Book review:
The Great Recession and the fight against it

(CV #47, September 2012)

By Pete Brown

Two British writers have come out with recent (2009) books about the latest economic crisis and tried to deliver Marxist analyses of it. They are Chris Harman, who wrote Zombie Capitalism: Global Crisis and the Relevance of Marx and Michael Roberts, who wrote The Great Recession: Profit cycles, economic crisis; A Marxist view. Both writers promote the same analysis of what caused the Great Recession, namely the falling rate of profit experienced by capitalist investors. They also endorse Marxism as relevant to today’s crisis. They are right to point to Marxism, but it’s questionable whether their particular analysis about the falling rate of profit is the right explanation for today’s ongoing crisis. And they’re particularly weak on giving advice to the working class about how to fight the effects of today’s recession.

Marx recognized that capitalism engenders periodic system-wide crises. Just to recognize this Marx had to go against the main bourgeois economists of his day, who admitted that disproportions in the economy might crop up from time to time but who insisted it was impossible for the system as a whole to go into crisis. The Great Recession has proved this wrong (again) and has revived interest in Marxism, and it’s timely for Harman and Roberts to come out with these books. They both contain criticism of the main bourgeois economic schools of thought (monetarism and Keynesianism).

What can be done about the recession? This is the practical question on the minds of workers today. How can this economy generate jobs? How do we get out of the recession? Presumably an analysis of the causes of today’s slump would be connected to an analysis of how to end the slump; remove the causes, or change them, and you can produce an economic revival or at least some relief for the masses.We can’t expect capitalism to stop getting into periodic crises, but writers on the Great Recession could at least indicate what kind of measures to demand as the masses struggle to defend themselves. There is no guaranteed way out of the crisis, and in fact a period of repeated crises is upon us. But one would expect a Marxist theory of the recession would at least have something to say about working class orientation.

So what do Harman and Roberts have to offer on this? Not much. They share the view that capitalism just sucks and can’t be expected to produce jobs no matter what. That’s all very well for an ivory-tower academic to say, but what about the millions of workers who have been discarded by the recession? What about the tens of millions who have suffered reduced work hours and cuts in wages and benefits? What about the hundreds of millions who are facing cuts in social security, pensions, Medicare and other government-sponsored health plans? To say, “Well, that’s capitalism!”, and leave it at that, is not an activist approach.

Roberts stresses that profits drive investment, and investment produces jobs. The recession, he says, is caused by a fall-off in the rate of profit; the capitalists stop investing, and this dries up jobs. He doesn’t just discuss up and downs in profit rates but pushes the theory that a fall in profit rates is the cause of recession. Such a theory might lead some capitalists and their friends to say, the way to bring back jobs is to increase the rate of profit. Thus we’d get the Tea Party/Romney/Ryan plan: cut wages and benefits, slash Social Security, Medicare and Medicaid, tear up collective bargaining agreements and destroy workers’ pensions, drive the workers harder and in this way restore profitability. Capitalist spokesmen are constantly whining on TV, “We need to be guaranteed higher profits, we need stability, we need promises of tax cuts,” etc. before they’ll do any hiring.

A self-proclaimed Marxist, Roberts would never endorse such a plan. But it shouldn’t be regarded as completely out of the ballpark that some working class “leaders” would advocate restoration of the profit rate as the solution to workers’ problems. Look at the AFL-CIO trade union bureaucrats. The main call in their propaganda is for trade war and sanctions against China, which they say unfairly competes against American industry. As they campaign for Obama, at the same time they are campaigning to push Obama for tougher sanctions against China, to restore American industry to its pre-eminent monopoly position in the world. So a call to increase the rate of profit is not that far-fetched for self-styled “labor leaders.”

And Roberts has no other plan to offer workers outside of a few mild reformist suggestions. Instead of encouraging workers to fight the effects of the recession and analyzing how to build the struggle, he’s satisfied with musing about profit cycles. Harman is a little more praxis-oriented, especially in the last chapter where he gives a call to intellectuals to engage in struggle. But it’s very short, and general. As a leader of the SWP of Britain Harman helped promote their reformist orientation in the movement, but this is generally kept apart from his book’s theorizing, which concentrates on the rate of profit.

