By Aleksandr Buzgalin and Andrey Kolganov, translated by Renfrey Clarke
for Links International Journal of Socialist Renewal
March 23, 2009 -- The period at the end of 2008 and the beginning of 2009 was notable for
a whole range of developments. Two of them, however, seem to the authors to be
not only closely interconnected, but also of symbolic importance: a genuinely
profound economic crisis broke out, and along with it, sharply increased
interest came to be shown in the works of Karl Marx.
Over many years, various Marxists spoke of the crisis of capitalism at
such length that the great majority of analysts ceased to take them seriously.
The situation thus recalled the old story of the shepherd boy who continually
cried “Wolf! Wolf!” even though there was no wolf there.
But one day, the wolf
actually appeared ...
Meanwhile serious Marxists, unlike the party-political propagandists of
the Soviet era, began talking of the threat of a world financial crisis and of
the possibility of its turning into a world economic crisis only relatively
recently, around the turn of the 21st century. This was the point at which it
became obvious that the gap between fictitious financial capital on the one
hand, and human capacities and the requirements of material goods production on
the other, had reached dangerous dimensions.
Drawing out the lessons in 2004 of an analysis of the fictitious,
“virtual” capital of the 21st century, the authors of this article concluded
that “the crisis of the world financial system that is entirely probable in the
near future might act as the detonator for a series of global cataclysms”. In
another text, devoted to an analysis of the macroeconomic dynamic in our
country, Russia, the conclusions was also drawn that in these circumstances,
“growing economic difficulties” would become inevitable around 2008-2010. This
would also be the result of the persistence in Russia of the
state-oligarchic capitalism that had been established since 2000. With the
financial, raw materials and energy-based oligarchic groups still dominant,
there had been an effective refusal to prioritise the development of the social
sectors and to invest in the development of human beings.
The present authors were not alone in making this forecast.
Unfortunately, it has come true. The “wolf” has appeared on the scene. The
world crisis has become a reality.
The wolf appears on the
scene: the crisis and its origins, or why the world has started to take account
For the first time after a long interval, and despite all the mainstream
arguments about the definitive triumph in the new century of the universally
effective mechanisms of market self-regulation, a world financial crisis has
broken out and has rapidly become social and economic in character. The crisis
has proved to be astonishingly “normal”, very similar in all its main
parameters to the “usual” cyclical crisis described in the textbooks on
economic theory (political economy) back in the 19th century. The simultaneous
appearance of a mass of unsecured (“bad”) debts, panic on the stock exchanges
and falls in share prices, a gradual contraction of consumer demand and a fall
in production, growing unemployment, plus -- and this is something extremely
unusual in modern-day economies -- the threat of deflation, of a crisis-linked
fall in prices. All of this is extremely similar to the classical picture of a
crisis as described (or more precisely, drawn out of an analysis of the
capitalist economic system) by Karl Marx a century and a half ago.
Amid the events described above, the improbable but vast surge of
interest in Marxist theory in general and in Marx’s Capital in particular is quite understandable. Throughout the
world, it has been reported, this book is being snapped up by buyers at an
Marx, it follows, is once again topical. Are we seeing a return to Capital?
