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October 21, 2008



Keynes, of course, was strongly anti-Marxist, seeing it both as a muddled economic theory and the road to catastrophe. In fact, his advocacy of 'Keynesian' economics was to defend capitalism by making it work. Skidelsky brings this out well in his bio of JMK. Part of the problem with capitalism was its instability, which Keynes aimed to rectify, thus defeating the Marxists. As Markwell's study of Keynes shows, he also advocated managed capitalism in The General Theory as a response to the 1930s socialists - successors of Marx - who argued that capitalism caused war. So 70 years ago Keynes was capitalism's great defender against Marxism. It would seem that he is again today.


It's true Marx tells us little about specifically financial crises. (He's pretty silent on Strictly Come Dancing and the advantages of ipods over other MP3 players as well come to that).

But in the dim distant days when I held a party card with his name in the constitution I seem to remember those that Wot Knew Better than I always referred to Hilferding's Finance Capital(1910) as the seminal Marxist framework for this sort of thing. Not that I've ever read more than the wiki entry and Lenin's nicking of bits of the book to explain Imperialism, mind you.... http://en.wikipedia.org/wiki/Hilferding

David Heigham

Remember, who talked of capitalism before Marx? Our Karl invented two economic systems, capitalism and communism. We who come after have done pretty well by him; we made one of them work (with hiccups).


Is not one of the main triggers of the crisis, subprime lending, due to low profits and competetion from the banks?


I'm no economist, but I have read in several places that the last decade or so has seen a very large expansion of consumer debt, along with other kinds of debt (and subprime lending is further expansion of debt). Even if there might have been a financial crash without there being so much debt, it does seem that at least the severity of its impact will be related to this. And that expansion of debt makes perfect sense as a reaction to lack of demand stemming from standard capitalist mechanisms, i.e. extract surplus value by selling the goods at a price higher than wages.

Like I said, I'm not an economist and don't really get the details of everything, but that sort of explanation makes sense to me at least.


The credit crunch is making Marx fashionable again. Which I find odd. Strictly speaking, this crisis has made Marx less relevant, not more.

He never was relevant - just destructive.

Bob B

"He never was relevant - just destructive."

Check-off how many of Marx's policy proposals in his 10-point plan in the Communist Manifesto for immediate application were implemented in Britain at one time or another. Quote:

Nevertheless, in most advanced countries, the following will be pretty generally applicable.

1. Abolition of property in land and application of all rents of land to public purposes.

2. A heavy progressive or graduated income tax.

3. Abolition of all rights of inheritance.

4. Confiscation of the property of all emigrants and rebels.

5. Centralization of credit in the banks of the state, by means of a national bank with state capital and an exclusive monopoly.

6. Centralization of the means of communication and transport in the hands of the state.

7. Extension of factories and instruments of production owned by the state; the bringing into cultivation of waste lands, and the improvement of the soil generally in accordance with a common plan.

8. Equal obligation of all to work. Establishment of industrial armies, especially for agriculture.

9. Combination of agriculture with manufacturing industries; gradual abolition of all the distinction between town and country by a more equable distribution of the populace over the country.

10. Free education for all children in public schools. Abolition of children's factory labor in its present form. Combination of education with industrial production, etc.


Btw I regard Marxian economics as virtually useless for analysing current issues.


Well, while it's correct to note that this current crisis cannot just be read off a script written 140 years ago, Marx's analyses are very relevant and helpful in trying to comprehend the present debacle; particularly his development of the concepts of the average rate of profit, credit, and fictitious capital. Marx's dissections of the 'credit crunches' of his day- eg in Chapter 30 of Capital Vol 3, a taste of which you can get at
are almost spooky in their similarities to some aspects of the current financial meltdown.

One very useful thing about Marx's writings is their insistence that all value is created in the real, productive, sectors of the economy; and that the wealth which is supposedly 'created' in the stock exchange and the financial sector is a combination of:-
a) value which is transferred into that sector from the 'real economy' (Marx goes into some detail about the mechanisms by which this takes place), and
b) fictitious capital, the illusory nature of which is suddenly exposed when the inevitable crisis comes along.

So. Karl Marx didn't write the last word on capitalism and capitalist crises- but the words that he did write provide very illuminating starting points.