Harman’s history of stagnation

Harman’s book is mostly a history of 20th century capitalism, arguing that it has constantly suffered from a falling rate of profit and has an innate tendency to stagnation. Today it’s a “walking dead” system, still feeding off its victims (the workers) but not producing anything alive. Chapter 6 covers “The Great Slump” (the Great Depression of the 1930s), Chapter 7 “The Long Boom” (post-war capitalism, the 1950s-60s). Chapter 8 is “The end of the golden age” (the 1970s), while Chapter 9 is “The Years of Delusion” (globalization and the expansion of finance in the 1980s-90s). Harman argues that throughout most of the century capitalism has been struggling against a falling rate of profit. There’s truth to this, since Marx showed that capitalism has a tendency to produce a fall in profitability even as it expands production and the mass of profits. Marx showed that as capitalism expands it has a tendency to expand constant capital (c) relative to variable capital (v). This results in a constantly falling rate of profit, given by Marx’s formula, p’ (rate of profit) = s (surplus value) /( c + v). (See Capital Vol. III, Chapter II.)

But with his chronology Harman is promoting the Trotskyist “general crisis” theory, which says that world capitalism has been in overall constant crisis since 1917, and not before. But weren’t there crises and in fact long depressions in the 19th century? Weren’t there wars and lots of them (including imperialist wars of conquest) during the so-called “Pax Victoria”? For Harman 20th century capitalism is chock full of crises and wars, but apparently 19th century capitalism was healthy.

Marx showed ways the capitalists have of fighting against the fall in profitability. These are ways of increasing exploitation, of driving the workers harder, faster and longer. In new industries or with expanded markets (China, India) the capitalists can also hire workers new to capitalist exploitation and in this way expand their variable capital (v) relative to c. Even in old capitalist countries like the U.S., the capitalists have a huge supply of “reserve army” of sometime workers (the old, the young, women, immigrants, rural residents, etc.) who can be called on to expand v when necessary.

Harman likes to indict militarism as a way the capitalists have of avoiding excess constant capital. He says they burn off old c in wars by bombing and blowing it up, and they throw away new capital in the sinkhole of destruction. Thus World War II restored the rate of profit not by building new factories and employing lots of people but by demolishing old capital. Harman rightly denounces capitalism for its tendency to generate wars, but he gives a one-sided view of how the capitalists escaped from their Great Depression. Aside from destruction of capital, they also built new industries and hired many new workers, including women (with strict wage controls, long hours of work, and intense exploitation under wartime discipline). After the war the government also gave away many factories -- constant capital purchased with workers’ tax dollars -- to capitalist corporations as they transitioned back to a civilian capitalist economy.

Harman tries to follow the same logic in his explanation for the “long boom” of the 1950s-60s, arguing that the capitalists continued to burn off capital during the Cold War. Maybe they didn’t actually demolish lots of capital in hot wars, but their military budgets diverted lots of investment to wasteful military spending, which propped up the profit rate for civilian industry. But by the 1970s this combination no longer worked. By this time so much constant capital had been built up that capitalism tipped over and went into crisis. Political leaders tried to restore the system with a dose of Keynesian spending, but it didn’t work, and Keynesianism also went into crisis. Since the early 1980s capitalist thinking has been dominated by monetarist market fundamentalists who have presided over a big expansion of finance capital in the established economies. Through globalization of industry they’ve been able to prop up the rate of profit temporarily, but there were periodic scares leading to the big crash of 2007-08. That’s Harman’s story of capitalism up to the Great Recession.

Importance of the working class

Despite his faulty logic and one-sided arguments, Harman has interesting observations to make along the way. He’s good at emphasizing the decisive role of the working class. In the last chapter, “Who can overcome?” Harman argues that the working class is still the decisive political force, and this working class is still largely industrial. He points out that, even after “deindustrialization”, the number of workers in industry in the U.S. was still nearly 20% higher in 1998 than in 1971 (p. 332). And he argues that industrial workers play a more important role in the economy than before, objectively, as their productivity has gone way up in recent decades. He also points out the close ties between the newly expanding service industries and manufacturing industries: service workers use all kinds of manufactured goods provided by industrial workers. And many service workers are themselves engaged in manual occupations (garbage collection, truck and bus drivers, longshoremen, postal workers) just like manufacturing workers. Even the educated strata -- teachers, nurses and other health workers -- are increasingly being forced into disciplined, proletarianized, semi-industrial positions (p. 334). He argues that most workers, even though they’re told they’re expendable, actually occupy traditional long-term jobs, jobs that will not be lost by globalization; and he concludes,

