Marxism and the Crisis of Capitalism


Capitalism is going through its greatest crisis since the 1930s or before.  The banking system has been saved from meltdown (at least for the time being) only by extensive government intervention in the USA, Britain, and a number of other countries.  Stock markets all over the world have plummeted.  A long and deep recession is in prospect.  Capitalism, it is sometimes said, may be on the verge of collapse.

Few economists or politicians foresaw these developments.  The long boom had lulled them into the belief that the cycle of boom and bust had finally been overcome.  One figure who would not have been surprised and whose reputation has risen dramatically is Marx.  After a long period when his ideas were dismissed as ‘refuted’, there is now a new interest in them.1  He long ago argued that capitalism is inherently unstable and prone to crisis, and he predicted its eventual demise.  Marx’s analysis of capitalism, some say, has been proved correct.

But exactly which aspects of Marx’s analysis have been vindicated?  In the first place, Marx’s critique of the free market has been confirmed.  The liberal, laissez-faire, free market philosophy which has dominated economic and social thought for the past 30 years has been discredited.  Even Alan Greenspan, the former Chairman of the US Federal Reserve, one of its most influential champions, has admitted that the free market philosophy is flawed.  “I made a mistake in presuming that the self-interests of organisations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms”.2

The present crisis is demonstrating, yet again, that the free market is not the benign, self-regulating mechanism that the free market fundamentalists have claimed it to be.  It does not always serve the general interest or lead inevitably to economic growth and prosperity.  On the contrary, as Marx argues, the free market operates as an alien system with a life of its own.  It is an uncontrollable and inherently unstable mechanism.  It leads to periodic crises in which huge numbers of people are thrown out of work and useful means of production are wantonly destroyed.  These show that the capitalist system is incapable of mastering the productive forces which it itself has created.  In Marx’s graphic image, it is ‘like the sorcerer who is no longer able to control the powers of the nether world whom he has called up by his spells.’3 Periodically the forces of production develop so far that they come into conflict with existing capitalist economic relations.  A crisis then ensues.

And how does the bourgeoisie get over these crises?  On the one hand, by enforced destruction of a mass of productive forces; on the other, by the conquest of new markets, and by the more thorough exploitation of the old ones.  That is to say, by paving the way for more extensive and more destructive crises, and by diminishing the means whereby crises are prevented.4

Thus the system lurches along through a series of booms and depressions.  At the same time, it stifles competition through the growth of monopoly and leads to huge inequalities of wealth.  Eventually, Marx believed, capitalism is destined to collapse and be superseded by a socialist form of society.

Is this what we are witnessing?  Some seem to think so.  The US Administration under President Bush has been forced to take over banks and mortgage companies in order to rescue the world financial system from the danger of immanent collapse.  Bush has even felt obliged to plead for the preservation of what he has termed, without apparent irony, ‘democratic capitalism’.5

Governments all around the world have had to adopt similar measures.  They have been forced to take major stakes in banks and mortgage companies and, in some cases, to nationalize them altogether.  Tighter regulation of their operations is being introduced.  There have been massive injections of government funds into the financial system.  There is talk of large scale public works programmes to mitigate the worst effects of economic depression along the lines of the New Deal in the 1930s in the US.  It is evident, moreover, that this is a global crisis of a global economic system.  Although there has been a measure of international coordination, the institutions required to respond to the crisis in a global fashion hardly yet exist; and, where they do so, they need to be reformed and extended to reflect current economic realities, particularly by including emerging economies such as those of China, India, Russia, Brazil, Korea, etc.

The extent of these measures attests to the depth of the crisis.  It probably has not yet run its course.  There is still a real possibility of a meltdown of the financial system and of a severe and prolonged recession.  Are we witnessing the collapse of capitalism itself, as some have suggested?  That is unlikely in my view.  More is needed to bring about the end of the capitalist system than an economic crisis, no matter how severe.  A change of system, or mode of production, has a positive as well as a negative side to it.  It involves not just crisis and the collapse of the old system, but also the creation of an alternative, of a new order.  This is not only an economic process it is also a political one.  It requires the existence of political forces that can bring this about.  Despite the enormous and widening gulf of inequality and widespread poverty and misery, however, such forces do not exist.  There are, at present, no effective and credible anti-capitalist forces.

