Journal of Socialist Theory

Critique Notes 44

In the previous Critique Notes we said that the issue for the world economy was not whether there would be a recession but how deep it would go. That analysis is now widely shared.[1] The orthodox definition of a recession as being negative gdp growth over two quarters has little meaning, given the impossibility of exact calculation of the figures required. Furthermore, Marxists reject the actual calculation itself, disputing the sectors included as well as the basis of calculation. It makes more sense to look at the underlying problems, conflicts and contradictions and estimate their importance and depth. In this issue, we have a number of articles discussing both the present economic downturn and the overall stage of modern capitalism.

There are two questions. Firstly, how deep is the present crisis and secondly, is this a crisis of epochal proportions. Put differently, are we at a turning point in world history? This may seem an unnecessary exaggeration of what appears to be a normal cyclical downturn, however deep. The rest of these notes will seek to explain the argument as to why we should be exploring the question of whether capital has reached a decisive moment in its decline. A number of the articles in this issue discuss the question of the depth of the crisis.

Martin Jacques, former editor of Marxism Today in its liberal Stalinist phase, has argued that the present situation is indeed a turning point in history. He maintains that we are seeing a shift away from Western, more particularly US dominance, towards a greater role for Asia. He takes the view that US economic decline, as shown in its negative balance of payments as well as in its current banking crisis, is matched by the growing importance of Asia.[2] While we agree with him that the US is in precipitate decline and that it represents the end of an era, as did the earlier decline of the British Empire, we cannot go along with his worship of Asian development. The fact is that China remains dependent on the USA, even though it holds 1.2 trillion dollars in its reserves. . We have argued in these notes before that China is highly unstable and that it is closer to being a modern semi-colony than a world power.

The USA remains the main world power industrially and financially, and it is not being threatened in this respect by any Asian country. Germany remains the world’s greatest exporter and it is the only country to compete with the United States in industrial terms, but it is more limited in its range. Japan, once touted as the next great power, remains mired in its own economic implosion. Individual European countries may have higher levels of productivity or may make superior or more innovative products but overall the combination of military, aerospace, pharmaceutical and engineering industries in the USA has no comparator. At one point, the USSR was also regarded as a potential power before it disintegrated. In other words, the idea that there is some replacement for the USA and it will come from Asia is already a failed third worldist dream. We have argued in these notes before that China is highly unstable and that it is closer to being a modern semi-colony than a world power.

Nonetheless, Martin Jacques is attuned to the new zeitgeist. The nationalisation of Northern Rock does represent a sudden judder in the onward march of marketisation in the UK, not least because it is perceived as such. The fact is that the USA had no trouble nationalising the Savings and Loans banks in the eighties under Reagan and no one talked of it as a major change. The point is that Britain led the world in de-nationalisation and in its proclamations on the superiority of the market. Nor is it just a question of one nationalised bank. The fact is that the government is intervening in the economy in a series of ways in order to avoid a possibly severe downturn. Economists are deploring the increased government interventionism, and what they choose to call neo-mercantilism.

Turning points

The Russian Revolution of 1917 was the greatest shock to capitalism. It changed the political economy of the epoch fundamentally.

The history of the last century was dominated by the Russian Revolution and its consequences. Modern orthodox historians play down the consequences of the Russian Revolution, usually looking at it either as a justified revolt, which ultimately failed, or as a monstrosity that unfortunately finished off the Romanov dynasty and/or its replacement, the Kerensky government. That ends their analysis. In reality, the February Revolution had overthrown the most reactionary regime in Europe and the October Revolution was a probable consequence given the importance of the left in the February Revolution. Even if the October Revolution had done nothing else, the obliteration of the relics of the Absolutist regime from the oppression of nationalities, the anti-Semitic pogroms, to the backwardness of the peasantry would have altered the balance of power in Europe and so the world, however limited the actual replacement regime.

Whatever one’s viewpoint of the achievements of the Russian Revolution in the period 1917-1923, it went much further. It raised the banner of socialism, and in rejecting the doctrine of socialism in one country it assisted the left movements in Europe both physically and intellectually, so forever destabilising capitalism. The suppression of the subsequent insurrections, general strikes, mutinies and demonstrations were successful but the European countries were only stabilised in the end through a combination of repression and concessions. Much of Europe came to be governed by semi-Fascist, proto-Fascist and directly Fascist regimes. Hitler’s coming to power was a direct result of the instability of Germany. Between his repression of the German population and the World War, capitalism was reached a new equilibrium, with the assistance of Stalinism.

The continued equilibrium of capitalism in the post-war period rested on the decision to go for full employment and the welfare state, and the support of the Stalinist parties. The instability of the Soviet Union was masked by a period of post-war exhaustion and an apparent lack of an alternative, combined with a form of atomisation unheard of in human history. The mass killing and incarceration of a large part of the ‘intelligentsia’ and all the left has no precedent in human history. The destruction of the left in the Soviet Union and its disembowelling in the rest of the world was a result of which the ruling class could only have dreamed.

