three myths about the crisis

Conrad Russell challenges common left myths about the meaning of the crisis

This article is designed to question a number of theoretical assumptions implicit in much Marxist – including autonomist or left communist – writing on the crisis. In particular, I want to question assumptions around capitalist contradictions, capitalist decline, and the role assigned to financial and ‘fictitious’ capital.

much left analysis of the crisis leans on a shallow understanding of the financial sector

My argument is that these assumptions paint a model of a decaying ‘collapsing’ capitalism (hence my term ‘collapsism’). They also fetishise the mechanics of capitalist functioning at the expense of the real social relation underlying them – the class struggle.  It is class struggle, not some quasi – mystical ‘debt meltdown’ or ‘falling rate of profit’, which constitutes capitalism’s permanent crisis.


 Too often, there is a tendency, in Marxist writings on the crisis, to see the famous ‘irresovable contradictions’ at the heart of capitalism in purely mechanical terms. The rate of profit is falling, financial capital is strangling ‘productive’ capital, and various occult ‘fixes’ involving trading debt are all that is keeping capitalism on life-support. The crisis, it is argued, results from the inexorable ‘tightening’ of these contradictions, as the fixes stop working. Implicit to this view (if unintentionally) is an understanding of capitalism which represents it in the same way that an ‘orrery’ – a clockwork model – was used to represent the solar system in the 18th century. This analogy is used by the Marxist Historian, E.P. Thompson, in his critique of Althusser’s ‘structural’ Marxism (see his book The Poverty of Theory). In this mechanistic account, the capitalist ‘orrery’ has inherent flaws, which will ultimately lead to its collapse. The problem with this model is that it takes the appearance of the system – as a system of objective, interacting, determinate, yet contradictory, laws – as its essence. In the process, this analysis ignores the one fundamental contradiction within capitalism – the appropriation of private social labour through the market mechanism. Capital, try as it might, can never abolish social labour.

In the words of Simon Clarke (in the edited collection The State Debate) – as capitalism reproduces itself, it always reproduces the working class as a barrier to capitalist accumulation. This barrier may be a weak, atomised one, dispersed in precarious labour, atomised in home-owning households, divided by ‘race’ and ‘gender’, but it is always there. All the other contradictions flow from this one – they are not autonomous forces inscribed within capitalism’s ‘laws of development’. The contradiction is social and political, not technical and economic.

Dominance of Financial Capital

It is often argued that the rise in unproductive ‘financial’ or ‘fictitious’ capital is an unavoidable feature of ‘late’ capitalism, which both intensifies capitalist crisis, and pushes capital to ever increasing levels of abstraction and unreality. The argument usually goes something like this – because of a decline in capitalist accumulation (the ‘falling rate of profit’- discussed below) a form of fictitious growth has taken its place, through the inflation of money capital. M is transformed into M’ (profit) via derivatives, inflation of property prices etc… Whilst it is true that such capital is fictitious because it does not involve the creation of new value (only social labour can do that), it is not true that this is the only kind of ‘accumulation’ available to the bourgeoisie, to stave off otherwise inevitable collapse. Rather, this is a political choice. Isidro López and Emmanuel Rodriguez in ‘The Spanish Model’ (New Left Review # 69) make clear that the inflation of the Spanish housing market allowed the ‘wage’ to rise – in the form of debt secured against property – as house prices kept rising. This secured ‘growth’ without actually raising wages, taxes, employment, or, crucially the concentration and centralisation tendencies of Capital and therefore working class power –  a model which they term ‘asset-price Keynesianism’.  The issue here is whether this is the only strategy left. Is this Capital’s ‘last gasp’ or the most attractive option for a particular capital fraction at a particular time?  If ultimately, this ‘asset growth’ approach is exhausted, what inherently prevents a switch back to ‘productive’ capital investment ?  In a recent article, Oisín Mac Giollamóir (The Commune # 24) argues that such asset-inflation is relatively marginal within the capitalist economy, when compared to profits derived from the exploitation of labour. This suggests capital has more room for manoeuvre, and more options, than the ‘collapsist’ model suggests.

