 Q 1 1968 Q 1 1969 Q 1 1970 Q 1 1971 Q 1 1972 Q 1 1973 Q 1 1974 Q 1 1975 Q 1 1976 Q 1 1977 Q 1 1978 Q 1 1979 Q 1 1980 Q 1 1981 Q 1 1982 Q 1 1983 Q 1 1984 Q 1 1985 Q 1 1986 Q 1 1987 Q 1 1988 Q 1 1989 Q 1 1990 Q 1 1991 Q 1 1992 Q 1 1993 Q 1 1994 Q 1 1995 Q 1 1996 Q 1 1997 Q 1 1998 Q 1 1999 Q 1 2000 Q 1 2001 Q 1 2002 Q 1 2003 Q 1 2004 Q 1 2005 Q 1 2006 Q 1 2007 Q 1 2008 Q 1 2009 Q 1 2010 Q 1 2011 Q 1 2012 Q 1 2013 Q 1 2014 Q 1 2015 Q 1 2016 Q 1 2017 Q 1 2018 Q 1 2019 Q 1 Share of Net Interest Payment in Before-tax Profit 25% I II IV V VI VIII IX X 12% 15% 10% 8% 10% 6% 4% 5% 2% 0% 3 -Month Treasury Bill Secondary Market Rate Net Interest Payment and Interest Rate 16% XI 14% 20%

0 1947 Q 1 1948 Q 1 1949 Q 1 1950 Q 1 1951 Q 1 1952 Q 1 1953 Q 1 1954 Q 1 1955 Q 1 1956 Q 1 1957 Q 1 1958 Q 1 1959 Q 1 1960 Q 1 1961 Q 1 1962 Q 1 1963 Q 1 1964 Q 1 1965 Q 1 1966 Q 1 1967 Q 1 1968 Q 1 1969 Q 1 1970 Q 1 1971 Q 1 1972 Q 1 1973 Q 1 1974 Q 1 1975 Q 1 1976 Q 1 1977 Q 1 1978 Q 1 1979 Q 1 1980 Q 1 1981 Q 1 1982 Q 1 1983 Q 1 1984 Q 1 1985 Q 1 1986 Q 1 1987 Q 1 1988 Q 1 1989 Q 1 1990 Q 1 1991 Q 1 1992 Q 1 1993 Q 1 1994 Q 1 1995 Q 1 1996 Q 1 1997 Q 1 1998 Q 1 1999 Q 1 2000 Q 1 2001 Q 1 2002 Q 1 2003 Q 1 2004 Q 1 2005 Q 1 2006 Q 1 2007 Q 1 2008 Q 1 2009 Q 1 2010 Q 1 2011 Q 1 2012 Q 1 2013 Q 1 2014 Q 1 2015 Q 1 2016 Q 1 2017 Q 1 2018 Q 1 2019 Q 1 Ratio of Debt to Before-Tax Profit 5 I II IV V VI VIII IX X XI 4. 5 4 3. 5 3 2. 5 2 1. 5 1 0. 5

60% 1947 Q 1 1948 Q 1 1949 Q 1 1950 Q 1 1951 Q 1 1952 Q 1 1953 Q 1 1954 Q 1 1955 Q 1 1956 Q 1 1957 Q 1 1958 Q 1 1959 Q 1 1960 Q 1 1961 Q 1 1962 Q 1 1963 Q 1 1964 Q 1 1965 Q 1 1966 Q 1 1967 Q 1 1968 Q 1 1969 Q 1 1970 Q 1 1971 Q 1 1972 Q 1 1973 Q 1 1974 Q 1 1975 Q 1 1976 Q 1 1977 Q 1 1978 Q 1 1979 Q 1 1980 Q 1 1981 Q 1 1982 Q 1 1983 Q 1 1984 Q 1 1985 Q 1 1986 Q 1 1987 Q 1 1988 Q 1 1989 Q 1 1990 Q 1 1991 Q 1 1992 Q 1 1993 Q 1 1994 Q 1 1995 Q 1 1996 Q 1 1997 Q 1 1998 Q 1 1999 Q 1 2000 Q 1 2001 Q 1 2002 Q 1 2003 Q 1 2004 Q 1 2005 Q 1 2006 Q 1 2007 Q 1 2008 Q 1 2009 Q 1 2010 Q 1 2011 Q 1 2012 Q 1 2013 Q 1 2014 Q 1 2015 Q 1 2016 Q 1 2017 Q 1 2018 Q 1 2019 Q 1 Capacity Utilization in Post-WWII Business Cycles 110% I II IV V VI VIII IX X XI 105% 100% 95% 90% 85% 80% 75% 70% 65%

