Nevertheless, despite weak profitability and high debt, the modest recovery in profits in 2017 suggests that the major capitalist economies will avoid a new slump in production and investment in 2018, confounding my prediction.
Now when you are proved wrong (even if only in timing), it is necessary to go back and reconsider your arguments and evidence and revise them as necessary. Now I don’t think I need to revise my fundamentals, based as they are on Marx’s laws of profitability as the underlying cause of crises. Profits in the major economies have risen in the last two years and so investment has improved accordingly (to Marx’s law). Only when profitability starts falling consistently and takes profits down with it, will investment also fall. Until that happens, the impact on the capitalist sector of the rising costs of servicing very high debt levels can be managed, for most.
What seems to have happened is that there has been a short-term cyclical recovery from mid-2016, after a near global recession from the end of 2014-mid 2016. If the trough of this Kitchin cycle was in mid-2016, the peak should be in 2018, with a swing down again after that. We shall see.
What will happen to the world economy in 2018? The global capitalist economy rises and falls in cycles, ie a slump in production, investment and employment comes along every 8-10 years. In my view, these cycles are fundamentally driven by changes in the rate of profit on the accumulated capital invested in the major advanced capitalist economies. The cycle of profitability is longer than the 8-10 year ‘business cycle’. There is an upwave in profitability that can last for about 16-18 years and this is followed by a downwave of a similar length. At least this is the case for the US capitalist economy – the length of the profitability cycle will vary from country to country.
Alongside this profitability cycle, there is a shorter cycle of about 4-6 years called the Kitchin cycle. And there also appears to be a longer cycle (commonly called the Kondratiev cycle) based…
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