I strongly suspect that this presently developing crisis will produce, not only a rediscovery of interest in Marx, but a new generation of analysts and leaders who will revive Marx's aim of overthrowing capitalism.



Bob B

Once capitalism has been "overthrown", I wonder how long it will take for the gulags to reappear or for dissenters to be consigned for rehabilitation by drug therapy in the psychiatric hospitals.

With the passing of time, we are apt to forget what Communist Parties in Western Europe were really like.

Famously, the French Communist Party was the most Stalinist minded this side of the Iron Curtain. When Georges Marchais, Secretary General of the Party in France (1972-94), was pressed for comment on the crumbling Soviet empire c.1990, he replied: “I tell you, they didn’t arrest enough. They didn’t imprison enough. If they had been tougher and more vigilant, they wouldn’t have got into the situation they are in now.” [Jonathan Fenby: France on the Brink (1999)]

Before we get confused about the difference between Communism and Socialism, the Soviet Union only ever claimed to have established a Socialist state, according to the taxonomy authoritatively expounded in VI Lenin: The State and the Revolution (1918):

With Socialism, comrades were expect to produce according to their ability and receive according to their work. Note that the official title of the Soviet Union was: the Union of Soviet Socialist Republics.


Marx is as relavent now as he was 100 years ago. It's Free Market ideology that has become less relavent. TARP? Anyone....

Marx is laughing from his place in Himmel.



"Once capitalism has been "overthrown", I wonder how long it will take for the gulags to reappear or for dissenters to be consigned for rehabilitation by drug therapy in the psychiatric hospitals."

Well, the 21st century socialist countries held no monopoly on the use of violence & repression for political ends. To take two examples out of very many, you could look at the events in Vietnam and Chile.

You add:

"the Soviet Union only ever claimed to have established a Socialist state [...] With Socialism, comrades were expect to produce according to their ability and receive according to their work."

Correct. Especially given that:

i) the countries in which capitalism was overthrown were, with few exceptions, less-developed countries in terms of industry, education etc; and also that

ii) those countries remained a global minority, subject to active economic and political hostility from the dominant rich capitalist counties,

it would have been unrealistic of them to claim that they could advance to the application of communist principles in such circumstances.


Ooops! the first line of the 2nd para of my post above should read:

Well, the 21st century socialist countries held no monopoly... etc.


Ouch! try again:

Well, the 20th century socialist countries held no monopoly... etc.


Well, Marx's theory of the formation of fictitious capital is actually rather sophisticated. That's not to say it doesn't need modification to fit the crisis today, but Noah's right, you could open Vol. 3 of Capital nearly at random and find a dead match for a story from the last month. It's rather clear you haven't read any of this stuff.

Lastly, non-financial profits have not been reasonably healthy, at least not in the US, where if you discount the financial sector we would have been stagnant since 2001. Look at Robert Brenner for confirmation. I suppose it's never occurred to you that inflating consumer demand through cheap debt would be one of the factors behind the so-called healthy real economy. The idea here, that the real economy and the financial sector are on different tracks, is nothing less than risible. . .


Yes Bob B. The distinction between town and country is being abolished. But 8, the obligation to work? Is there any country other than Britain where it is easier to sit on your backside and get paid for it if you don't fancy the work on offer? Why do we import east europeans?


Well said Jasper, and Luke (at October 22, 01:06 PM) also made a crucial point. Although as he says he's not an economist and doesn't really get the details of everything, he has a better grasp of the underlying causes of this crisis than Chris Dillow does.

Now Chris, having re-read your article, I really have to take you to task on the main claim in your article, that:

"this crisis has made Marx less relevant, not more.
Our current crisis is a less Marxist one than almost any post-war recession."

You make this claim on the basis of your rather clunky precis of Marx's analysis of capitalist economic crises. I won't repeat what you wrote, but instead I'll let the wise man speak for himself- here's a very short quote from a very long book, Capital vol 3 (& BTW, Chris, if you imagine that Marx did not "say much about the mechanisms that caused waves of financial speculation and crashes", then you really ought to read the scores of pertinent pages in that book.) Anyway, this is from Chapter 30:

"The ultimate reason for all real crises always remains the poverty and restricted consumption of the masses as opposed to the drive of capitalist production to develop the productive forces as though only the absolute consuming power of society constituted their limit."