“The most important impact of offshoring and rising imports has not been their role in destroying jobs, but in helping employers to destroy workers’ confidence in their capacity to defend conditions, wages and working hours.” (p. 336)

So he says the most important roadblock to building a new workers’ movement is subjective, not objective. Harman sees capitalist crisis creating conditions in which the working class will be stimulated to overcome misery, and the task of Marxists today is to help ensure that subjective conditions are created to push forward a revolutionary situation.

Thus Harman ends with some inspiring words and enthusiasm for the future. And his comments along the way give a trenchant criticism of capitalism, for example his exposure of global warming and the coming environmental crisis (see Chapter 12, “The new limits of capital”).  But Harman thinks it all hangs on his theory of the falling rate of profit, and he isn’t really very convincing on this. He provides some tables on profit rates since 1948, and they do seem to show a decline (though they also show some recovery). But he also endorses Lewis Corey’s tables for the 1920s. And according to Corey the profit rate in the 1920s was only half of what it was, according to Harman, in the 1990s-2000s. In other words, after decades of “decline”, the rate of profit was still double what it had been back in the 1920s! So much for the “general crisis” theory!.(1)

Roberts misreads his own graphs

Like Harman, Roberts also attributes the present crisis to a fall in the rate of profit. But it’s hard to tell how serious to take this, since Roberts misreads his own graphs and charts on the rate of profit. Roberts doesn’t try to go back to the 1930s and before; he starts with the post-World War II era, which he calls the Golden Age of capitalism. Like Harman he argues there was a very high rate of profit in this era. His charts show considerable up and down movement since then, but Roberts insists that it’s all downhill. Chapter 7, “Secular Decline in Profitability,” argues for a secular (long-term) decline in the rate of profit since the 1950s. But his chart on p. 44 shows a rate of profit in the low 20%s in the 1950s-60s, then dropping in the 1970s to a low of 15% in 1982, after which it recovered in the 1980s to hover around 19% in the 1990s and after. So yes, on the average the rate of profit in the 1990s/2000s is lower than it was in the 1950s-60s, according to his figures from around 21-23% down to 18-20%. But simply to assert this is to overlook the main change, which is decline in the 1970s and recovery in the 1980s. What happened in these decades? Roberts never explains this very well.

For that matter, Roberts never explains the Golden Age of high profitability. Like Harman he attributes some of it to the burn off of capital in World War II, and he also attributes some of it to the “new, expanding” industries of auto and electrical goods -- apparently they didn’t exist before the war. But like Harman his main assertion, not supported by his own graphs, is that of a “secular decline” of profitability caused by a buildup of organic composition (the ratio of c to v). For some reason this results in a crisis from time to time. But why? Like Harman he says the buildup of capital eventually reaches a tipping point, and this generates a crisis. But why, and at what particular point?

Roberts’ graphs show a rising rate of profit in the period around 2005, but then he says a crisis ensued because the rate of profit fell sometime after that. Did it really? -- his graphs don’t show that. And even if profit rates dropped a little, would that be enough to trigger a total strike on new investment? Are the capitalists really that sensitive? More generally, Roberts’ graphs show the rate of profit dipping whenever there’s a recession. He takes this to be a causal relation, a fall in profitability causing a crisis in production. But given the rough timeline in his graphs, it’s hard to see; it may be they simply coincide. Causality might even go the other way: as sales fall, the capitalists are stuck with a load of unsalable goods, so of course their profit rate falls.

As the book goes on, Roberts more and more recognizes the ups and downs given by his graphs -- that is, he qualifies (without saying so) his original thesis of a simple decline. But he never explains the ups and downs, and at the end he’s still insisting on his original thesis as an explanation for the crisis of 2007-09.

Can unproductive industries make a profit?

One topic Marxists need to deal with is the structure of capitalism, how it’s changed in recent decades. Roberts makes an attempt at dealing with this in his theory of productive vs. unproductive industries. This is connected to his thesis about the long-term decline in profitability in this way: postwar capitalism has developed lots of unproductive industries (he says) which don’t add to real profits or profitability, and this is what underlies the general decline in the rate of profit.

