Thoroughly Modern Marx

By Leo Panitch

May/June 2009

Lights. Camera. Action. Das Kapital. Now.

Illustration by Hanoch Piven for FP

Related: Confessions of a True Believer, By John Judis
The economic crisis has spawned a resurgence of interest in Karl Marx.
Worldwide sales of Das Kapital have shot up (one lone German publisher sold
thousands of copies in 2008, compared with 100 the year before), a measure of a
crisis so broad in scope and devastation that it has global capitalism—and its high
priests—in an ideological tailspin.
Yet even as faith in neoliberal orthodoxies has imploded, why resurrect Marx? To
start, Marx was far ahead of his time in predicting the successful capitalist
globalization of recent decades. He accurately foresaw many of the fateful factors
that would give rise to today’s global economic crisis: what he called the
“contradictions” inherent in a world comprised of competitive markets,
commodity production, and financial speculation.
Penning his most famous works in an era when the French and American
revolutions were less than a hundred years old, Marx had premonitions of AIG
and Bear Stearns trembling a century and a half later. He was singularly cognizant
of what he called the “most revolutionary part” played in human history by the
bourgeoisie—those forerunners of today’s Wall Street bankers and corporate executives. As Marx put it in The
Communist Manifesto, “The bourgeoisie cannot exist without constantly revolutionizing the instruments of
production, and thereby relations of production, and with them the whole relations of society. . . . In one word, it
creates a world after its own image.”
But Marx was no booster of capitalist globalization in his time or ours. Instead, he understood that “the need for a
constantly expanding market for its products chases the bourgeoisie over the whole surface of the globe,” foreseeing
that the development of capitalism would inevitably be “paving the way for more extensive and exhaustive crises.”
Marx identified how disastrous speculation could trigger and exacerbate crises in the whole economy. And he saw
through the political illusions of those who would argue that such crises could be permanently prevented through
incremental reform.
Like every revolutionary, Marx wanted to see the old order overthrown in his lifetime. But capitalism had plenty of
life left in it, and he could only glimpse, however perceptively, the mistakes and wrong turns that future generations
would commit. Those of us now cracking open Marx will find he had much to say that is relevant today, at least for
those looking to “recover the spirit of the revolution,” not merely to “set its ghost walking again.”
If he were observing the current downturn, Marx would certainly relish pointing out how flaws inherent in
capitalism led to the current crisis. He would see how modern developments in finance, such as securitization and
derivatives, have allowed markets to spread the risks of global economic integration. Without these innovations,
capital accumulation over the previous decades would have been significantly lower. And so would it have been if
finance had not penetrated more and more deeply into society. The result has been that consumer demand (and
hence, prosperity) in recent years has depended more and more on credit cards and mortgage debt at the same time
that the weakened power of trade unions and cutbacks in social welfare have made people more vulnerable to
market shocks.