There is also a more fundamental problem in the way that the concept of ‘fictitious capital’ is used. Whilst it is true that self-inflating money capital is adrift from the ‘underlying’ value produced by variable capital (labour), we must remember a fundamental, apparently obvious, but much neglected point. Value is in itself inherently ‘fictitious’. It is not inherent in social labour as such, but is imposed upon it. Labour Value is rooted in the accounting of labour in terms of (necessary and surplus) Labour Time, which only emerges at the point at which social labour is separated from appropriation –  under Capitalism. It is when labour becomes commodified, that ‘valuing it’ (in terms of clock-time) becomes necessary to govern its exchange on a market (in terms of money). As Marx observes, all (bourgeois) economy is economy of time. E.P. Thompson (in Customs in Common) discusses the long history of working-class resistance to the shift towards working to the clock, rather than the demands of a specific task – which was inherent to the introduction of wage-labour.

Whilst the concept of fictitious capital may be useful when used cautiously, the notion of a ‘real productive economy’ – as fictitious capital’s ‘real’ counterpart – is bourgeois. It is no accident that Orthodox Communist Parties, whose model was ‘Soviet’ State Capitalism, made much use of this concept in their attempt to form popular fronts with the ‘productive’ sections of their respective national bourgeoisies. Of course it is true that fictitious capital has a fictitious relationship to value – but this is a fictitious relationship to a fiction.  All ‘value’ is at root an ideology, a set of imaginary social relations imposed by real and symbolic violence everyday on living social labour. Value makes no sense outside of private property, market exchange and rational accounting of labour time, which reduces living social labour to an abstraction. Getting worked up about dodgy debt bonds or banking sleights of hand distracts us from this essential reality.

Blaming fictitious capital for the crisis is a fetish – a bestowing of ‘magical’ powers upon an object – in the same way that fetishising commodities gives them an inherent value they do not possess. The nature of both ‘real’ commodities (a raincoat, or a brick, or a copy Marx’s Capital) and of ‘fictitious’ bonds, shares, futures etc… derives from social relations which are antagonistic – from the exploitation of living labour. And thus both can only ultimately be understood from the perspective of class struggle.

Falling Rate of Profit

There is an observable tendency for the proportion of capital deployed in production represented by plant, machinery and infrastructure to increase over time at the expense of living workers. Only workers  – not machines – create value, so profit will decline as the ratio of workers to machines does … unless counter tendencies are in operation. These include raising productivity (output per unit of wages) or cutting wages or raising prices. In order to really understand the issue of ‘falling profit’ we need to examine it in the light of concrete social relations. Capitalism separates workers from what they produce, in exchange for a wage which represents only part of labour-time, that deemed necessary for survival – this portion is ‘negotiated’ through the class struggle. In exchange for a wage, workers produce what they are directed to produce, with no control over the process, or the end product.

The commodities workers produce (objects in which labour is embodied) pass through market exchange to realise (release) the value labour has embodied in them. As this value exceeds the value of the wage, this is the source of profit. Thus living labour is transformed into ‘dead labour’ – stored up in marketable objects which have a ‘life’ of their own, severed from those who created them, a life as consumer objects or as constant capital (machines and material for production). Capitalists are forced under the pressure of competition to constantly expand production by reinvesting the value realised by exchange – either as money value (stocks, investments) as constant capital bought with money value (plant, machines), or by purchasing more labour. This reinvestment typically leads to ‘dead’ labour crowding out living labour, as mechanisation increases. Thus, the more commodities are produced (under the ceaseless pressure of capitalist competition), the more go round the circuit back into production, as semi-finished goods to be worked up, as machinery to govern labour, or supervise and control it (computer monitoring, CCTV etc.)

Thus, as Marx concludes, under capitalism, dead labour ‘weighs like a nightmare on the brains of the living’. The growing mass of dead labour is turned against the workers who produced it. The more they labour, the more they are separated from labour and the more it is turned against them. This contradiction at the heart of capitalism between dead labour and living labour becomes a stake in the class struggle – for example, machine breaking and union struggles over control of assembly lines, where living labour takes on dead labour. What is often at stake here is the use of dead labour precisely to increase productivity (automation) and act as a brake on falling profit. In other words, the rise in dead labour (machines) makes the remaining living labour more productive, so profits shouldn’t fall – unless workers fight back against speed-ups.