0% 1947 Q 1 1948 Q 1 1949 Q 1 1950 Q 1 1951 Q 1 1952 Q 1 1953 Q 1 1954 Q 1 1955 Q 1 1956 Q 1 1957 Q 1 1958 Q 1 1959 Q 1 1960 Q 1 1961 Q 1 1962 Q 1 1963 Q 1 1964 Q 1 1965 Q 1 1966 Q 1 1967 Q 1 1968 Q 1 1969 Q 1 1970 Q 1 1971 Q 1 1972 Q 1 1973 Q 1 1974 Q 1 1975 Q 1 1976 Q 1 1977 Q 1 1978 Q 1 1979 Q 1 1980 Q 1 1981 Q 1 1982 Q 1 1983 Q 1 1984 Q 1 1985 Q 1 1986 Q 1 1987 Q 1 1988 Q 1 1989 Q 1 1990 Q 1 1991 Q 1 1992 Q 1 1993 Q 1 1994 Q 1 1995 Q 1 1996 Q 1 1997 Q 1 1998 Q 1 1999 Q 1 2000 Q 1 2001 Q 1 2002 Q 1 2003 Q 1 2004 Q 1 2005 Q 1 2006 Q 1 2007 Q 1 2008 Q 1 2009 Q 1 2010 Q 1 2011 Q 1 2012 Q 1 2013 Q 1 2014 Q 1 2015 Q 1 2016 Q 1 2017 Q 1 2018 Q 1 2019 Q 1 Before-Tax Profit Rate v Interest Rates in Business Cycles 18% 25% I II III Before-Tax profit rate IV V VI VIII IX X XI 16% 14% 20% 12% 15% 10% 8% 10% 6% 4% 5% 2% 10 -Year Treasury Constant Maturity Rate 3 -Month Treasury Bill Secondary Market Rate Moody's Seasoned Aaa Corporate Bond Yield, Percent, Monthly, Not Seasonally Adjusted Moody's Seasoned Baa Corporate Bond Yield, Percent, Monthly, Not Seasonally Adjusted 0%

Marx wrote of the credit-fueled boom of 1844 -46 in England: • The enticingly high profits had led to operations more extensive than the liquid resources available could justify. But the credit was there, easy to obtain and cheap at that. . All domestic share prices stood higher than ever before. Why let the splendid opportunity pass? Why not get into the swing of it? (Capital Vol. 3)

0 1947 Q 1 1948 Q 1 1949 Q 1 1950 Q 1 1951 Q 1 1952 Q 1 1953 Q 1 1954 Q 1 1955 Q 1 1956 Q 1 1957 Q 1 1958 Q 1 1959 Q 1 1960 Q 1 1961 Q 1 1962 Q 1 1963 Q 1 1964 Q 1 1965 Q 1 1966 Q 1 1967 Q 1 1968 Q 1 1969 Q 1 1970 Q 1 1971 Q 1 1972 Q 1 1973 Q 1 1974 Q 1 1975 Q 1 1976 Q 1 1977 Q 1 1978 Q 1 1979 Q 1 1980 Q 1 1981 Q 1 1982 Q 1 1983 Q 1 1984 Q 1 1985 Q 1 1986 Q 1 1987 Q 1 1988 Q 1 1989 Q 1 1990 Q 1 1991 Q 1 1992 Q 1 1993 Q 1 1994 Q 1 1995 Q 1 1996 Q 1 1997 Q 1 1998 Q 1 1999 Q 1 2000 Q 1 2001 Q 1 2002 Q 1 2003 Q 1 2004 Q 1 2005 Q 1 2006 Q 1 2007 Q 1 2008 Q 1 2009 Q 1 2010 Q 1 2011 Q 1 2012 Q 1 2013 Q 1 2014 Q 1 2015 Q 1 2016 Q 1 2017 Q 1 2018 Q 1 2019 Q 1 Ratio of Debt to Net Value Added 1. 4 I II IV V VI VIII IX X XI 1. 2 1 0. 8 0. 6 0. 4 0. 2

