Reviewed by Francis Lee for the Saker Blog

Mr Mullan’s book first saw the light of day in 2017 which was a far-sighted anticipation of the path-dependency of the global economy prior to the present debacle 2020/2021. The book covered a wide range of insights in the history of capitalism, particularly contributions from Mr Joseph Alois Schumpeter, as well as the Marxist theory of the tendency of the rate of profit to fall. (see below). Mr Mullan should be congratulated on his foresight in this respect as the internal workings of a system which was never going to avoid its subsequent fate predictably hit the buffers in 2020. Suffice it to say that no genuine economic recovery has at this time taken place.


A recession is defined in economics as two or more quarters of negative growth. A depression, on the other hand, comprises a sharp and deep downturn, usually as a result of bursting asset-price bubbles, a weak recovery, and a subsequent prolonged period of sub-optimal growth. This is about where we are at the present time.

Mr Mullan’s book – which I would recommend although my own views don’t always coincide with the author’s – is well-argued, researched and well worth reading.

The title itself is an obvious allusion by Mullan to the theories put forward by the great Austrian economist, Joseph Alois Schumpeter (1883-1950) whose works include, Socialism, Capitalism and Democracy (1941) The Theory of Development, The History of Economic Analysis, Imperialism and the Social Classes, Ten Great Economists, from Marx to Keynes, and many more. However, Schumpeter was never part of the Austrian school of Von Mises and Von Hayek.

Capitalism is nothing if not cyclical, but the cycles themselves vary from mild recessions to full-blown semi-collapses and long ‘Kondratiev waves.’* (see below for fuller explanation). These episodes are necessary to the system; they are the cleansing method whereby all the bad investment decisions, false values and misallocation of productive resources which had grown up in the boom phase of the cycle reach their inflexion point where boom turns to bust.

A crisis was the decisive moment when suddenly all the plans, hopes and inane euphoria which were formed during the upswing were put to the test. Many of them were found wanting and those responsible would have to face the consequences of their actions.

The cycle took no prisoners. If your business failed, well, tough shit. No namby-pamby bailouts for the losers in the great game of rags to riches and back again. All very reminiscent of the film starring Eddy Murphy – Trading Places – a down and out street hustler who was groomed by two eccentric millionaires and became a stock-market player with considerable success.


This process was not just necessary to keep capitalism efficient; it was also necessary to keep capitalism moral. Only if market agents bore responsibility for their actions of prudence, reliability, sound judgement and trust, upon which capitalism was based, would the system be upheld. The crisis of capitalism was in a double sense – both practical and moral.” [1]

This process has undergone a fundamental change as will be discussed later.


Mr Mullan situated the latest phase of the Kondratiev Wave, or as he determines it, The Long Depression, during the initial upswing which started in about 1944. The period lasted from its early formulations which were implemented by 1945 lasting until approximately 1975. This era became known as Les Trente Glorieuses.

Thus was born the Bretton Woods system.[2] Key to this system was the anchoring of currencies of all of the major western economies to the US$-Gold nexus. The US dollar was linked to gold which held at US$35 per oz and was convertible into gold upon request.

But trouble was brewing. Owing to the costs of America’s wars in Indo-China together with the profligate spending of President Johnson’s ‘Great Society’ programme, surplus dollars began to flow abroad, particularly to Europe.

The Europeans – particularly De Gaulle – saw this as an opportunity to trade in these surplus dollars for payment in gold. This led to an outflow of gold from the US to Europe at which point the then President (Nixon) suspended US$ gold convertibility as of 15 August 1971. Speaking to his fellow Americans on a nationwide TV appearance he stated that this policy involved a ‘temporary’ expedient, but this soon morphed into a permanent arrangement.

This signalled what was in fact the end of the Bretton Woods system, and the beginning of the new phase of the Kondratiev downturn or as Mr Mullan puts it the beginning of the Long Depression. The new world order now rested on the rather dubious moorings of a fiat system – a system in which currencies float in a rather unstable relationship with each other in an increasingly volatile global environment.


