Whether it’s the Occupy movement in the US and elsewhere or the indignados in Spain, the Greek revolt against austerity or the British response to the depredations of the coalition government, one source of frustration for many socialist activists and intellectuals has been the inability of these movements to formulate a truly socialist demand. There have been many arguments about the economics of the crisis lately, and books from a left-wing viewpoint expounding the causes and tendencies of the crisis sell very well. There is no doubt that the current crisis, both in its scope and its severity, has undermined the dominance of neoclassical liberalist economics on the mindset of the public, and opened up the possibility for different economic theories and viewpoints to take hold. As Marx pointed out, theory too becomes a material force once it grips the masses; this goes for economic theory not in the last place.

The persistent problem of the inadequacy of the revolts against the crisis is for this reason immediately related to the inadequacy of the theories that formulate their mindset. In a recent talk at Brunel University, Slavoj Zizek rightly criticized the defeatism of leftist movements, the notion that the important thing is first and foremost the existence of a movement as such rather than the results achieved and the habit of finding glorious defeats and symbolic resistance more important than messy victories. One could similarly point to the dominance of nostalgia as a mode of critique among the left, in particular in the United Kingdom. Yet in the same talk, Zizek referred in his political-economic explanation of the crisis to the theories developed by the eminent Greek economist Yanis Varoufakis in his recent book The Global Minotaur.(1) In this work, Varoufakis analyzes the global monetary order as it has developed since WWII, identifying two stages: first, the Bretton-Woods stage, in which the United States sought to dominate and bring into its orbit all the other major countries of the world, but financing them so that they could serve as markets for its export products, and the second, neoliberal, stage in which the reverse is the case, and the United States is propped up by the flow of capital to the country because of its currency strength, allowing it to buy up the goods of the rest of the world on credit. Many similar works have been written, and the bookstores are full of leftist economic explanations of neoliberalism and its crisis in terms of the stagnating real wage, the assault on trade unionism, the increase in international inequality and the effects of the ‘Washington Consensus’, the need to compete with China and so forth.

These theories are true enough within their own domain, but they are inadequate, and the connection between their inadequacy and the inadequacy of anti-neoliberal movements must be made. From the Marxist perspective, the salient point here is to distinguish between arguments based on the distribution of value, and arguments based on the nature of the production of value. Varoufakis’ left-Keynesian explanation, and all similar arguments about neoliberalism (such as those of David Harvey(2)), ground the political movements against neoliberalism in arguments about the distribution of value. Whether it is at a global scale, concerning the call for a post-Washington Consensus economics of development, or at a local scale, when it is a call for regulation of the banks, taxation of the wealthy, the preservation of a welfare state, and so forth, these arguments are all founded in critiques of the national and global distribution of value. They are justified to that extent that a reorganization of such distribution along the lines proposed would raise the standard of living for the great majority, whether locally or globally, and would pose a considerable challenge to liberalism and conservatism as political bulwarks of the Party of Order. But the economic theories supporting them do not go far enough, and therefore the politics based on these ideas do not go far enough either.

Marxism is the only theory capable of explaining the inherent tendency to crisis that inheres in capitalism. It is therefore not, unlike the theories of Varoufakis or the critics of neoliberalism, a theory of this crisis, or even any particular crisis: it is a theory explaining all crises of capitalism, not in a proximate way, but in a fundamental causal way. Marxism does this because unlike all the other theories, it concerns itself not primarily with distribution (important as that is), but with production. Because of its significance for capitalism as a system, Marx described it as “the hidden abode of production, on whose threshold there stares us in the face “No admittance except on business.” Here we shall see, not only how capital produces, but how capital is produced. We shall at last force the secret of profit making.”(3) This is exactly then what Marxist economic theory does. Profit is the organizing category of capitalist competition, and thereby in the last instance guides all capitalist production of value, without which there is nothing to distribute in the first place. Marx demonstrated that because of the tendency towards labor-saving technology through competition, combined with the necessity of living labor for the creation of value, capitalism would display a secular tendency of the rate of profit to decline. Because the rate of profit is in the last instance the measure of the ability of capitalism to reproduce itself as a social relation, as a way of life one might say, this secular decline is a deep problem for the continued existence of the capitalist order. If therefore the rate of profit reaches a sufficiently low point across sectors that this reproduction becomes difficult, capitalism is thrown into crisis. The ancient Greek word ‘krisis’ means, among other things, ‘decision’, and this is exactly what it is for capitalism. Only Marxism can demonstrate that capitalism has this innate crisis tendency, and only Marxism understands that from the point of view of capitalism as a system, that is the collective interest of the capitalists, a crisis is not a problem but in fact the solution. It is the way in which the rate of profit is restored: the massive unemployment, the immiseration, the destruction of enormous amounts of value (just think of Lehman Brothers or AIG), all these devaluations cause the rate of profit on the remaining capital to rise, and the incentive for investment to be restored.