By “productive” industries Roberts means the traditional commodity-producing industries like mining and manufacturing. He also includes transportation and communications and some unspecified services. In these industries capitalists extract surplus value and generate profits. These profits then get circulated around and invested partially in “unproductive” sectors, in which, Roberts asserts, the capitalists may make substantial profits for themselves, but they don’t generate any profits for the system as a whole. No surplus value is extracted, and they don’t add to the general rate of profit, they only subtract. This is why there’s a general decline in profitability.

Some of these sectors may be necessary to the continued growth of capitalism; for example Roberts mentions education and other government services. But their growth leads to a decline in direct profit-making, which eventually makes the system stall.

Roberts has some accurate comments about the growth of new industries, and his dismissal of “unproductive” industries sounds realistic when he’s talking about the financial “industry” and playing around with fictitious capital on Wall Street. But he overstates things when he tries to draw a sharp distinction between value-producing and non-value-producing industries. Harman is closer to reality in pointing out that many so-called “service” industries actually involve a lot of manual occupations and use of industrial equipment. For example in retail: workers stocking shelves and moving goods around are doing manual jobs and using industrial moving equipment; sales clerks are punching keys on a machine for hours at a time. Similar things could be said of workers in hospitals, hotels, schools, postal facilities, etc. It’s hard to see how the capitalists involved are not extracting surplus labor from these workers.

Anyone who thinks capitalists in the “hospitality” industry are not making real profits should take a trip to Florida and look at the miles of high-rise hotels in Orlando and Miami. These employ tens of thousands of partly unionized workers -- clerks, room cleaners, maintenance workers, busboys, servers, etc. The capitalist hoteliers take their massive profits from this industry and invest them no doubt partially in “productive” sectors like manufacturing; then they take profits from there and invest them no doubt partially back into “unproductive” investments like restaurants, cruise ships, amusement parks, etc. So the profits get churned back and forth between “productive” and “unproductive” sectors. For the capitalist it doesn’t make any difference, so long as he’s making a profit. He exploits labor in both kinds of industries. Insisting that only manufacturing produces “real” profits is like 18th-century Physiocrats insisting that only agriculture produces “real” value.

Strangely, Roberts himself includes the profits made in retail, hospitals, etc. in his calculations on profitability. In Appendix A, “Measuring the rate of profit”, Roberts says he includes the net profits from all industries and the wages (variable capital) of all workers. He doesn’t restrict it to just mining, manufacturing, etc. So his harping on productive vs. unproductive industries begins to look like a diversion he doesn’t take very seriously himself.

Denouncing profiteering

The fact is, capitalists in the period just before the onset of the latest crisis were making profits hand over fist. And many of them, despite the capitalist shakeout, still are. This is well known and recognized by Roberts, who denounces the capitalists in some of the best sections of his book. For example, on p. 295 Roberts writes:

“Overall, GS [Goldman Sachs] has got free money [from the government] worth around $70bn in the last year. It has paid back about $20bn of that. But in the meantime, it has been able to make over $30bn in profit! What is GS doing with those profits? It is paying its bankers and directors around 50% in straight bonuses. This year, GS employees will get about $16bn in bonuses on top of their salaries -- at a time when a record number of Americans (32m) are on food stamps, unemployment of various sorts has reached 16% of the workforce and people are losing their homes.”

Roberts even goes so far as to offer a solution on p. 297:

  “There is an obvious solution. Bring them all [the banks] into public ownership and make them democratically accountable to the elected institutions with a measure of control for the workers in them. Then the top bankers and their bonuses can be reined in; then the risk of excessive borrowing and speculation can be stopped; …”

This is similar to the reforms urged by Roberts on p. 173:

“… But if deposits are to be saved at the taxpayer’s expense, should not ownership of the banks also pass to the people? … People’s money is not safe with capitalists -- only a democratically accountable state system can make it so.”

  This is the closest Roberts comes to offering a way out of the crisis for workers. What’s missing is some idea of how to build a movement that can actually force these changes from the government, a movement that can compel the capitalists to cough up some of their wealth and put their compulsive profit-seeking under some restrictions. Though lacking in analysis, Roberts does make a contribution to building such a movement with his exposures of capitalist profiteering and his relentless exposures of bourgeois economic “experts.” For example, on p. 281:

“… [Ben] Bernanke [chairman of the Federal Reserve Bank] propounded in March 2005 that ‘… Higher home prices in turn have encouraged households to increase their consumption – all these are good things.’