0 1947 Q 1 1948 Q 1 1949 Q 1 1950 Q 1 1951 Q 1 1952 Q 1 1953 Q 1 1954 Q 1 1955 Q 1 1956 Q 1 1957 Q 1 1958 Q 1 1959 Q 1 1960 Q 1 1961 Q 1 1962 Q 1 1963 Q 1 1964 Q 1 1965 Q 1 1966 Q 1 1967 Q 1 1968 Q 1 1969 Q 1 1970 Q 1 1971 Q 1 1972 Q 1 1973 Q 1 1974 Q 1 1975 Q 1 1976 Q 1 1977 Q 1 1978 Q 1 1979 Q 1 1980 Q 1 1981 Q 1 1982 Q 1 1983 Q 1 1984 Q 1 1985 Q 1 1986 Q 1 1987 Q 1 1988 Q 1 1989 Q 1 1990 Q 1 1991 Q 1 1992 Q 1 1993 Q 1 1994 Q 1 1995 Q 1 1996 Q 1 1997 Q 1 1998 Q 1 1999 Q 1 2000 Q 1 2001 Q 1 2002 Q 1 2003 Q 1 2004 Q 1 2005 Q 1 2006 Q 1 2007 Q 1 2008 Q 1 2009 Q 1 2010 Q 1 2011 Q 1 2012 Q 1 2013 Q 1 2014 Q 1 2015 Q 1 2016 Q 1 2017 Q 1 2018 Q 1 2019 Q 1 Unit Profit (Index, 2012 = 100) 120 I II IV V VI VIII IX X XI 100 80 60 40 20

40% 1947 Q 1 1948 Q 1 1949 Q 1 1950 Q 1 1951 Q 1 1952 Q 1 1953 Q 1 1954 Q 1 1955 Q 1 1956 Q 1 1957 Q 1 1958 Q 1 1959 Q 1 1960 Q 1 1961 Q 1 1962 Q 1 1963 Q 1 1964 Q 1 1965 Q 1 1966 Q 1 1967 Q 1 1968 Q 1 1969 Q 1 1970 Q 1 1971 Q 1 1972 Q 1 1973 Q 1 1974 Q 1 1975 Q 1 1976 Q 1 1977 Q 1 1978 Q 1 1979 Q 1 1980 Q 1 1981 Q 1 1982 Q 1 1983 Q 1 1984 Q 1 1985 Q 1 1986 Q 1 1987 Q 1 1988 Q 1 1989 Q 1 1990 Q 1 1991 Q 1 1992 Q 1 1993 Q 1 1994 Q 1 1995 Q 1 1996 Q 1 1997 Q 1 1998 Q 1 1999 Q 1 2000 Q 1 2001 Q 1 2002 Q 1 2003 Q 1 2004 Q 1 2005 Q 1 2006 Q 1 2007 Q 1 2008 Q 1 2009 Q 1 2010 Q 1 2011 Q 1 2012 Q 1 2013 Q 1 2014 Q 1 2015 Q 1 2016 Q 1 2017 Q 1 2018 Q 1 2019 Q 1 Ratio of Potential Output to Capital Stock 70% I II IV V VI VIII IX X XI 65% 60% 55% 50% 45%

-10% 1947 Q 1 1948 Q 1 1949 Q 1 1950 Q 1 1951 Q 1 1952 Q 1 1953 Q 1 1954 Q 1 1955 Q 1 1956 Q 1 1957 Q 1 1958 Q 1 1959 Q 1 1960 Q 1 1961 Q 1 1962 Q 1 1963 Q 1 1964 Q 1 1965 Q 1 1966 Q 1 1967 Q 1 1968 Q 1 1969 Q 1 1970 Q 1 1971 Q 1 1972 Q 1 1973 Q 1 1974 Q 1 1975 Q 1 1976 Q 1 1977 Q 1 1978 Q 1 1979 Q 1 1980 Q 1 1981 Q 1 1982 Q 1 1983 Q 1 1984 Q 1 1985 Q 1 1986 Q 1 1987 Q 1 1988 Q 1 1989 Q 1 1990 Q 1 1991 Q 1 1992 Q 1 1993 Q 1 1994 Q 1 1995 Q 1 1996 Q 1 1997 Q 1 1998 Q 1 1999 Q 1 2000 Q 1 2001 Q 1 2002 Q 1 2003 Q 1 2004 Q 1 2005 Q 1 2006 Q 1 2007 Q 1 2008 Q 1 2009 Q 1 2010 Q 1 2011 Q 1 2012 Q 1 2013 Q 1 2014 Q 1 2015 Q 1 2016 Q 1 2017 Q 1 2018 Q 1 2019 Q 1 Share of Net Dividend Payment in Before-Tax Profit 35% I II IV V VI VIII IX X XI 30% 25% 20% 15% 10% 5% 0% -5%