What!? you may protest- how on earth can that be relevant to our current crisis, which originates purely [you claim] in the financial sector?

But it is extremely relevant, and the very brief gospel of Luke in his post on this thread points you in the right direction.

Let's look at the USA, where I am sure you will agree, this present crisis originates.

The majority of people in the US could hardly be described as poor, & as suffering from restricted consumption, when considered against global average living standards. Yet, due to the decline in trade union power & various other factors, the real hourly rate of the median average worker in the USA has been held down to such an extent that it is hardly higher now than it was in the mid 1970s.

But, despite their incomes stagnating, the masses in the US have kept on increasing their spending, thus (until now) staving off a big economic crisis. If the late Gerald Thomas had made a film about them, it could have been titled 'Carry on Consuming'. And how did they carry on buying - shiny new consumer durables, new houses etc?

The financial sector (which BTW overlaps with the industrial sector, Jasper is correct about this) lent them the money.

And those loans then became 'raw material', if you like, for the collossal expansion of the bizarre multi-dimensional universe of financial speculation; a universe which even evolved its own belief-system, the idea that by devising & selling each other all these CDOs, CDSs & other abstruse 'financial products', its inhabitants were actually creating wealth, and that financial de-regulation was the way to stable economic growth.

What made this huge system of largely fictional value suddenly implode?

One very important factor was the inability of some of the poorest, most income-restricted people in the USA to service the big debts that they had taken on, specifically via mortgages.

Then, as the buying power of the public goes down, and also due to the interconnection between credit and actual production (all explained in Capital) the crisis spreads to the 'real economy'.

Sure, Marx's analyses need updating- I'm fairly confident that one or two people with the intellectual competence for this task will emerge in due course.

But his key ideas about the nature of capitalism and its crises are vindicated, not invalidated, by this present & ongoing crisis.

Bob B

"Is there any country other than Britain where it is easier to sit on your backside and get paid for it if you don't fancy the work on offer? Why do we import east europeans?"

I'm aware of the c. 2.6 millions on incapacity benefit in Britain but even so I think that you'll find on checking that (at least until very recently) the employment rate of working-age people in Britain is (was) high by the standards of other EU countries.

The east Europeans (especially the Poles) who came here came because they are EU citizens and because the governments of Britain, Ireland and Sweden didn't elect to derogate from their right to employment mobility in the EU.

By several reports, a half or more of the east European migrants have returned home because of: (a) the weaker exchange rate for Sterling has hit the value of their remittances back home; (b) employment prospects back home have improved and many migrants were over-qualified/trained for the jobs they were doing here.

Bruno Breyer Caldas

"profits arose from exploitation"
Thats not true, its pure dependency of labour-value theory, that BTW, does not explain our world.
"right on alienation and primitive accumulation"
Wrong again, dependency of labour-value theory and alienation is more of a misinterpretation of division of labor that a characteristic of capitalism. It would happen in socialist and communist societies.

Marx analisis of capitalist crisis is utterly wrong. He seeks the explanation in the fact that because only labour creates value, the increase in capital reduces profits to the point of crisis and mass unemployment. FAR from the crisis of today and FAR from any crisis ever to exist. Labour is not the only source of value, labour in itself is not value at all, you know vlue is not some inherent to work, neither its limited by it.

Marx had good logical thinking. His oly mistake is that he supported all his theory in an unlogical proposition.


Bruno Breyer Caldas:

"Marx analisis of capitalist crisis is utterly wrong. He seeks the explanation in the fact that because only labour creates value, the increase in capital reduces profits to the point of crisis and mass unemployment."

Marx's analysis of the tendency of the rate of profit to decline is only one of several aspects of his (clearly correct) prediction that capitalism will always suffer from periodic crises.

You add:

"Labour is not the only source of value, labour in itself is not value at all, you know vlue is not some inherent to work, neither its limited by it."