This new economic disorder becomes increasingly chaotic as fundamental and intractable problems became increasingly apparent. Mr Mullan notes:

‘’To maintain a semblance of vitality, western capitalism has become increasingly dependent on expanding debt levels and on the expansion of fictitious capital.[3] This layer of financial assets that are only symbols of value, not real values. For example, company shares are traded like goods and services do not, in the same way, embody value.

They are tokens which represent part ownership of a company and the potential distribution of future profits in the form of dividends. The paper or electronic certificate itself is not a genuine value that can create more value. Rising share/stock prices are often presented as a healthy economy, but the amount of money a share/stock changes hand for says nothing definitive about the value of a company’s assets or about its productive capacity. On the contrary, it is when real capital stagnates that the amount of fictitious capital tends to expand.’’[4]

Thus, during a property boom prices assets may reach astronomical levels where those who own their houses feel they are getting richer but come the down phase they wonder what happened to their new-found wealth which seems to have disappeared during the market correction.

The fact of the matter is that the inflationary growth of paper assets, e.g. stocks did not confer any new value as embodied in the commodity assets but were simply paper claims on a fixed level of real assets – like cars, houses, which might increase in value. Paper assets such as stocks are not value, they are simply a claim of future increases in real values. Usually unpayable. Paper stock investment might increase the price of these stocks but that is not growth, it is asset-price inflation – no more no less.

The chief characteristics of the 1980/90s was the growing reliance on debt, and, in addition, the growth of financialization; this in order to stimulate growth. Debt in all its forms: corporate, household, financial, student loans, car loans and sovereign debt were a function of easy money – QE and ultra-low interest rates – and bore witness to increasing levels of leverage which kept the system going.

Debt was cheap. Its costs had fallen since the 1980s. Interest rates had been declining for over three decades.

The United States shows this clearly – and its rates remain the dominant influence across the mature economies because of the dollar’s role as a world money. Real commercial bank interest rates averaged 7% during the 1980s, 5.5% during the 1990s 4% during the 2000s for the period leading up to the financial crash of 2008 and have been below 2% ever since.[5]

Financialization [6] was the other leg of a system which in, Mr Mullen’s words artificially propped up – a ‘decaying system.’ Free monies from the Central banks was used by banks and other financial institutions to buy up and speculate on various markets including in particular stock and bond markets.

It was financialization and debt which functioned as an increasingly counter-balancing force to the long-run tendency of decline in the productive industries.

Unfortunately, the productive sector was the creator of real value whereas the rent-seeking nature of debt-driven finance capital was essentially a parasitic outgrowth on the productive sector.


During the same period debt was and still is rising faster than national income, and indeed growth seemed to be in a long downward trajectory. At the present time growth has come to a stop in Europe. (In alphabetical order).

Figures circa 2017/2018


Quarterly: 0.3%
Annual: 1.4%


Annual: 0.5%



Quarterly 0.1%

Annual 0.3%



Quarterly: 0.3%
Annual: 1.0%



Quarterly 0.2%

Annual 1.2%

(Source: Trading Economics)

10-Year Bond Yields Yearly

France: –0.73%

Germany: -0.54%
Italy: –1.69%
UK: 0.67%
EU Area: 0.3%

(Source: These yields might be a little out of date)

No ifs or buts, these really are depression figures. European industry is not merely slowing to a crawl but is actually becoming negative. Mr Mullan attributes this decline in value production as systemic under-investment due to the Tendency of the Rate of Profit to Fall (TPRF). No guesses from what source that came.


The Labour theory of value began life with Adam Smith (1723-1790) was subject to further elaboration with David Ricardo (1772-1823) and additional further final additions by Karl Marx (1818-1883).

Briefly stated the theory rests on the thesis that capital or value represents the objectified process of past human labour. Actually, existing value/capital is nothing more than labour which has already been expended.

Thus, a potter will start with a piece of clay on his wheel, and through several stages of moulding, painting, and baking, the piece of clay has become a vase, a commodity, with a value and price. As labour becomes more productive and innovative, output (growth) expands in both a quantitative and qualitative sense.