Since we are not just self-described Marxists, but Marxists in our very
essence, we are obliged to warn the credulous public and the professionals. Not
everything here is simple. In the past century and a half, Capital has aged to a significant degree. This confirms the
correctness of Marxism; our theory and methodology have always demanded
self-development and self-criticism in line with the development of life
itself. This is fully borne out with the current crisis, since the “classical”
causes of the crisis have manifested themselves in a new century and in a new
Our first thesis is as follows. The precondition for the crisis (not its
cause) is the spontaneous, elemental nature of the development of the market
economy. A year ago, any prediction of the present situation would have seemed
like a hopelessly antiquated delusion. Now, a few months of crisis have forced
many analysts to recognise that a precondition for the crash was the wave of
deregulation and desocialisation of the economy which gave a “second wind” to a
natural, innate feature of capitalism: periodically repeated crises. Here lies
the most profound secret underlying all anti-crisis regulatory measures:
ensuring that the producer has social, not market-based, guarantees for
production (guaranteed investments, cheap credits, and so forth) and for the
sale of the goods produced (state purchases or the “make-believe” crediting of
The second thesis is that the possibility of crisis is linked to a
rupture between the acts of sale and purchase and the relatively independent
movement of money. This classical 19th-century theme has taken on a new resonance
in the 21st century. A particular type of fictitious capital (money seemingly
made out of money -- shares, debt obligations, futures and so forth) has
emerged. Virtual (that is, existing in computer networks) and footloose, this
capital has become radically dissociated from the real sector. In recent
decades this dissociation has become glaring. Twenty years ago world share
values were roughly equal to gross world product, but on the eve of the crisis
they exceeded it by a factor of 3.5, while the volume of derivatives (which can
be equated in very crude fashion with the volume of financial speculation)
exceeded it by a factor of 12. A gigantic bubble had emerged. It had to burst,
and it did.
The third thesis is that the cause of the crisis was an overaccumulation
of capital, which could not be profitably employed. In the new century it was
intensified by the growth of the fictitious sector -- a sector in which the
output was of products and services useless for the development of production
and for the progress of human capabilities. These ranged from financial
speculation to mass culture and symbolic (over)consumption. The economy, as it
were, came more and more to create simulacra of money and commodities:
derivatives of all types that were quasi-money (before the crisis hit, these
represented a liquid resource, afterwards, merely paper); brand names (these
inflated the capitalisation of well-known firms, capitalisation which swiftly
vanished in the conditions of the crisis); and prestige goods which were in
essence useless, and which both oligarchs and the “middle class” have now been
forced to renounce.
The fourth thesis is that the material basis of the crisis was the
cyclical nature of the renewal of basic capital, that is, technological cycles.
Toward the end of the first decade of the new century, the world was having to
contend with the fact that the information technology boom was drawing to a
close. This was principally because the information revolution had finished up
in a dead end, with computers used mainly for office plankton and by
adolescents playing computer games, while the internet in more than two-thirds
of cases was a means of keyhole-gazing (porno sites) and simulated socialising
with former classmates.
Such a trajectory of development of the economy and society, we wrote
long ago, would lead to a crisis. But we were not believed.
The most comic aspect is the fact that many people refuse to believe
this even now, arguing that the way out of the crisis lies along the road of
reviving the very causes that got us into it.
How, and at whose cost, we
can get out of the crisis
This is how socially aware Marxism poses the question of what needs to
be done to overcome the crisis. We should stress to begin with that three
solutions are possible.
The first of these is the one urged by George Bush and Vladimir Putin
not quite six months ago: take taxpayers’ money and save the financial
speculators! This was the aim of the Olsen plan in the US (more than US$700
billion) and of Putin’s first suggestions (more than $100 billion) -- to buy up
the bad debts, supporting the crisis-wracked private financial institutions and
giving cheap (unsecured!) loans to the commercial banks. All this was argued on
the basis of the need to support the financial sector of the economy with the
aim (naturally!) of ensuring the stability of the financial system so as to
avert the crisis, as was needed to protect the interests of all the country’s
citizens (avoiding the devaluation of savings, preserving jobs, and so forth).
The fact that this would require supporting the owners of financial capital and
compensating them for their losses from failed speculation was a “technical”
question, a question of the means through which the crisis was to be overcome,
not of social (and still less of class) priorities. From the point of view of
supporters of this decision, there was simply no other way out of the crisis.
In one sense, amusingly enough, they were correct; so long as their rules were
abided by, it was impossible to escape the crisis except through pouring “new
wine” (vast sums obtained from taxpayers) into the “old bottles” of financial
corporations on the verge of bankruptcy.
The fact that the rules can be changed is something else entirely.