Marx believed that such forces would be brought into being by capitalism itself.  He argued that the industrial working class, created by the conditions of modern industrial work under capitalism, would constitute such a force.  The conditions of the working class in industrial countries at the time he was writing were dreadful.  Agricultural and handicraft workers were driven off the land and into cities and factories.  Industrial production in factories had greatly intensified exploitation and worsened working conditions.  Workers, including women and even young children, were driven by economic necessity to work extraordinarily long hours for near starvation wages.  Protection for workers’ welfare and rights was minimal.

Nevertheless, for Marx the working class are not a mere impoverished, downtrodden, dehumanized and exploited mass.  The impact of industry is not purely negative.  The working class was energised and radicalized by these conditions.  It was united and educated, its solidarity and consciousness were increased.  Steadily, through the 19th and into the first half of the 20th century, it became politically stronger — better organized and more militant.  A revolutionary industrial working class grew up just as Marx predicted.

In the advanced capitalist world, however, conditions are much changed since then.  Whether these ideas apply still today is questionable.  In particular, the character of the classes that make up these societies has been transformed.  The industrial working class is now only a small and still diminishing part of work force of advanced industrial societies.  This is due partly to global economic changes and the growth of industry in China and elsewhere; but it is due also to changes in the character of production itself, particularly with automation and the use of information technology.  The old industries which gave birth to the revolutionary working class have been transformed.  The old industrial working class in these industries is only a small fraction of its former self.  Increasing numbers of people work in the service sector — in offices, shops and even at home using computers.  Trade union membership and political militancy have declined.  The solidarity and class consciousness which characterized the industrial proletariat in its heyday is gone.  It is doubtful that it will ever return.

Nevertheless, it is important to see that class is still the fundamental form of division in capitalist society: that aspect of Marx’s analysis still stands.  The working class still makes up the great majority of the population even though its character has changed.  For the most part it is now located in offices and shops, in distribution depots and call centres, rather than in factories.  But it is still the working class, made of people who are in subordinate positions, who have no share in capital and are dependent entirely on their labour for their livelihood.

Many commentators have ceased to regard the working class of any sort as a potential revolutionary force.  Instead they look to disenfranchised, dispossessed and disaffected social groups — to women and minority groups, and to the young.  They look for revolutionary potential to the environmental movement, the women’s movement, and to the amorphous anti-capitalist movement.  However, these groups lack the solidarity and unity of interests of the class-based socialist movement or the unifying vision of Marxism.  It is doubtful that they can form a sufficiently united or coherent movement.  The working class is still the most likely revolutionary agent.

There is little present sign of its fulfilling this role, but it would be a mistake to interpret this as a mark of satisfaction with the present state of things.  Particularly with the economic recession that is now upon us, there is a large measure of alienation and disillusion.  The main reason why people are so quiescent is that they see no way in which they can bring about significant change which will lead to a better future.  Once that hope is present the situation could change quite rapidly.

It is likely that the economic crisis will erode still further people’s faith in the established political parties that support the present order, and lead to a greater level of support for radical alternatives, of both left and right.  However, it is not certain that the left will be the main beneficiary.  If the experience of the great Depression of the 1930s is anything to go by, the danger is that a nationalist and far right reaction will develop.  The prospects for socialism are still distant.

Similar things must be said about the situation in the third world.  The theory that the massive wealth that was generated in the bubble of the last thirty years would ‘trickle down’ and benefit even the very poorest has proved illusory.  On the contrary the gulf between rich and poor has increased dramatically, not only within nations like the USA and Britain, but also globally.  In large parts of Africa and Latin America the most dreadful levels of poverty and disease are endemic, and yet for the present there are no signs of revolutionary forces emerging.  Who can doubt, however, that the conditions exist for revolutionary movements and that they will arise given the right circumstances.

In the newly industrializing nations of Asia the situation is perhaps different.  China and more recently India have been industrializing at an unprecedented rate.  The processes that were occurring in Britain in the middle of the 19th century, and which Marx analyzes in Capital, are being repeated on a massive scale and at an accelerated pace.  People are flooding in from the countryside to the cities to work in the newly created factories and sweatshops which have sprung up.  Extremes of wealth and poverty exist side by side.  Whether these developments will lead to the creation of a militant working class in Asia, as they did in Britain, remains to be seen.  But again, there are few signs of this so far that I am aware of.

