Zombies hold back the recovery

Michael Roberts emphasises in his book, "The Long Depression", that capitalist economies recover from recessions - slumps - only by the restoration of the rate of profit. This comes about via three mechanisms:

1. Reduction in taxes on business revenue streams (via Government cuts and 'austerity')
2. Reduction in workers' real wages, benefits, conditions and bargaining power 
3. Devaluation of constant capital.

All of these phenomena will naturally be politically contested by workers but the mechanism I found most difficult to understand was the third. How does constant capital get devalued in a slump?

Here is what Stuart Easterling had to say.

"Another factor in restoring profitable accumulation is a depreciation in the price of constant capital (tools and machines). Consider, for example, a capitalist who purchased a computer for $1,000. A couple of years later he goes out of business, and one of his competitors wants to buy up his assets. By that time the value of the machine has fallen (it can be produced much quicker) and so the price is only $750. Obtaining the computer at the new price devalues the capital, as described earlier in the case of the Tecan machine.

"However, let’s also assume that the bankrupted capitalist is desperate to unload his assets, in order to pay his debts. Therefore, he sells his computer for only $500. The machine has therefore also depreciated in price. Most importantly, the surviving capitalist benefits from this.

"In certain circumstances, constant capital can also be depreciated through overproduction; that is, if computers are heavily overproduced, they can be purchased on the cheap by capitalists seeking to restore their accumulation.

"Hence, as Marx notes, during crises "part of the commodities on the market can complete their process of circulation and reproduction [purchase and sale] only through an immense contraction in their prices.... The elements of fixed capital are depreciated to a greater or lesser degree in just the same way [Capital, Volume III, Chapter 15, Section 3]."

"In other cases, capital that can no longer be profitably employed is simply destroyed: A bankrupt steel factory’s machines may just lay idle and rust, for example. Through this process of devaluation, depreciation and destruction, the surviving capitalists are able to renew profitable capital accumulation."

This process of creative discussion is currently on hold in the UK economy, where much capital languishes in "zombie companies" just ticking over, barely able to pay the interest on their debts. If interest rates rise, expect a wave of bankruptcies, unemployment and depreciation of constant capital as described above.

Roberts predicts a new recession over the next few years.