While the depression of the 1890s and the stagflation of the 1970s appear to be manifestations of Karl Marx's contention that the rate of profit tends to fall over time, the Great Depression of the 1930s and the Great Recession of the 2000s appear to be rooted in rising rates of exploitation. Mainstream macroeconomics represents the watershed changes in world capitalism in the 1970s as due to technical improvements in economic theory and policy, thereby obscuring the underlying political economy of those changes. Globalized financial capitalism eliminated upward wage pressures and created an enormous engine for the appropriation of surplus value, which has led to a chronic stagnation of aggregate demand and unsustainable stress on the world financial system. The lack of a coherent solution to the problem of aggregate demand at the world level threatens to exacerbate conflicts among the capitalist nations and challenges US hegemony.

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