Financial crisis and Marxist mis-steps

On ABC Radio National recently, I listened to a discussion on the financial crisis, between an orthodox economist, a Marxist, and a mediating compere.

The crisis has taken different characteristics by turns:
- from the aggressive selling of mortgages in the US to people who could not afford to service the loans,
- the wrapping up (and obscurement) of those non-performing loans into complex financial instruments which were sold around the world, led to
- a crisis in confidence between financial institutions, who could not sufficiently trust other institutions, leading to
- a great slowdown in the circulation of financial capital, which caused
- a collapse of the viability/stability of many financial organisations (due to bad debts and reduced access to credit), which caused
- globalised recession, with the attendant bankruptcies and unemployment.

Only the last point (but not specifically global) is a recurrent feature of capitalism – the booms and busts so usually cyclic. The others are a particular chain of events. The fact that the complex, toxic financial instruments were circulated around the world is what led to the crisis becoming deep and global.

Because the crisis has been deeper than anything since the 1930s depression, governments around the world have been taking uncommon action to reduce the impact of the recession. This includes classical Keynesian stimulation measures (to encourage faster circulation of money to get the system pumped up again). But it has also included governments supporting major industries: as well as financial institutions (which supply the lifeblood to capitalism), industries that are core to a nation's production - the US auto industry, for example.

Some assistance to industry has taken the form of loans, some as guarantees, some as handouts - and sometimes governments have taken a stake in the corporation - partial or full nationalisation.


Now this is where the debate comes in. Classical Marxist analysis points to a crisis of over-production - too many goods produced, too little money in the hands of workers to purchase the goods. This in turn leads to the evolution of capitalism eventually into communism. Government nationalisation of industry - for capitalistic reasons (which somewhat precludes the recent nationalisations in Latin America by left-wing governments) - can be seen to be a direct harbinger of the classical crisis.


Be that as it may, the Marxist in the radio programme - a visiting Canadian professor - was asked for some insight into the current crisis. The best he could to was the classical viewpoint, that it was a crisis of overproduction. Which it is not. Recession can be characterised like that, to an extent. And in this case, it is quite stretching the point to shoehorn the current events into classical Marxist crisis theory.

It would have been very hard to predict the emergence of the particular characteristics of this crisis. Yet Marxian analysis takes many forms, of which prediction is only one.

In the article Crisis in capitalist society, David Held, a British analyst of globalism, writes*:"a distinction must be drawn between, on the one hand, a partial crisis or collapse and, on the other, a crisis which leads to the transformation of a society or social formation." Held notes that government attempts to “regulate economic activity and sustain growth”, especially from the 1950s to the 1970s, “deepened the state's involvement in more and more areas”. But the trend after that was largely towards deregulation, bar regulatory regimes intended to foster competitive (rather than anti-competitive) corporate behaviour. Held characterises several forms of crisis, based on loss of political (popular) legitimacy. Ultimately, however, he calls for “a differentiated analysis of international conditions which form the constraints on, and the context of, the politics of modern societies”. Held himself concludes that it is hard to see that an analysis of transformation crises can “take the form prescribed by classical Marxism with its emphasis on, for instance, history as the progressive augmentation of the forces of production or history as the progressive evolution of societies through class struggle**.”

Which would tend to suggest that Held is not (or no longer) a classical Marxist (and his final sentence is a giveaway: "the theoretical tools of Marxism are inadequate as a basis for a theory of crisis today"). All this is to say that therein lies a multitude of differential interpretations from the Marxist end of the spectrum – only one part of which adheres to the traditional analysis of ultimate crisis.

In particular, to suggest that the current crisis is a classical one of overproduction is laziness, at the very least, and intellectual dishonesty at the worst. Don't expect all Marxian analyses to have the same faults.

For what it's worth, I don't see any clear endgame in current events; so far, it seems like just a major hiccup in the course of capitalistic history. Will there be any significant transformative changes by the time economic systems return to balance? I can't see that, although I would suggest the biggest potential effect may relate to the hangover of government debt. And government is, I contend, the main arena for class struggle today.

*Held, David: Crisis in captalist society, in Bottomore, Tom (ed.), 1991: A Dictionary of Marxist Thought (2^nd ed.), Blackwell, Oxford.

**I would here note that class struggle should not be simplistically characterised as, for example, struggle between manual workers and wealth owners, but better the struggle between people qua wage-earners and forces - and people - that specifically propel the agglomeration of capital.