“When the housing boom burst in 2007, Bernanke was quick to deny any fallout for capitalism. ‘We have not seen any major spillovers onto other sectors of the economy,’ he claimed in June 2007. By November, when the losses for the banking system began to accrue, Bernanke told the U.S. Congress that any losses for the financial system would be no more than $50-150bn. They have currently reached $1.6trn and are expected to be at least double that ultimately.

“The ‘free marketers’ were equally unable to see ahead. Robert Lucas, the president of the American Economic Association … told his audience in 2003 that ‘the central problem of depression-prevention has been solved’ – in other words, economies could avoid any recessions from now on.”

  This shows Roberts at his best. He amasses quotes from the bourgeois experts and uses them to show that these people really don’t know what they’re doing. They’re like the captain of the Titanic who, after smashing his ship head-on into an iceberg, shouts “Full speed ahead! We’re right on course!”

Roberts is also good at throwing out statistics about how the recession is affecting different classes. He has all the numbers at hand, how the working people suffer increased unemployment, loss of homes, higher taxes and cuts in social welfare while the rich are getting richer. These numbers are familiar to anyone who reads a daily paper, but it’s good to have them concentrated and underlined. These are the kind of facts that can fuel a new rise in the workers’ movement.

How to get things moving

Roberts doesn’t have any plan to fight the effects of recession and neither does Harman. Harman’s only “solution” for recession is destruction of capital through wars or ongoing depression, and Roberts’ solution is similar. Both of them hope that further misery for the masses will somehow spark an upsurge in the workers’ movement, but neither of them understands the unique situation we’re in today. They think a declining rate of profit somehow disarms the capitalists, makes them weaker and easier to push over. Roberts thinks reform measures will be fairly easy to carry through.

But that isn’t our situation today. The working class is disorganized and disoriented, and the capitalists are stronger than ever. They aren’t in a weak position ideologically or financially. Profits in fact are very high, and the capitalists don’t feel compelled to resort to radical measures to restore them. The recession wiped out a lot of weaker capitalist firms, but the ones left are stronger than ever. Low interest rates are not encouraging firms to borrow and invest in productive activity; on the contrary, they borrow from the government just to buy government bonds which pay a higher rate of interest. Financial firms make profits hand over fist by pushing money around in a circle and making handlers’ fees. Firms are sitting on trillions of dollars in cash, but they make higher profits by sitting on it than they would by hiring people and building new sectors of the economy. Higher productivity means they can produce the same number of cars, houses, etc. that they used to without hiring more people.

The average rate of profit is in fact more difficult to calculate than either Harman or Roberts thinks. But whether the rate of profit today is going up, down or sideways, one thing is clear: the working class is hurting while the rich capitalists, propped up by the capitalist governments, are doing better than ever. Regardless of the rate of profit, workers need jobs, and they have a right to demand their needs be met. The capitalists put us in this fix, and we should angrily demand relief measures at least.

This kind of anger fueled the rise of the Occupy movement, which had some basically correct ideas. First, the importance of class differences (“the 99% vs. the 1%”). Their percentages and analysis were off, but the basic idea, that the needy are getting stepped on while the greedy are being bailed out, was (and is) correct. Second, their tactic of mass gatherings in the streets. The working class and poor can’t rely on the rich media and contacts with the bourgeois politicians; they must use the means they have, mass pressure. These tactics need to be followed up and expanded by workers today, but they need to be supplemented with clearer class analysis and political organization so the movement can stand up to blandishments and outright attacks from government leaders.

It would be wrong to think (as Roberts apparently does, in some places) that we have a working class party already in place, ready to implement reforms as soon as the rate of profit drops off. Last year the politicians, mostly Democrats, undermined Occupy with promises of help and then smashed occupations with police attacks (coordinated by Obama’s Homeland Security cops). This year the Democrats and trade union leaders are trying to pull activists into the campaign to re-elect Obama, as if he represents a block to the capitalists’ program.