This process did not simply represent the output of the individual labourer, it involved the aggregated social labour of the economy as a whole which produced goods and services.

In modern parlance – growth qua capital stock. It should be said that the value of a commodity doesn’t always coincide with its price (which is the phenomenal form of value) due to supply and demand pressures. In contemporary economic parlance this process would be described as productivity growth and value-added growth. Goods become cheaper and markets expand to purchase these new goods. We have seen this in the production of among other items, cars, I-Phones and shoes.

Of course, the entire process is underpinned by businesses quest for profit, and this is central to the theory of capitalist crisis.
One cycle of accumulation will (I hope!) serve to clarify this.

Let M stand for money capital, C stand for Capital consisting of both living labour, workers, and dead labour, machinery and raw materials, and P for the production process.

Here we go:

One cycle of capital circulation: M – C … P … C’- M’

Let us suppose this is car manufacture. It starts with money capital M, this transmutes into commodity capital, C, Production takes place P, Commodity capital transmutes into C’ finally commodity C’ is transformed into money capital contingent on sale M.’ Here we have growth. M – M’

Money capital is transformed into dead and living capital. M to C. These factor inputs are brought together during the process of production P. Thus, emerges new capital as a Car C.’ But what is the significance of the ‘ or C’?

Well the ‘ is the surplus labour time (or value) which is part of total value of ’ which also includes necessary labour time which represents costs to the capitalist i.e., wages. Surplus labour time is the source of surplus value and money profit. The workers have worked for 10 hours but were paid for eight.

The 2 hours were a surplus over and above what was paid to the workers. And this would be the case at any level of production. It is the source of surplus value and profit. Finally: M’ or the transition to C’- M’ This is sometimes referred to as the realisation problem, but simply means how does C’ become M.’ This takes place in the final phase of the process where the cars are on sale in the dealership courtyard waiting to be sold.

Having appropriated the M’ surplus value, the business can restart the whole cycle once again, – ceteris paribus. However there maybe problems of transforming the surplus value into prices of production (that is to say converting C’ into M’) due to the level of aggregate demand. (For further discussion refer to Michael Roberts and David Harvey*).

It is essential that profit maximization is the driving force of capital and the accumulation process. If profit starts to undergo a secular decline, this will have serious implications to the system as a whole. This is exactly what Mr Mullan picks up.

‘’Investment is in decline due to the falling rate of profit. And the rate of profit is declining due to the fact that labour input into each successive unit of output has declined. It may sound strange to say but declining profitability is due precisely to the increased efficiency and productivity of the system.’’

Marx argued that:

(i) each individual capitalist can increase their own competitiveness through increasing the productivity of his workers.
(ii) The way to do this is by using a greater quantity of dead capital —tools, machinery and so on—for each worker. There is a growth in the ratio of the physical extent of the capital to the amount of labour power employed, a ratio that Marx called the “technical composition of capital.”
(iii) But a growth in the physical extent of the means of production will also be a growth in the investment needed to buy them. So, this too will grow faster than the investment in the workforce.
(iv)The growth of this ratio, which he calls the “organic composition of capital,” is a logical corollary of capital accumulation.
(v)Yet the only source of value for the system as a whole is labour. If investment grows more rapidly than the labour force, it must also grow more rapidly than the value created by the workers, which is where profit comes from.
(vi) In short, capital investment grows more rapidly than the source of profit. As a consequence, there will be a downward pressure on the ratio of profit to investment—the rate of profit must therefore decline.

Each capitalist has to push for greater productivity in order to stay ahead of competitors. But what seems beneficial to the individual capitalist is disastrous for the capitalist class as a whole.

Each time productivity rises there is a fall in the average amount of labour in the economy as a whole needed to produce a commodity (what Marx called “socially necessary labour”), and it is this which determines what other people will eventually be prepared to pay for that commodity.

So today we can see a continual fall in the price of goods such as computers or DVD players produced in industries where modern technologies are causing productivity to rise fastest.