The significance of this is not to be underestimated. Firstly, the important point is that capitalism’s crises are not failures of the system, they are not caused by lack of regulation, by excessive greed, by too much debt or too much financialization: in the most proximate sense, they may be, but the underlying logic of capitalist crisis is always the decline in the rate of profit, whatever may be the sectors in which the crisis first manifests itself and whatever may be the mode of appearance of the crisis. Secondly, as Andrew Kliman has shown in his excellent work The Failure of Capitalist Production(4), the United States has shown just such a secular decline in the rate of profit since the crisis of the 1970s. Thirdly, because of the deeply socially destructive impact of the Great Depression and then again the (lesser) crisis of the 1970s, the governments of the capitalist countries, mindful of the possibility of a political challenge against their rule and the system as a whole, are ever more loath to allow capitalism to ‘do its work’. Instead of permitting a deflationary crisis to fully live itself out, they seek ways of dampening the crisis tendency, to paper it over – and they do so by ever increasing state and personal debt, and by attempting to find means within the credit system of countervailing this tendency. These are the underlying economic theory meanings of the most evident surface phenomena of the neoliberal period and in particular its defining crisis, the one we are living in today.

The inability to understand the primacy of the relationship between profit and production under capitalism, and the inherent nature of this crisis tendency, lead the distributionist theorists to some dangerous arguments. Varoufakis, for example, spends a considerable time in his work analyzing the impact Wal-Mart had on American consumers.(5) He suggests, essentially, that Wal-Mart’s ‘ideology of cheapness’ caused American workers to be subject to deflationary tendencies in prices and wages, and at the same time to promise them higher living standards, leading them to increasingly rely on debt rather than saving. Just like his general distributionist analysis, this is not untrue, but it misses the point in political terms. These stories of the neoliberal drive towards lowering wages and reducing unionism, to use labor competition from abroad more effectively, etc. are not false, but they are too limited. They create a political picture in which leftist resistance movements believe that the flows of value, that is its distribution, is the primary locus of the problem, and that there they should push for a solution. But this will not do. Leaving production and profit untouched means leaving the causes of the crisis untouched, in favor of attacking the chimera of neoliberal financialization and ‘greed’, which are simply products of the normal functioning of capitalism unleashed. It also encourages left-wing nostalgia, the belief that we should aim for a return to the order of the 1950s-1970s, capitalism’s Golden Age. Not only is this impossible, once the genie is out of the bottle; but even if it were possible, it would simply develop in the same way again, and in due time there would be another crisis destroying the capitalist confidence in the welfare state compromise, and another neoliberalism, and another neoliberal crisis. Such solutions are not really solutions, but reactionary attempts on the part of Western (especially European) workers to reclaim the privileges they had at the expense of workers elsewhere, and to try and forget the nature of the beast called capitalism.

All this is not to say that to resist austerity or to resist the lowering of living standards, to fight for employment, and so forth, are bad things. By no means. After all, no economic theory is any good if it does not give people the means to fight for the interests of the great majority and their standard of life and culture in an effective manner. But it is incumbent on Marxists to point out the inadequacy of purely distributionist critiques. Failure to understand the nature of crisis, as opposed to just its surface phenomena and its proximate causes, means a failure to take steps that would prevent future crisis. It also means failing to understand that the only way for capitalism to move forward from this crisis is through the destruction of value that it needs, in other words, the wholesale deflationary lowering of living standards familiar of the Great Depression – a time when capitalism was allowed to ‘do its thing’. Only by understanding this can leftists rebut the criticisms of the promoters of austerity, the logic of the creditors, and the liberal economists. Because when these say that capitalism requires economic growth, and that this growth requires a free credit system, and that such a system requires the confidence of creditors in the repayment of debtors, and that regulations, minimum wage laws, and so forth only impede the ability of the system to recover from the crisis, this is from the point of view of capital true! But it is of course also true that this entails mass unemployment, immiseration, destruction of entire economies, loss of independence, and a lost generation. Only by acknowledging that both these things are true can leftists make the argument that a system which requires such crises to reproduce itself in the long term is a system we are better off without.

1) Yanis Varoufakis, The Global Minotaur: America, The True Origins of the Financial Crisis and the Future of the World Economy (London 2011)

2) See: David Harvey, A Brief History of Neoliberalism (Oxford 2007)

3) Karl Marx, Capital Vol. 1, Ch. 6: http://www.marxists.org/archive/marx/works/1867-c1/ch06.htm

4) Andrew Kliman, The Failure of Capitalist Production: Underlying Causes of the Great Recession (London 2011)

5) E.g., http://yanisvaroufakis.eu/2012/02/14/the-global-minotaur-interviewed-by-naked-capitalism/