-24% 1947 Q 1 1948 Q 1 1949 Q 1 1950 Q 1 1951 Q 1 1952 Q 1 1953 Q 1 1954 Q 1 1955 Q 1 1956 Q 1 1957 Q 1 1958 Q 1 1959 Q 1 1960 Q 1 1961 Q 1 1962 Q 1 1963 Q 1 1964 Q 1 1965 Q 1 1966 Q 1 1967 Q 1 1968 Q 1 1969 Q 1 1970 Q 1 1971 Q 1 1972 Q 1 1973 Q 1 1974 Q 1 1975 Q 1 1976 Q 1 1977 Q 1 1978 Q 1 1979 Q 1 1980 Q 1 1981 Q 1 1982 Q 1 1983 Q 1 1984 Q 1 1985 Q 1 1986 Q 1 1987 Q 1 1988 Q 1 1989 Q 1 1990 Q 1 1991 Q 1 1992 Q 1 1993 Q 1 1994 Q 1 1995 Q 1 1996 Q 1 1997 Q 1 1998 Q 1 1999 Q 1 2000 Q 1 2001 Q 1 2002 Q 1 2003 Q 1 2004 Q 1 2005 Q 1 2006 Q 1 2007 Q 1 2008 Q 1 2009 Q 1 2010 Q 1 2011 Q 1 2012 Q 1 2013 Q 1 2014 Q 1 2015 Q 1 2016 Q 1 2017 Q 1 Growth Rate of Gross Private Domestic Investment and Personal Consumption Expenditures 24% 8% 20% 7% 16% 12% 6% 8% 5% 4% 4% 0% 3% -4% 2% -8% 1% -12% -16% 0% -20% -1% Gross Private Domestic Investment (Left-axis) Personal Consumption Expenditures -2%

80% 60% 1947 Q 1 1948 Q 1 1949 Q 1 1950 Q 1 1951 Q 1 1952 Q 1 1953 Q 1 1954 Q 1 1955 Q 1 1956 Q 1 1957 Q 1 1958 Q 1 1959 Q 1 1960 Q 1 1961 Q 1 1962 Q 1 1963 Q 1 1964 Q 1 1965 Q 1 1966 Q 1 1967 Q 1 1968 Q 1 1969 Q 1 1970 Q 1 1971 Q 1 1972 Q 1 1973 Q 1 1974 Q 1 1975 Q 1 1976 Q 1 1977 Q 1 1978 Q 1 1979 Q 1 1980 Q 1 1981 Q 1 1982 Q 1 1983 Q 1 1984 Q 1 1985 Q 1 1986 Q 1 1987 Q 1 1988 Q 1 1989 Q 1 1990 Q 1 1991 Q 1 1992 Q 1 1993 Q 1 1994 Q 1 1995 Q 1 1996 Q 1 1997 Q 1 1998 Q 1 1999 Q 1 2000 Q 1 2001 Q 1 2002 Q 1 2003 Q 1 2004 Q 1 2005 Q 1 2006 Q 1 2007 Q 1 2008 Q 1 2009 Q 1 2010 Q 1 2011 Q 1 2012 Q 1 2013 Q 1 2014 Q 1 2015 Q 1 2016 Q 1 2017 Q 1 2018 Q 1 2019 Q 1 Wage Share in Post-WWII Business Cycles I II IV V VI VIII IX X XI 78% 76% 74% 72% 70% 68% 66% 64% 62%