This, nevertheless, is the gist of the second group of solutions, which
presuppose a more or less radical (depending on the objective preconditions and
subjective factors) change in the existing financial system. This would allow
an exit from the crisis through reducing not only the incomes but also the
wealth (property) of all those who have actively invested in financial
speculation during recent decades. The people who took part in the games of
chance of 21st century casino capitalism should (as in the rules of any private
casino) pay their debts not only out of their current income, but from their
assets as a whole. If they cannot pay, they should descend into the pit of
indebtedness. Society should not have to compensate anyone for their losses in
the financial casino; these are the rules of the market, to say nothing of
social justice. In this scenario, the funds of state budgets would go not to
commercial banks, but directly to support production, public works and the
solving of social problems, without any mediation by private financial
institutions (an example of such a solution is the direct allocation in China
of more than $550 billion to developing infrastructure and construction, and to
solving social and environmental problems).
The third solution (which is the most radical available within the
framework of the capitalist mode of production, at a time when the
preconditions for socialist revolution are not sufficient either in Russia or the US), is the
socialisation of finance. In essence, this amounts to surgical intervention in
the sphere of finance -- the removal of a cancerous tumour (the financial
bubbles) while retaining the socially useful functions of this system. In
particular (but not only), these measures presuppose the nationalisation of the
largest banking institutions, while guaranteeing deposits and providing bank
shareholders with gradual compensation for their shareholdings to the degree
that these retained value after the
crisis hit (responsibility for failed speculation must lie with the speculator,
not with society); the compulsory merger of small and medium banks into a few
large structures and their transfer to public control; and so forth. Guarantees
of deposits can and should be provided in full measure only in the case of
small and middling sums associated with the receipt of wages, pension savings,
and so on. Guaranteeing the deposits of people who sought to grow rich from the
speculative financial boom, investing large amounts of capital at high interest
rates, is illogical. When people enter a casino, they have to know that they
could lose their money, and that society is not obliged to provide compensation
for such calamities.
To support the production of material goods and services, mechanisms of
direct state finance and credit can be employed, tied strictly to the
implementation of production programs.
The recommendations set out here are not only those of the authors. In
recent months experts working with international NGOs (in particular, with the
international ATTAC network, which since the early 1990s has set itself the
goal of limiting financial speculation) and with social movements (such as the
international networks Intellectuals and Artists for Humanism, the World
Alternatives Forum and others) have repeatedly demanded that the solution to the
crisis should not be at the expense of the mass of citizens.
Here, we shall mention just two aspects.
- Demand no. 1: The people who should answer for the crisis -- and not
just with their incomes, but also with their capital, property and positions --
are those who are guilty of having initiated it. Those at fault here are, in
the first place, all the initiators and participants in the unrestrained
expansion of virtual fictitious financial capital (in highly simplified
fashion, they could be termed financial speculators in the broadest sense of
the word); that is, all the people who “inflated” the huge bubble of fictitious
financial resources. Second, those responsible are all the members of political
structures (from presidents and governments to the parties which approved and
supported this policy, including their ideologues, experts and similar people),
who in essence pursued a monetarist policy of boundless trust in the “invisible
hand” of the market. Over recent decades, such a policy has been characteristic
of most countries and of the “unholy trinity” of the World Trade Organisation, the
World Bank and the International Monetary Fund. Accordingly, the crisis can and
should be overcome through a sharp reduction of the incomes and property of
these people and organisations (the already mentioned socialisation and
nationalisation of banks, but not of deposits), and through a broadening and
tightening of public and state control over the finance industry. This should
be accompanied by complete transparency of financial transactions, the closure
of offshore zones and so forth; by the social restriction of investments in
financial speculation; and by forcing capital out of this area through direct
institutional restrictions, special tax increases, and so on.
- Demand no. 2 is for discussion and decision making in the developing,
adopting and implementing of anti-crisis programs to be open, frank and
transparent. It is true that finance is a matter for professionals, but
professionals have already brought the world economy into a thoroughly
“professional” crisis. In any case, various professionals are urging different
models for overcoming the crisis.