The current crisis has brought the capitalist economic system to the brink of breakdown.  It has demonstrated that the free market is a dysfunctional basis for economic life.  In this respect it has confirmed Marx’s critique of capitalism.  There is no sign yet of the forces that Marx believed would emerge to bring about its overthrow and supersession.  Nevertheless, the conditions in which such forces could develop are present.  The question of alternatives to capitalism is on the agenda once again.

The failure of the market has forced Governments to take a large stake in banks and a major role in the economy.  These measures have been described as ‘socialist’ by advocates of the free market.  There is an element of truth in that description.  State ownership and control of the financial system and other large enterprises is a necessary condition for socialism in that these enterprises are taken out of private hands and social control exercised over their operations.  But more is involved in socialism.

What more?  Now that Governments have taken these measures, the question is: what should they do with these newly acquired assets and powers?  What sort of economic and financial system do we want?  It is for his answers to these questions, as much as for his criticisms of capitalism, that Marx is important and relevant today.

What has been done so far should not be confused with socialism as Marx understood it.  These measures have not been taken in the interests of working people or the community as a whole.  Their primary aim is to rescue the banks and other parts of the system from collapse.  The intention is to return them to the private sector and the free market as soon as conditions make this possible, and to do nothing in the meantime which will jeopardise this aim.

Socialism is something quite different.  It involves a planned economy, run in the interests of the community and particularly of working people.  Socialism means an economy ruled not by alien and uncontrollable economic forces, but consciously planned and operated for the good of all rather than for the profits of a few.  In the present context, this means, for example, investment in hospitals, schools, social housing, public transport and other much needed infrastructure, and in initiatives to deal with the threat to the environment.6

Moreover, for Marx this would be only the first step towards a fully socialist society.  Ultimately he envisages a further stage in which the alien mechanism of the market is not only brought under control, but eliminated altogether, and society is governed by the principle ‘From each according to his ability, to each according to his needs!’7

This is a remote and distant vision.  Nevertheless, it is a vitally important idea which must be kept alive.

One of Marx’s most important insights is that capitalism is a particular stage of historical development not an inescapable necessity.  Society and the economy need not be ruled by the hostile and alien mechanism of the market.  Capitalism came into existence at a certain time, it has a life history, and it is likely to become an increasing barrier to the full use of productive powers.   Marx envisages that it will eventually be superseded by a voluntary and cooperative organization of social and economic life in which goods and services are distributed according to need rather than ability to pay, and people contribute their labour to produce them willingly and not only because they are paid to do so.  A better alternative to capitalism is possible.  This is the basis of Marx’s criticism of it.

1  Sales of his works are significantly up, it is reported (The Times, 20 October 2008).

2 ‘Greenspan — I Was Wrong about the Economy.  Sort of,’ The Guardian, 24 October 2008.

3  Karl Marx and Frederick Engels, “Manifesto of the Communist Party,” in The Marx-Engels Reader, ed. Robert C. Tucker (New York: W.W. Norton, 1978), 478.

4  Ibid.

5  Timothy Garton-Ash, ‘The US Democratic-capitalist Model Is on Rrial.  No Schadenfreude, Please’, The Guardian, 2nd October 2008.

6  Measures along these lines are being taken in China.  ‘Beijing to Pump 4tn Yuan into Economy to Offset Fall in Exports’, The Guardian, 10th November 2008.

7  Karl Marx, “Critique of the Gotha Program,” in The Marx-Engels Reader, ed. Robert C. Tucker (New York: W.W. Norton, 1978), 531.

Sean Sayers is Professor of Philosophy, School of European Culture and Languages University of Kent.  His publications include Plato’s Republic: An Introduction (Edinburgh University Press, 1999; Marxism and Human Nature (Routledge, 1998); Socialism and Democracy (edited with David McLellan,  Macmillan, 1991); Socialism, Feminism and Philosophy: A Radical Philosophy Reader (edited with Peter Osborne, Routledge, 1990); Socialism and Morality (edited with David McLellan, Macmillan, 1990); Reality and Reason. Dialectic and the Theory of Knowledge (Basil Blackwell, 1985); and Hegel, Marx and Dialectic: A Debate (with Richard Norman, The Harvester Press/Humanities Press, 1980).