Thus, there is no automatic falling profit rate – rather it is precisely contingent on class struggle against the stranglehold of dead labour. So, in consequence, there is certainly a ‘tendency’ for successful class struggles to cause profit rates to fall.  The ‘hot 1970’s’ –  where factory workers pushed wages close to, or above productivity gains in Italyand the US- are an example. A ‘freeing up’ of capital to flow to lower wage zones with repressive labour laws, the crushing of Allende’s social democracy in Chile, and de-industrialisation and a shift to atomised service industry in the UK were all parts of the bourgeois response. So was a shift to asset-price Keynesianism and financial capital (also boosted by the freeing of capital controls to weaken labour).

My argument is that this shift to the neo-liberal asset-led model was an assault in the class war, not a rearguard action to shore up decadent collapsing capital trying to escape the inevitable Fall of Profit (a near-Biblical vision of Apocalypse). This was an active strategy – just, as, I argue, are bourgeois responses to the current crisis. Taken as an abstraction, an autonomous dynamic under capitalism which drives it as a system (i.e. a fetish), the falling rate of profit does not exist. Rather, it is historical and contingent, and a ‘stake’ in the class struggle.

The Crisis

It could of course be argued that the points made above are self-evident, but abstract. One could object that you can reduce the mechanisms of crisis and capital accumulation down to class struggle, but that this just makes a fetish of that struggle rather than of fractional reserve banking or falling profit rates. So I want to sketch out briefly here what an account of the crisis based on my premises here might look like, and why it is important in understanding the crisis politically. Evidently this is an impressionistic sketch, not a full analysis – I’d hope it might however spark debate about alternative ways of developing such an analysis.

The crisis needs to be understood as a struggle over the wage over the balance between socially necessary and surplus labour time. Firstly, austerity in Southern Europe, the US and elsewhere has led to cuts in wages both absolutely (cuts in the money wage) and relatively (where the wage is not directly cut, but inflation is allowed to cut into the wage; i.e. the UK public sector pay freeze). Secondly, the surplus value capitalists have previously been forced (under the pressure of class struggle) to return to workers as a ‘social wage’ (benefits, health services etc…) is being cut to ‘pay for’ the debt crisis. Thirdly, rising house prices allowed workers to finance consumption through borrowing secured on assets (asset-price Keynesianism). This debt-financed consumption formed a ‘fictitious’ component to the wage itself. As interest rates go up, this ‘virtual wage’ disappears. Finally, increases in working hours without pay increases and increases in lifetime working (pension ‘reform’) serve to increase socially necessary labour time – time worked to ensure survival – and thus are another attack on the wage.

The crisis is a social struggle over the price of labour. It is a particularly harsh and vicious one. In Europe, the most vulnerable and poorest workers – precarious labour, women, public sector workers and above all, those on the ‘periphery’ (Spain, Greece, Ireland, Portugal) are paying the highest price. The crisis is not a result of Capitalism’s senility (stalling accumulation) decadence (fictitious capital) or decline. Capital can precisely flourish in the midst of utter misery and jobless growth is hardly a new phenomenon. And the push to cut wages is precisely to brake falling profits, by reducing the ‘cost’ of labour. Asset inflation is not the only weapon available in capitalism’s arsenal to help sustain the profit rate.

Of course, proper theoretical work on the crisis needs to carefully examine the mechanisms of debt, credit ratings, asset inflation, and, yes, fictitious capital. However, this work needs to start from an understanding of the essential causes of the crisis -not overheating machinery in the engine-room of moribund capital, but a crisis in the previous class settlement, of which domestication of debt and asset inflation were a part.  A politics of working-class self activity cannot fetishise the crisis by pointing to ‘failing’ bits in the circuits of capital accumulation. We should be clear that capitalism is in permanent crisis because of the antagonism between social labour and private appropriation at its heart.