Thus, according to Mr Mullan, falling profitability is the root cause of curtailed business investment.[7] Moreover, this observation has been observed in a number of authoritative sources.[8]

COUNTERACTING FORCES TO THE Tendency of the rate of profit to fall

Although the declining rate of profit is a necessary feature of the capitalist accumulation process there are counter-acting forces.

These include the increase in the mass of profit which offsets the decline in the rate of profit, and the rate of surplus value which also slows down the decline in the rate of profit. The two deep economic slumps of 1974-5 and 1980-2 had sufficiently reduced the value of constant capital. At the same time, the slumps had driven up unemployment and weakened the ability of the labour movement to protect wages (the cost of variable capital).

The productivity of labour rose as new techniques (and hi-tech ones at that) were introduced to many sectors of the economy, while wages were not allowed to rise as much. The wage share in the US economy plunged. The rate of surplus value rose. Additionally, subsidies to business and low interest rates helped to mitigate declining profits but could not stop it in the longer run. (Again, see Roberts and/or Harvey for a more detailed explanation.)


In football (soccer) parlance a player ‘bottles it’ when he/she pulls out of a 50-50 tackle which might result in a broken leg. A referee ‘bottles it’ when he gives a dubious penalty decision to the home team. The political left ‘bottled it’ when they gave up on socialism or communism circa 1989/90. There was a turbulent period of class struggle – the Miners’ Strike in the UK – and the Air Traffic Controllers’ strike in the US, launched and overseen by Thatcher and Reagan circa 1984. This was also a period which bore witness to the collapse of communism in Eastern Europe.

Neoliberalism was to carry the day to such an overwhelming extent that even ‘left’ political parties were entranced by the new order. Strange they couldn’t tell the difference between revolution and counter-revolution.

One of the first things the incoming Labour government – in the shape of Gordon Brown – did after the 1997 election was to grant independence to the Bank of England! No more monetary policy! Continue entrenching Mrs T’s pet projects.

We know the rest. The new order was established from Washington to Moscow being imposed by the IMF, World Bank and WTO. The left had been neutered and was officially declared dead.

Mr Mullan explains:

It was ironic that it was not the strength of the alternatives to capitalism, but their demise that eventually crystallised the elites intellectual crisis. The return to depressed economic conditions had already put the establishment on the defensive. But capitalism’s self-confidence to its next blow came not from the vehemence of its former adversaries attacks but by the reverse. Opposition withered away not just in the Soviet Union as its international enemy, but from the domestic challenges from the left and from organized labour.” [9]

A similar view was put forward at an earlier date by Peter Gowan, who wrote,

We had thought that the interwar capitalist society was a thing of the past, a deviation overcome by post-war social progress. But it turns out that the post-war social gains were a deviation, and the inter-war state and society is again the norm. Post-war social progress, was, it seems, a tactical aberrant form of European capitalism made necessary by the challenge of communism.

We now know the second part of the sentence whose first half, so strongly believed in 1989, stated: ‘Western-style welfare capitalism is better than Eastern Communism … ‘ The second half went unnoticed 10 years ago: It reads: ‘But western style welfare capitalism only existed because of communism.’ Europe seems to be drifting towards a divided, turbulent and ugly future.”[10]


What has seemed to have emerged in the neoliberal era was an unexpected form of capitalist decline. This has been termed the zombie economy.

Low interest rates create zombie companies. Weak businesses survive (when they ought to have gone out of business) directing cash flow to cover interest on loans – but not the principal – that cannot be repaid but that banks will not write off. With capital tied up, banks reduce lending to productive enterprises, especially small and medium sized ones, which account for a substantial proportion of economic activity and employment.

Firms do not dispose of or restructure unproductive investments. The creative destruction of the slump when businesses of this type go out of existence and debts are wiped out and the reallocation of resources necessary to restore the economy does not take place.

