When I launched this set of commentaries back in 2005 I identified two poles of economic analysis --- one which one might call “libertarian, right-wing, a/k/a “conservative”!” represented by former Fed Chair Alan Greenspan, the other represented by the late John Kenneth Galbraith who was a liberal (dare I say, progressive) Keynesian.
Much of my commentaries have been attempts to make it clear that most of the time when these two approaches collide, the right-wing version shows up as insufficient to explain reality – and their policy proposals almost never work --- even on their own terms.
I wrote an entire book which investigated the so-called Reagan Revolution in economic policy --- which in fact is predated by a few years in the 1970s. We on the left of the economic spectrum referred to that set of policies as NEO-LIBERALISM. My book concluded that the Reagan Revolution did not produce any of the promised improvements in economic well-being for the majority of the population. (See Meeropol: Surrender, How the Clinton Administration Completed the Reagan Revolution, University of Michigan Press, pbk, 2000) For a more recent treatment see David M. Kotz, The Rise and Fall of Neoliberal Capitalism, Harvard University Press, 2015/2017.)
The big success of neoliberalism was the increase in inequality much of it fueled as increased income for owners of capital --- the so-called “job creators” to the right wing --- came at the expense of wages. Between the end of World War II and about 1979, workers’ wages tracked productivity growth.
[For details see Economic Policy Institute, “THE PRODUCTIVITY PAY GAP” (Sept 3, 2025) https://www.epi.org/productivity-pay-gap/. According to calculations by EPI, hourly wages pretty much tracked productivity growth between World War II and about 1980. Those were the years that saw the great American middle class built. Then came neoliberalism and during the period since 1979, the hourly wage lagged very much behind increases in productivity. Productivity went up about 87 percent between 1980 and 2025 while wages rose 32 percent. I have argued elsewhere that the painfully slow recovery from the Great Recession of 2008-2009 led to the disaffection of “just enough” Obama voters to give the 2016 election to Trump. And despite the strong efforts of the Biden Administration, too many people felt left behind and disaffected – which resulted in Trump getting a second term. For an analysis of the failures of the Obama policies as the economy struggled out of the great recession, see Meeropol and Ragusett, “The Failure of the Recovery from the Great Recession,” available at https://teachingsocialstudies.org/2023/08/27/the-failures-of-the-recovery-from-the-great-recession/ A recording of a presentation of this research at the University of Massachusetts-Amherst is available at https://peri.umass.edu/event/the-failure-of-the-obama-recovery-or-how-we-got-trump/]
The increased incomes of the owners of capital did not result in an increase in jobs at a faster rate than the previous decades. Neither did the rising share going to profits and high-income salaried workers increase the rate of economic growth. All it did was left the working class getting a smaller share of the pie.
Fast forward to today --- The very weak tea efforts of Clinton, Obama and even Biden to reverse some of the worst aspects of neo-liberalism have pretty much failed (despite some very promising temporary improvements as a result of the COVID emergency legislation).
This summarizes a lot of my research going all the way back to 1998 into what I called then “right-wing economics” and which I now recognize with a longer time horizon was the neoliberal version of 20th century American capitalism.
Today I want to re-introduce a third approach to the US’ economic reality, that of Karl Marx and his modern-day followers. My text is an article in the THE CONVERSATION --- see “The AI bubble isn’t new — Karl Marx explained the mechanisms behind it nearly 150 years ago” by Elliot Goodell Ugalde. This article was published online for free and is available at https://theconversation.com/the-ai-bubble-isnt-new-karl-marx-explained-the-mechanisms-behind-it-nearly-150-years-ago-270663
The most significant part of the article is the assertion that Marx’s 19th century analysis of the business cycle – the fits and starts that determine the long run growth of economies organized like ours with private property and wage labor – was based on a natural tendency in the economy. Marx’s insight was that the owners of capital (business owners, “capitalists” if you will) were pressured by competition to keep accumulating more and more capital. He even defined “capital” as “self-expanding value.”(This is in marked contrast to what I taught my students in Principles of Economics where “capital” was just the physical goods that led to further production. Marx was analyzing a tendency for “capital” to constantly reinvest itself – to seek to grow. If a capitalist did not grow, his business would surely be left in the dust by those that did grow.)
Given this tendency, he argued that the accumulation of capital would routinely from time to time outrun the capacity of the economy to purchase all the goods and services produced by that capital. In other words, the business cycle --- which had been identified by economists long before Marx wrote about it --- was not the result of shocks to the system like wars or famines but it was part of the natural flow of the economy.
It was Keynes who made the details of this problem concrete. Total demand depends on private consumption, private investment, government spending and the difference between exports and imports. Private consumption mostly depends on the incomes of the vast majority of the population --- who work for wages. (Yes, very rich people consume yachts and mink coats but there are too few of them to make a difference when 10 or 20 % of the people lose their jobs.). Private investment depends on expected profitability and if it is interrupted the economy goes into a tailspin. Marx said the same thing at least 70 years before Keynes.
What the article in question does not merely restate Marx’s general argument about the business cycle. The writer zeroes in on another of Marx’s points from the 19th century. If business owners do not find PRODUCTIVE ways to invest--- building more housing, producing more cars, producing more clothing ---- they will find speculative activities to invest in --- loans, other financial instruments. When these speculative activities ramp up sufficiently, the result is called a “bubble.” Now there have been bubbles for centuries. But the important bubbles this article focuses on are the dot.com bubble of the late 1990s, the housing bubble of 2003-2008 and the current AI bubble that is still in the expansion phase.
What makes a bubble a bubble? If speculators buy, say stock in a new company, they are predicting that the company will make sufficient profits over time to validate the rising value of that stock. A bubble occurs when the rising value of the stock is so significant there is no way the actual profits from producing actual products will validate the expectations of the speculators. When they realize that --- sort of like Wile E.Coyote realizing he’s off the cliff --- the value of the stock crashes. This happened in 2000 when the dot.com bubble crashed and businesses failed that had high stock value even though they had never made a profit. It occurred doing much more damage in the financial meltdown after the housing bubble popped in 2008 and millions of homeowners found that the value of their home which had been propelled upwards by a speculative bubble had fallen below what they owed on their mortgage. And, according to most predictions it will happen relatively soon --- it might already be starting --- with the overvaluation of AI investments.
Here’s how the writer of the article put it:
“When Open AI’s Sam Altman told reporters in San Francisco earlier this year that the AI sector is in a bubble, the American tech market reacted almost instantly.
Combined with the fact that 95 per cent of AI pilot projects fail, traders treated his remark as a broader warning. Although Altman was referring specifically to private startups rather than publicly traded giants, some appear to have interpreted it as an industry-wide assessment.
Tech billionaire Peter Thiel sold his Nvidia holdings, for instance, while American investor Michael Burry (of The Big Short fame) has made million-dollar bets that companies like Palantir and Nvidia will drop in value.
What Altman’s comment really exposes is not only the fragility of specific firms but the deeper tendency Prussian philosopher Karl Marx predicted: the problem of surplus capital that can no longer find profitable outlets in production.”
The writer concludes: The future of AI is not in question. Like the internet after the dot-com crash, the technology will endure. What is in question is where capital will flow once AI equities stop delivering the speculative returns they have promised over the past few years.”
Moral of the story --- when the big boys create a speculative bubble stay away from it. Marx said the same thing in the 19th century.
Michael Meeropol is professor emeritus of Economics at Western New England University. He is the author with Howard and Paul Sherman of the recently published second edition of Principles of Macroeconomics: Activist vs. Austerity Policies.
The views expressed by commentators are solely those of the authors. They do not necessarily reflect the views of this station or its management.