Although the Cold War produced an apparent form of conflict between socialism and capitalism, in reality the Soviet Union was not socialist and the conflict itself was sometimes more of a charade than a reality. The occupation of Eastern Europe was effectively accepted by the West while the wars in the East tended to be out of Soviet control. There was nonetheless a real conflict but it was not about socialism. It had much to do with Russian nationalism, now once again showing itself. It had also to do with the need for an unstable elite to find support outside its borders and the enmity that capitalism has for any non-market type system. However, the most important factor maintaining the Cold War lay in the need of both the ruling groups in the USSR and the capitalist countries to stabilize their own positions within the socio-economic formations. No form could have been invented, which fitted that task better than the Cold War.

The Soviet Union was highly unstable and had used the threat of outside intervention as an excuse for all the ills of the system, for the entire period of its existence. Without a believable ideology, relying on atomisation as the major force containing the population, the possibility of war was a real mobilising force. That was why the Reagan squeeze achieved the opposite of what was intended, even though various conservatives seem to believe that Reagan/Thatcher brought down the USSR. The army and the secret police had a reason for existence, apart from the maintenance of internal order. For the West, Stalinism appeared as the awful fate, which befell any country that was stupid enough to allow itself to take the communist, if not socialist road. Anti-communist ideology was a potent force, and, given the considerable numbers of people in the West who had either come from Eastern Europe or had relatives there, it was clear that a great deal of it was true.

The Stalinist communist parties played crucial roles in controlling working class movements in this period. The fact that right wing journalists seem not to have been aware of their role does not alter this fact. We live in a period where the ruling class does not necessarily act rationally. That was obvious when it chose to allow Fascism to come to power, even though they did not like it. In the last period, they seem to have believed their own propaganda. The fact that the USSR was a status quo power, containing revolutions around the world, was ignored and the Western bourgeoisie chose to believe that it had triumphed when the USSR ceased to exist. Their ignorance, if not stupidity, was shown when they rubbed the noses of the Soviet elite in their own mess in 1992 onwards. This is discussed in the article on Putin’s Russia.

Radical changes in history, whether major wars or revolutions, are caused by specific changes in society. Those changes, in turn, at a certain point take on a momentum that drives to completion or destruction. In the contemporary context, social democracy and Stalinism have rejuvenated capitalism to the point where its objective decline has been largely obscured.

Both those forces have exhausted their potential and are either dead or dying. The end of the Cold War has dealt a deathblow to the structured stability of the world order. The logic of this situation is that the inherent instability of a declining capitalism should show now begin to show itself both subjectively and objectively. It does not mean that the end of capitalism is near, because that requires a considerable change in mass consciousness but it does mean that the systemic crisis will show itself in more obvious ways and that governments will appear more directly oppressive and irrational. The point, of course, is that it is already true that the political system is cracking, that Western governments have passed repressive legislation, and engaged in unwinnable wars. They have used torture while proclaiming the superiority of democracy as practised by themselves.

In short, there is a reason why we have a downturn, which is predicted to be the ‘mother of all downturns’. It is not just one more cycle in an endless series of cycles. The huge surplus of capital is a direct result of the end of the Cold War, the downgrading of the welfare state, and the relative weakness of the working class. At the same time, these same changes mean that the previous mode of control over the working class has been destroyed. This apparent victory of the bourgeoisie has dealt a fatal blow to the equilibrium of the world system.

We can interpret this in two ways. The view of old time Stalinists, unsurprisingly, is that we live in a period of reaction and retreat. At the present time, most of the left is closer to this view, causing it to shift to the right. The alternative is to argue that the major obstacles to the formation of a genuine socialist movement, since the rise of Stalinism, are at an end. In that sense, we are now in a new period for the left, in which it has to re-constitute and develop itself but in which the potential is unlimited.


  1. See for instance Martin Wolf: America's economy risks the mother of all meltdowns Financial Times (London); 20 February 2008,p.9. Martin Wolf is effectively the chief economic commentator of the Financial Times:
    “So how bad might this downturn get? To answer this question we should ask a true bear. My favourite one is Nouriel Roubini of New York University's Stern School of Business, founder of RGE monitor. Recently, Professor Roubini's scenarios have been dire enough to make the flesh creep. But his thinking deserves to be taken seriously. He first predicted a US recession in July 2006. At that time, his view was extremely controversial. It is so no longer. Now he states that there is a rising probability of a 'catastrophic' financial and economic outcome.”
  2. Martin Jacques: “Northern Rock’s rescue is part of a geopolitical sea change” The Guardian, London, 18/02/2008, p.29.