Thus, a zombie economy, where failed businesses are kept artificially afloat is one where the necessary adjustments including liquidation of unproductive enterprises and assets are allowed to continue and the necessary restructuring fails to take place. This thus results in a semi-permanent depressed condition, until the next downturn comes along.

As opposed to Mr Mullan’s enthusiasm for a Schumpeterian policy of creative destruction we have been served up with an ever-deepening economic and social stasis by a brain-dead political and business class.

This has been eerily reminiscent of the British Prime Minster, Stanley Baldwin, who fought the 1929 general election on a “Safety First” ticket. Stabilisation and ‘muddling through’ has become the policy of successive western governments, particularly in the EU still labouring under the Stability and Growth Pact.

Schumpeter writing in Capitalism, Socialism and Democracy (1941) described a bourgeoisie which was losing not just its wealth in the economic crisis but also its sense of purpose. This loss of belief in their own functions, capability and sense of moral leadership is becoming increasingly evident. They are a corrupt and decadent force in society and increasingly of them and society at large are beginning to realise it.

This purpose was reinstalled as a result of WW2. National economies of the belligerent nations were cranked up to full capacity and to all intents and purposes ceased to be capitalism and began of necessity to be command economies.

In the United States for example Roosevelt’s New Deal actually began to move away from the economic orthodoxies of the 1930s toward a more organized economic system, this process continued until the US entered WW2 where it was taken even further.

…the war economy did not stimulate the US private sector it replaced the free market and capitalist investment for profit. Consumption did not restore economic growth as Keynesians argued … instead it was weapons of mass destruction.

In many industries, corporate executives resisted converting to military production because consumer market share would go to competitors who did not. Conversion thus became a goal of public officials and labour leaders.

Auto companies only fully converted to war production in 1942 and only began contributing to aircraft production by 1943 … From the beginning of preparedness to the peak of war production in 1944, the war economy could not be left to the capitalist sector to deliver.

To organize a war economy and ensure that it produced the goods needed for war, the Federal Government created an array of mobilization agencies, which often purchased goods, closely directed those goods manufacture, and heavily influenced the operation of private companies and whole industries.

The US Treasury introduced the first income tax in US history and war bonds were sold to the public. Income tax payees rose from 4 million in 1939 to 43 million by 1945.[11]

Moreover, all types of technological discoveries were part of this process. Radar, aircraft design, chemicals, pharmaceuticals, the jet engine, plastic surgery for treating aircraft crew who had suffered burns. And this in the most capitalist of all countries!

So, what couldn’t possibly be done, was done. A revolution had occurred because it was needed. And where there’s a will…

So Mullan’s arguments for a desperately needed change seem all too plausible and necessary even from a common-sense point of view. He argues:

Escaping from the grip of the Long Depression will not be easy, but it is necessary, and it is possible … there are many barriers to economic health, yet none is insuperable. The biggest challenges are not economic constraints. They lie in the realms of, ideas and imagination, culture and politics.” [12]

Agreed, but the ideological hegemony of the ‘Washington Consensus’ permeates all levels of social being smothering any attempt to break out of the template. From globalization and what are called ‘free-markets,’ to hyper-individualism and identity politics, the orthodoxy of the power-elites seems escape proof.

It is what Max Weber called the escape proof ‘Iron Cage’ of bureaucracy, or in our own time the iron cage of what Ray McGovern termed the MICIMATT, or Military-Industrial-Congressional-Intelligence-Media-Academia-Think-Tank Complex. It all seems a lost cause. But I wonder? The late-capitalist monolith may not be as powerful and impregnable as it would have us believe and as it really is. We shall see.

La Lotta Continua


*Kondratiev Waves

This an evolutionary perspective was delineated by the Russian economist, to wit, Nikolai Kondratiev who postulated that economic growth occurs in a series of historical ‘waves’ or cycles. (K-Wave). This process would involve a long wave of 50 years duration. Starting in 1780 economies moved in the usual pattern of growth-prosperity-overproduction-collapse-depression. The process will revive with innovations such as the steam powered and transport systems. There have been five such long waves since the early 18th centuries.