But Obama is just another sellout politician. In 2008, despite all the hype about “hope” and “change”, the only definite policy endorsed by Obama was support for Bush’s bank bailout. This was important for candidate Obama, as it assured rich supporters he was a safe defender of the establishment. Four years later the banks are doing fine while millions of workers suffer the effects of high unemployment and cutbacks in government services. Obama never brought the jobless rate down as he promised and never devised a bailout for underwater homeowners as he promised; the only promises he’s kept were to the rich. Today a couple congressmen have jobs bills they’re trying to push, but Obama ignores them; he doesn’t endorse, favor, or even mention these mild reforms. Instead he sticks to his game plan: don’t rock the yacht.

Lenin’s advice: go after the capitalists

But this is what needs to be done. The capitalists need to be targeted as the cause (and beneficiaries) of the system’s collapse. We can take good advice for this from Lenin’s article, “The Impending Catastrophe and How to Combat It.” This article was written at a time (September 1917) when the Russian economy was headed for disaster, and Russia was in the midst of a revolutionary crisis. So the situation isn’t exactly the same as today, but what Lenin says provides some guidance for workers today. Lenin argued that any partial solution (short of socialism) must be something that actually hurts capitalism and hurts profitability. There’s no way around it. Either the capitalists or the workers must be forced to pay for today’s crisis. The bourgeois politicians Romney, Ryan, Obama, etc. can’t imagine forcing the capitalists to pay, so their only solution is to force cuts onto the workers. The Romney/Ryan plan is to do so directly and brutally, while Obama’s plan is to be less direct, to talk the workers into meekly accepting cuts on their own. Neither of them can imagine forcing the capitalists to pay.

But this is just what must happen. Of course any measures to help the workers will be denounced by Republicans as “socialism”, but this is hyperbole. A partial solution -- a jobs program, for example -- is not permanent and is not even “creeping socialism.” But, as Lenin argues, you can’t be afraid to open the door toward socialism, you can’t be afraid to trample on bourgeois rights and privileges. Otherwise you won’t get anywhere. This is where the trade union bureaucrats and other self-styled working class leaders get stuck. They bend over backwards to find a “win-win” solution that benefits both capitalists and workers, but actually means cutbacks for the workers and continued domination by the rich.

Workers should be in the streets today demanding no more cutbacks, demanding jobs, demanding an end to layoffs, and demanding that the rich pay for these programs with higher taxes or even special levies. These are things workers can fight for today, and such a fight will prepare workers for the struggle tomorrow to get rid of capitalism entirely. <>


(1) Harman likes to refer to Lewis Corey as an expert on the falling rate of profit and the use of it to explain the Great Depression of the 1930s. From Wikipedia we learn that Lewis Corey was the pseudonym of Louis (Luigi) Fraina, an Italian-American labor activist and one of the founders of the Communist movement in the U.S. In the early 1900s Corey was around the IWW and for awhile was editor and chief writer for the SLP’s daily newspaper. He became a leader of the left wing of the SP, and he was the first to publish translated works of Lenin and Trotsky in the U.S., in 1918. He helped found the Communist Party but was expelled in the early 1920s for misuse of Party funds. He remained active in left circles and in 1934 published The Decline of American Capitalism (available online at Marxist Internet Archive). Chapter VIII of that book, “The Fall in the Rate of Profit”, contains some charts for the rate of profit in the 1920s. They show up and down movements, but even in good years for the capitalists, such as 1923, the rate of profit did not exceed 9.2%, and in bad years such as 1927 it was only 5.5%. (He shows it dropping to 1.7% in 1930, but this was after the Depression’s beginning.) Harman shows the rate of profit in the 1990s-2000s in manufacturing as varying between 13% and 17.7% (p. 235), double that of the 1920s! How is that a “decline”?
    Another problem with Corey is that in the 1940s he became a Cold War renegade who campaigned against Communism on the basis that the capitalist tendency for the profit rate to fall could be overcome by rising productivity. This shows that Corey never really understood Marx, according to whose explanation productivity has nothing to do with profit rates. Rising productivity means that workers produce more goods in the same amount of time, but it doesn’t affect the value of the goods produced in that time (which is a function of the labor time involved) nor does it affect the division between necessary and surplus labor time. Harman is grasping at straws when he tries to pull in Corey as an expert on the falling rate of profit.


The reference to hotel workers in Florida has been changed to read "partly unionized", not "largely unionized".

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Last changed on November 23, 2012.