6 thoughts on “three myths about the crisis

  1. I happen to disagree with a few things in that article.
    First the idea of ‘contradictions inherent in the system’ as static structural analysis.
    I think David Harvey has a great way of looking at this, it’s not static, the contradictions are
    embedded in the capital, and it is in the constant process of resolving or subverting them,
    in way or another. And then crises are the moments where under the current set of capitalistic relations
    the contradictions become unsustainable and the system engages in creative destruction in order to find another way.
    It’s the a-limit-into-a-barrier argument (if you search youtube for ‘david harvey rsa animate’ there is a nice visual illustration of it).
    Second the ‘mythical falling of the rate of profit’. He agues that the source of the falling rate of profit is class struggle.
    I think the original Marx’s argument ism more or less, that capitalists seek ephemeral profits by innovating,
    but due to the coercive laws of competition those innovations inevitably spread, and as value is SOCIALLY NECESSARY labour time
    the value of commodities produced falls.
    I think Russell’s main struggle is that over agency. Analysis of the current crisis as a problem of the falling of the rate of profit
    give agency to capital whereas he is trying to position class struggle at the centre in order to give agency to the working class.
    You can agree with his conclusion, that it is a struggle over the price of labour, and say that this is the solution of the problem
    of the falling rate of profit, which increases if the price of labour falls. But then again this gives agency to capital.
    Unfortunately, I think the agency belongs to capital in the current crisis. I mean, the class struggle is becoming important in
    some countries in Western Europe now, but to position the class struggle as the source of the crisis in 2008, that seems a bit far fetched.
    It is purely a subjective judgment, but most of my grown up life, the 90s and noughties, I just don’t seem to remember it as a period of intensive class struggle.
    I think the capital has been on the front foot for a while, and we should admit it in order to find a way out of this.


  2. I’d have to go through Mac Goillamóir’s article to see which are his reasonings but in principle the “asset growth”, more commonly known as the credit bubble, is a pseudo-Keynesian way applied by the rather anti-Keynesian late Capitalist direction (Neoliberals) to keep the working class content while they liquidated the USSR bloc (and the left in general) and developed the late imperialist strategy of Clash of Civilizations (aka War on Terror), in which both “contenders” are equally reactionary and Capitalist.

    At some point however the credit bubble had to burst, so the dialectics came back to the starting point of the 1970s and 1980s but in aggravated conditions.

    They have run out of tricks however. I have never seen Capitalism so determined to just rip off profits today at any cost and so much lacking any mid-term plan of any kind. Not just that, such decadent lack of planning, such hyper-classist emphasis on making the poor pay in exclusivity, has no historical precedent other than the crisis of the Ancien Régime. That is why we can understand almost intuitively that this crisis looms as quite final – or at least very much radical and essential.

    Yet it lacks (so far and mostly) the consciousness and organization of the Working Class. But it is developing quite fast, I understand.

    “Only workers – not machines – create value, so profit will decline as the ratio of workers to machines does”…

    This is a misunderstanding of what is value: it is not Marxism but Ricardianism. Marx was influenced by Ricardo and was at times confused/-ing about this nature of value but Marx’ value is either use-value (loose equivalent of demand) or exchange-value (price). Never in Marx value is defined as work. In fact value can come from the work of machines or from the work of Nature or all such work can be value-less because there is no demand for it.

    In the end all value is use-value and nothing else, and therefore depends only on demand.

    This Ricardianist deviation is a total error: one thing is that workers do add value (depending on what they do, in fact) and that among all producing forces they are the only one subject of rights in the Humanistic tradition of which Marxism is a major branch, and another very different thing is that the labour theory of value, which is Ricardian and not Marxist, is correct. The LTV is wrong.

    And finally you also have it wrong claiming that Capitalism can flourish in generalized social misery and collapse. We must not forget that all the power of the bourgeois class comes from their ability to organize the Working Class (economically but also socio-politically) and, as any ruling class, they are expected to deliver (salaries, working conditions in the job, but social content and stability in the socio-political sphere). While early or colonial capitalism can dwell on generalized exploitation and misery and that is indeed the tendency of Capitalism, in the advanced stage not of Capital only but also of the development of the Working Class (Negri’s social worker) Capitalism is expected to deliver rights, democracy and certain affluence, as it has done for two or three generations more or less.

    But it is now unable and unwilling of delivering anymore, lacking any plan for even short-term resolution other than extending and pretending (and hoping it’ll be solved alone). Why it is unable to deliver is clearly related to the senile financialization of Capitalism and also to the globalization which renders the central working classes less valuable… unless they can force their way in the socio-political arena, that is unless they can make a revolution.