Each wave can be divided into phases: prosperity, recession, depression and recovery, each wave tends to be associated with particularly significant technological innovations and their increase in utilization – and with other innovations in production, distribution and organization – which swarm or cluster and ultimately spread throughout the economy.

Unfortunately for Mr Kondratiev who had apparently upset someone was imprisoned and then shot by firing squad in 1938 for reasons best known to them.

[1] The Spectre at the Feast – Andrew Gamble – p.46

[2] The 1944 Bretton Woods agreement was negotiated in the small town of Bretton Woods in New Hampshire. It was to establish a new global monetary system. It replaced the gold standard with the U.S. dollar as the global currency. By so doing, it established America as the dominant power in the world economy. After the agreement was signed, America was the only country with the ability to print dollars. The agreement created the World Bank and the International Monetary Fund. These U.S.-backed organizations would monitor the new global system.

[3] Fictitious capital: Karl Marx made a simple yet profound discovery in the course of his critique of the contemporary political economy. He pointed out that money is not capital; it is only capital’s representation. It is a real representation only when and till there is continuous creation of capital during the production process. Money unrelated to the production process is fictitious as it is valueless

[4] Creative Destruction – Mullan – p.22

[5] Mullen, Ibid., p112.

[6] The term financialization is used as a reference to that part of the economy indicated by the acronym FIRE (Finance, Insurance and Real Estate) and its growing importance in the economy in both qualitative and quantitative terms.

Financialization is a process whereby financial markets, financial institutions, and financial elites gain greater influence over economic policy and economic outcomes. Financialization transforms the functioning of economic systems at both the macro and micro levels. Its principal impacts are to…

(A) elevate the significance of the financial sector relative to the real value-producing sector,
(B) transfer income from the real value-producing sector to the financial sector.
(C) increase income inequality and contribute to wage stagnation.

Since 1970 this part of the economy has grown from almost nothing to 8% of US Gross Domestic Product (GDP). This means that one dollar in every ten is associated with finance. In terms of corporate profits finance’s contribution now represents 40% of all corporate profits in the US. This is a significant figure and, moreover it does not include those overseas earnings of companies whose profits are repatriated to their countries of origin.

Thus, the increasing presence and role of finance in overall economic activity and the increase of profits channelled to the financial sector represent the salient indicators as to what has been termed financialization. It is argued by some that financialization may put the economy at risk of debt deflation and prolonged recession.

Financialization operates through three different conduits: changes in the structure and operation of financial markets, changes in the behaviour of nonfinancial corporations, and changes in economic policy. Countering financialization calls for a multifaceted agenda that

(D)restores policy control over financial markets,
(E) challenges the neoliberal economic policy paradigm encouraged by financialization,
(F) makes corporations responsive to interests of stakeholders
(G) reforms the political process so as to diminish the influence of corporations and wealthy elites.

This ongoing transformative process represents a structural change in the nature of the late capitalist economy. Principally the relationship between the value-creating manufacturing sector and the FIRE sector – that is to say, the creative part of the economy and the distributive part.

In the earlier phase of capitalism, the financial sector was much smaller and served to grease the wheels of industry by providing investment capital and credit obtained from depositors. That symbiotic relationship has now ended, and finance has increasingly taken on a life form of its own relegating manufacturing industry to the second tier.

Financialization is a pattern of accumulation that relies increasingly on profit making through financial channels even for firms which are not financial. General Motors in the US, for example, had a trading and finance sector which was to grow larger than the original auto-vehicle operations.

[7] Mullan op.cit., p.116

[8] Mullan op.cit p.116 footnotes -35, 36, 37.

[9] Mullen, Ibid., p.two hundred

[10] The Global Gamble – Peter Gowan – p.319

[11] The Long Depression – Michael Roberts – pp.56/57

[12] Ibid., Mullan – p.265.

The Essential Saker IV: Messianic Narcissism's Agony by a Thousand Cuts
The Essential Saker III: Chronicling The Tragedy, Farce And Collapse of the Empire in the Era of Mr MAGA