- Finally, people, the civil society of each of the various countries
along with world civil society, will have to know and understand who will pay
for overcoming the crisis, and what price; what will be done, how, and in whose
interests (and at whose expense); and who will take what specific
responsibility on themselves.
These suggestions are not new. The experts and intellectuals who number
among the opponents of neoliberal monetarist policies in Russia and beyond its
borders have long since set out these alternatives in detail. Well over a
decade ago they showed that in conditions of unrestrained “financialisation”, a
financial crisis was possible at any moment. Consequently, we now have ample
grounds for demanding that those who implemented “realistic policies” should
listen to those who, by contrast, showed how and why a crisis might occur, and
who long ago suggested ways out of it -- at the expense of those who gave rise
to it, not of those who have suffered, and continue to suffer, from the results
of financial speculation.
By itself, however, this appeal is a voice crying out in the wilderness.
Scenarios for post-crisis
development as a field of social and political struggle
We shall begin with an assertion: if the relationship of social and
economic forces does not turn out to favour the majority of citizens, the exit
from the crisis will be according to a scenario that sees an increased
concentration of capital and a further strengthening of a few large financial
institutions (some of them, of course, will lose out), along with a
deterioration of the position of most entrepreneurs in the real sector and a
dramatic worsening of the quality of life of practically all layers of hired
workers (including the “professional” financiers who before the crisis were in
a clearly privileged position). This scenario is for the present the most
likely one, to judge from the measures to “heal” the economy which the
governments of leading countries are adopting.
If this scenario comes to pass, we can expect a new twist in the path of
late capitalism, one that will set it on a course that is regressive even
compared to the neoliberal model of the past few decades. This will allow an
escape from the dead end in which global capitalism has once again finished up
(and the crisis is testimony to this dead end). But it is an escape to the rear
and to one side.
Even before the crisis we predicted the features of this post-crisis
model, and now these traits are standing out in ever-bolder relief. To replace
the outward triumph in the economy of the free global market, there will
increasingly be imperial protectionism: an intertwining of the power of world
mega-corporations (with capital measured not just in hundreds of billions, but
trillions of dollars) with state empires carrying out a recolonisation of the
rest of the world. The relations between capital and hired labour will be
characterised by a further weakening of trade unions, by a growing
differentiation of incomes within the social stratum of hired workers (less and
less resembling the classic model of a homogeneous “middle class”), and by a
divergence within this stratum into a narrow layer of highly paid
“professionals” and a majority of industrial and pre-industrial proletarians
leading precarious lives.
To ensure the viability of such an economic model will require
pro-imperial geopolitics and an increasingly manipulative political and
ideological system, which at best retains only the appearance of democracy.
For the countries of the periphery there will remain the scenario of a
semi-colonial existence, while for the countries of the semi-periphery, there
will be the status of “peripheral mini-empires”. Another possibility is the
formation of powerful anti-imperial unions (though also of a relatively
In ideological terms, all this will be accompanied by a powerful wave of
There is also a somewhat different scenario in the spirit of the
“Roosevelt-21” plan. This would involve, let us say, a new global economic
network with rules analogous to those which now apply in Norway or Venezuela: priority for
social-ecological goals, restrictions on big business, and the socialisation of
education, health care and finance. The likelihood of this scenario unfolding
depends on whether the potential of world civil society and of a number of
states now implementing such policies proves sufficiently powerful.
In our view this scenario is unlikely to play out, though we think it is
important to give it all the support possible. This is in order to signify that
a theoretical and ideological alternative exists, and also to mount a struggle
for a compromise, or at least, a contest in the near future between the two
counterposed scenarios for post-crisis evolution/development that have been
In strategic terms, overcoming the crisis is only possible if a
qualitatively different approach is adopted -- one that involves going outside
the framework of the capitalist system. But that is a topic that lies outside
the bounds of the present article.
[Aleksandr Buzgalin and Andrey Kolganov teach in the economics faculty