Marx's view was that wealth has TWO sources- natural resources and human labour. This is from Capital vol.1:

"The use values, coat, linen, &c., i.e., the bodies of commodities, are combinations of two elements – matter and labour. If we take away the useful labour expended upon them, a material substratum is always left, which is furnished by Nature without the help of man. The latter can work only as Nature does, that is by changing the form of matter. Nay more, in this work of changing the form he is constantly helped by natural forces. We see, then, that labour is not the only source of material wealth, of use values produced by labour. As William Petty puts it, labour is its father and the earth its mother."

Why not read Marx for yourself, and find out more?

Ian Lucas

Thanks Noah - right on.

Marx may not have got it 100% right, but he did damn well for a dead guy.

Re "..due to the decline in trade union power & various other factors, the real hourly rate of the median average worker in the USA has been held down to such an extent that it is hardly higher now than it was in the mid 1970s" - yep.

Key among the "various other factors" is the mass transfer of manufacturing capacity to low-wage China (facilitated by modern transport and communications). That fattens the profits of individual corporations and allows them to escape regulations while also weakening unions. However, its aggregate effect is to impoverish the very consumers that corporations depend on to buy their stuff. As you say, creating an asset bubble is an attempt to solve this by getting consumers to keep buying stuff by borrowing more. But that can only last until the consumers are maxed out on credit - at which point there is a crash.

Re the political observations above - seems to me that "civilised" capitalism (of the social-democratic form) delivers a reasonable result. Whereas "capitalism out of control" inevitably destroys the foundations that it needs for its own survival. Following a few decades of reasonable stability, globalisation and its ideological cheerleaders have taken us back to "capitalism out of control". What we desperately need now are ways of civilising this beast at a global level. It won't be easy, but the current crisis may at least provide some opportunities.


Yes, Ian- very good points re: China & social democratic capitalism. I would add a couple of thoughts re:

1) China. Because of the export-orientation of much of China's manufacturing industry to the USA & Europe which are now at the beginnings of a slump, China may now find itself suffering from a slowdown in its rate of industrial expansion.

If so, that is likely to maintain or even worsen the current fall in basic materials prices, and thus hit African and other poor commodity-producing countries very hard.

2) 'Civilised capitalism'. I agree on the relative success of the social democratic mixed-economy model which we saw, especially in W. Europe, after WW2. However, I suspect that this current crisis (while it has already produced nationalisations & no doubt will result in a re-regulation of the financial sector) will not result in a return of 'civilised capitalism'. Reasons include:-

a) The greed for profits of the capitalists usually overwhelms their ability to act strategically & collectively;

b) The desperate weakness of the trade unions & other components of the left;

c) Unlike in the immediate post-WW2 decades, no threat from a major socialist power.

We desperately do need a better system; but unfortunately that does not mean (in the short to medium term) that we will achieve one.

However, I do suspect that we will see, over the next few years, a revival of movements- even in the West- which will go beyond the wish to merely 'civilise the beast', and seek to abolish it.


There is no explanation, Marx or otherwise. The system is inexplicable and we impart meaning to it - it is financial theology as we try to read the mind of the gods of commerce. All these arguments and counter arguments, all these verses quoted from Marx, Lenin, Keyne, etc. are no better than those of Mark, Mathew, Luke, and John. I know this is sacrilege to say, as you can quote one dead French Communist or make a clever allusion to China. Take a bank note from your wallet? Why is it more valuable than any other scrap of paper - or a trinket icon from your favorite church?

Matt Russo

It is so pleasing to see so many Marx haters forced to address their nemesis, forced to robotically churn out their dismissals over and over again.

As against the blog, this is absolutely a classic capitalist crisis of overproduction in origin. Heard of a country called China, anyone? China has experienced a year-over-year continuous expansion of production unprecedented in history. Tell us that is not "overproduction"!

Further, this is a crisis of overproduction emerging directly out of a Keynesian style state orchestrated monopoly capitalist system (including China, remember it is "Communist") rather than one of 19th century free market competition. We are really taking up where we left off at the end of the 1970's, before the 30 year distraction of Reaganism-Thatcherism set in to mask the situation with a lot of "financializing" hocus-pocus. That period has come to an end!

This is therefore the reemergence of a more or less chronic crisis of capitalist overproduction that began in the 1970's, but now greatly aggravated by 30 years of "financialization" into one that will be considerably worse than its predecessor of that decade.

Keynesian economics is the problem and therefore cannot be the basis for a solution.

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