    And that’s the current situation: on one side the late Capitalist system is extending and pretending without even a slight idea of what to do now other than taxing the poor to pay the rich and promoting neofascism, on the other side the advanced Working Class of the central states is getting more and more conscious, self-conscious and organized. It is indeed a very incipient stage but at this rhythm it should reach revolutionary dimensions by the end of the decade.


  3. @UuOoBb

    ‘I think Russell’s main struggle is that over agency. Analysis of the current crisis as a problem of the falling of the rate of profit
    give agency to capital whereas he is trying to position class struggle at the centre in order to give agency to the working class.’

    In fact I’m arguing that the working class *has* agency as it is the only source of value, and capitalism is utterly dependent upon it. Workers have the potential to overcome capitalism entirely … through revolution.

    To argue class struggle is the source of the crisis does appear ‘far fetched’ I agree – if you take my argument as meaning workers chose either asset-price inflation or the crisis. But a weak class struggle (which is what gave capital the latitude to pursue this option) is still a class struggle. My point is that we need to see this as weak class struggle (and discuss how to overcome this) and not as a bourgeoisie with ‘agency’.

    I woiuld argue that the bourgeoisie does not have agency at all – it creates nothing. It merely turns our agency against us. Who makes the police batons, CCTV cameras and the rest of the panoply of repression ? Who builds the houses used to fuel speculative booms ? This may appear to be just turning your argument upside-down. It is. My point is to view the crisis from the standpoint of the progressive, universal class, not the bourgeoisie. This is the view workers gain through struggle. Without it, we are condemned always to give the capitalists the upper hand. Of course revolutionary potential is one thing, and revolution quite another… but a deterministic structural analysis is not the place to start if a revolution is what you want.


  4. @ouvrieriste

    I should clarify, I agree with a lot of your points too, that the capitalism is nowhere near a collapse and that t is in constant crisis and I agree what we are seeing is a struggle over the wage as you explain it.

    That the bourgeoisie does not have agency at all? I don’t think so. A view of the world, where there are the exploiting capitalists on one hand side, and the value creating workers on the other, and there is nothing in between, which your last paragraph suggests, is a bit simplistic.

    You talk about other resorting to mystical explanations, but your notion of the progressive, universal working class is a bit like too. It’s too generalised to account for real experiences of people.


  5. Greetings,

    This letter is relevant insofar as it addresses finance capital:

    Capital Idea (

    Having read Ticktin’s article on surplus capital, I should note that he’s not the only Marxist who emphasises surplus capital (and the lack of investment opportunities) over rates of profit (‘The theory of capitalist disintegration’, September 8). David Harvey is another such Marxist.

    However, I have also read other material that suggests that the emphasis on finance capital, financialisation, etc à la Hilferding may be quite overrated, to say the least. This also puts a dent on vulgar ‘popular’ discourse on the matter. Here I will mention another form of ‘macro’ capital (like industrial and finance capital, as opposed to the ‘micro’ variable capital, constant capital, money capital, productive capital, commercial capital, etc).

    Two Russian Marxists – Michael Prokovsky and your very own comrade, Boris Kagarlitsky – introduce trade capital. The former ignored finance capital, while the latter said in an interview with India’s Frontline that finance capital is merely subordinate to either industrial capital or trade capital at any given period of time. For example, neoliberalism is merely another period whereby it is subordinate to trade capital, and this in turn may explain more accurately tendencies towards export of capital (from classical Marxism on imperialism) and towards import of capital by the most developed capitalist countries.

    I’d like to read an elaboration on the subordination of finance capital to one or the other form of ‘macro’ capital (again, industrial versus trade) in a given period, and how this plus surplus capital plays some role in particular crises.


  6. Maju must have been reading a different Marx to me!

    “The contradiction is social and political, not technical and economic”

    I believe it is a mistake to divorce these categories from one another.

    On Crises – capitalism does have periodic in built cycles which cause contractions and expansions. This is due to its nature as an anarchic system. These crises get more acute as capitalism develops. Capitalism is still developing imo so the crises dialectically have within them their own solution. The symptons of the crisis are in fact the resolution of the crisis. As capitalism develops to an ever greater degree this negation of the negation becomes harder. These are technical points, so there is an element of Marx which is technical – part of the mechanical make up of capitalism causes periodic crises.

    I agree that an attack on the social wage is happening but the point is that this will only make the realisation of the surplus value created that much harder.


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