1
This leveraged, volatile global financial system contributed to overall economic growth in recent decades. But it also
produced a series of inevitable financial bubbles, the most dangerous of which emerged in the U.S. housing sector.
That bubble’s subsequent bursting had such a profound impact around the globe precisely because of its centrality to
sustaining both U.S. consumer demand and international financial markets. Marx would no doubt point to this crisis
as a perfect instance of when capitalism looks like “the sorcerer who is no longer able to control the powers of the
netherworld whom he has called up by his spells.”
Despite the depth of our current predicament, Marx would have no illusions that economic catastrophe would itself
bring about change. He knew very well that capitalism, by its nature, breeds and fosters social isolation. Such a
system, he wrote, “leaves no other nexus between man and man than naked self-interest, than callous ‘cash
payment.’” Indeed, capitalism leaves societies mired “in the icy water of egotistical calculation.” The resulting
social isolation creates passivity in the face of personal crises, from factory layoffs to home foreclosures. So, too,
does this isolation impede communities of active, informed citizens from coming together to take up radical
alternatives to capitalism.
Marx would ask first and foremost how to overcome this all-consuming social passivity. He thought that unions and
workers’ parties developing in his time were a step forward. Thus in Das Kapital he wrote that the “immediate aim”
was “the organization of the proletarians into a class” whose “first task” would be “to win the battle for democracy.”
Today, he would encourage the formation of new collective identities, associations, and institutions within which
people could resist the capitalist status quo and begin deciding how to better fulfill their needs.
No such ambitious vision for enacting change has arisen from the crisis so far, and it is this void that Marx would
find most troubling of all. In the United States, some recent attention-getting proposals have been derided as
“socialist,” but only appear to be radical because they go beyond what the left of the Democratic Party is now
prepared to advocate. Dean Baker, codirector of the Center for Economic and Policy Research, for example, has
called for a $2 million cap on certain Wall Street salaries and the enactment of a financial transactions tax, which
would impose an incremental fee on the sale or transfer of stocks, bonds, and other financial assets. Marx would
view this proposal as a perfect case of thinking inside the box, because it explicitly endorses (even while limiting)
the very thing that is now popularly identified as the problem: a culture of risk disassociated from consequence.
Marx would be no less derisive toward those who think that bank nationalizations—such as those that took place in
Sweden and Japan during their financial crises in the 1990s—would amount to real change.
Ironically, one of the most radical proposals making the rounds today has come from an economist at the London
School of Economics, Willem Buiter, a former member of the Bank of England’s Monetary Policy Committee and
certainly no Marxist. Buiter has proposed that the whole financial sector be turned into a public utility. Because
banks in the contemporary world cannot exist without public deposit insurance and public central banks that act as
lenders of last resort, there is no case, he argues, for their continuing existence as privately owned, profit-seeking
institutions. Instead they should be publicly owned and run as public services. This proposal echoes the demand for
“centralization of credit in the banks of the state” that Marx himself made in the Manifesto. To him, a financial-
system overhaul would reinforce the importance of the working classes’ winning “the battle of democracy” to
radically change the state from an organ imposed upon society to one that responds to it.
“From financialisation of the economy to the socialisation of finance,” Buiter wrote, is “a small step for the lawyers,
a huge step for mankind.” Clearly, you don’t need to be a Marxist to have radical aspirations. You do, however, have
to be some sort of Marxist to recognize that even at a time like the present, when the capitalist class is on its heels,
demoralized and confused, radical change is not likely to start in the form of “a small step for the lawyers”
(presumably after getting all the “stakeholders” to sit down together in a room to sign a document or two). Marx
would tell you that, without the development of popular forces through radical new movements and parties, the
socialization of finance will fall on infertile ground. Notably, during the economic crisis of the 1970s, radical forces
inside many of Europe’s social democratic parties put forward similar suggestions, but they were unable to get the
leaders of those parties to go along with proposals they derided as old-fashioned.
Attempts to talk seriously about the need to democratize our economies in such radical ways were largely shunted
aside by parties of all stripes for the next several decades, and we are still paying the price for marginalizing those
ideas. The irrationality built into the basic logic of capitalist markets—and so deftly analyzed by Marx—is once
again evident. Trying just to stay afloat, each factory and firm lays off workers and tries to pay less to those kept on.
Undermining job security has the effect of undercutting demand throughout the economy. As Marx knew,
microrational behavior has the worst macroeconomic outcomes. We now can see where ignoring Marx while
trusting in Adam Smith’s “invisible hand” gets you.
The financial crisis today also exposes irrationalities in realms beyond finance. One example is U.S. President
Barack Obama’s call for trading in carbon credits as a solution to the climate crisis. In that supposedly progressive
2
proposal, corporations that meet emissions standards sell credits to others that fail to meet their own targets. The
Kyoto Protocol called for a similar system swapped across states. Fatefully however, both plans depend on the same
volatile derivatives markets that are inherently open to manipulation and credit crashes. Marx would insist that, to
find solutions to global problems such as climate change, we need to break with the logic of capitalist markets rather
than use state institutions to reinforce them. Likewise, he would call for international economic solidarity rather than
competition among states. As he put it in the Manifesto, “United action, of the leading . . . countries, at least, is the
first condition for the emancipation of the proletariat.”
Yet the work of building new institutions and movements for change must begin at home. Although he made the call
“Workers of the world, unite!” Marx still insisted that workers in each country “first of all settle things with their
own bourgeoisie.” The measures required to transform existing economic, political, and legal institutions would “of
course be different in different countries.” But in every case, Marx would insist that the way to bring about radical
change is first to get people to think ambitiously again.
How likely is that to happen? Even at a moment when the financial crisis is bleeding dry a vast swath of the world’s
people, when collective anxiety shakes every age, religious, and racial group, and when, as always, the deprivations
and burdens are falling most heavily on ordinary working people, the prognosis is uncertain. If he were alive today,
Marx would not look to pinpoint exactly when or how the current crisis would end. Rather, he would perhaps note
that such crises are part and parcel of capitalism’s continued dynamic existence. Reformist politicians who think
they can do away with the inherent class inequalities and recurrent crises of capitalist society are the real romantics
of our day, themselves clinging to a naive utopian vision of what the world might be. If the current crisis has
demonstrated one thing, it is that Marx was the greater realist.

Leo Panitch is Canada research chair in comparative political economy and distinguished research professor of
political science at York University in Toronto, and coeditor of the annual Socialist Register.