1929 again Socialist Appeal Editorial Statement

Marxist Analysis · 2008-09-15

Core Argument

The central thesis of this editorial statement is that the 2008 financial crisis is not a temporary malfunction or a consequence of rogue individuals, but a systemic and inevitable convulsion of capitalism itself. The article argues that the crisis is structurally identical to the 1929 Wall Street crash, driven by the same underlying dynamics: speculative bubbles built on credit, over-leverage, and the irrational "herd instinct" of capitalist actors. The claim is that bailouts and state interventions cannot resolve the crisis because they treat symptoms rather than causes — the fundamental instability of a system based on unplanned production and the exchange of money. The conclusion is stark: 1929 could be re-run at any time, and it is being re-run now.

Theoretical Grounding

The analysis draws on Marx's theory of capitalist crisis, particularly the notion that crises are not exogenous shocks but endogenous to the system's internal contradictions. The article implicitly invokes Marx's observation in Capital Volume III that the credit system, far from stabilising capitalism, intensifies its contradictions by enabling the separation of ownership from production and permitting speculation to run ahead of real accumulation. The concept of "fictitious capital" — capital that exists as claims on future surplus value without any corresponding real value — is the unspoken theoretical backbone of the argument. When the article notes that $62 trillion in credit default swaps existed against a global output of $53 trillion, it is describing fictitious capital's explosive growth beyond any possible realisation.

The piece also draws on the Marxist tradition's critique of Keynesian "animal spirits" explanations. While acknowledging Keynes's descriptive accuracy, the article rejects the notion that psychological factors are the root cause. Instead, it insists on what Charles Kindleberger calls "an old-fashioned theory of the instability of the financial system" — a formulation that, in the Marxist tradition, points to the law of the tendency of the rate of profit to fall and the periodic devaluation of capital that crisis accomplishes. The editorial sits within the classical Marxist tradition of crisis theory, as developed by Lenin, Trotsky, and later theorists like Ernest Mandel, rather than the reformist or social-democratic traditions that treat crises as correctable through regulation.

Conjunctural Relevance

The article was written in October 2008, at the height of the acute phase of the Global Financial Crisis. It references specific events that were unfolding in real time: the collapse of Northern Rock (2007), the nationalisation of Fannie Mae and Freddie Mac (September 2008), the failure of Lehman Brothers (15 September 2008), the forced sale of Merrill Lynch to Bank of America, and the near-collapse of AIG. The editorial notes that within months, three of five major US investment banks had disappeared — Bear Stearns, Lehman Brothers, and Merrill Lynch — while Goldman Sachs and Morgan Stanley were forced to restructure as bank holding companies.

The article is particularly sharp on the scale of the crisis. It reports that the US government assumed $5.3 trillion in mortgage obligations from Fannie and Freddie, and that credit default swap claims on those two firms alone reached $62 trillion — a figure exceeding total global output. The editorial also references the UK context, noting Gordon Brown's orchestration of the Lloyds TSB takeover of HBOS, and the emerging plan for a "bad bank" to purchase $700 billion in toxic mortgages. The argument that 100,000 banking jobs were to be lost in Britain, with knock-on effects into the "real economy," proved prescient: unemployment in the UK rose from 5.2% in 2008 to 7.8% in 2009.

Geopolitically, the article situates the crisis as a global phenomenon centred on the Anglo-American financial system but with worldwide contagion effects. It does not yet address the longer-term consequences — the shift towards austerity, the rise of populism, or the weakening of the European project — but these are implicit in the analysis of capitalism's instability.

Where the Argument Continues

This editorial is an opening salvo in what became a sustained Marxist analysis of the 2008 crisis and its aftermath. The argument continues in several directions:

• Michael Roberts, cited in the article, produced a series of detailed economic analyses for Socialist Appeal (later In Defence of Marxism) throughout 2008-2009, developing the empirical case for the tendency of the rate of profit to fall as the underlying cause. His book The Great Recession: A Marxist View (2009) extends the argument.

• Alan Woods, also cited, wrote World Capitalism in Crisis (September 2008) and later developed the analysis into a broader critique of the "long depression" thesis, arguing that the 2008 crisis marked the beginning of a prolonged period of stagnation, not a cyclical downturn.

• The Against the Stream podcast series, particularly episodes from 2008-2010, regularly returned to the crisis, debating whether it represented a 1930s-style depression or a Japanese-style "lost decade."

• The theoretical question left open by the article — why the system is inherently unstable — is developed in the Marxist tradition through the law of the tendency of the rate of profit to fall. Roberts's later work, and the IDOM series Crisis and the Rate of Profit, provide the technical elaboration that the editorial only gestures towards.

Connections

This article should be read alongside:

• Marx, Capital Volume III, Part V — on the role of credit and fictitious capital in intensifying capitalist crises.
• Trotsky, The First Five Years of the Communist International — particularly his writings on the 1929 crash and the political tasks of Marxists in periods of crisis.
• Ernest Mandel, Late Capitalism — for the theory of long waves and the structural role of credit in the post-war boom's exhaustion.
• Michael Roberts, The Great Recession: A Marxist View (2009) — for the empirical elaboration of the rate of profit analysis.
• Andrew Kliman, The Failure of Capitalist Production (2012) — for the most rigorous contemporary defence of the law of the tendency of the rate of profit fall as the cause of the 2008 crisis.
• Alan Woods, The Crash of 2008 and the Marxist Theory of Crisis (IDOM, 2008) — for the political-strategic conclusions drawn from the same analysis.

Key Quotes

1. "The Banks are going down like ninepins. The whole financial system has been based on an unstable house of cards of credit. The pyramid had been built up over years of mad speculation. Now it is all unravelling."

2. "Fannie and Freddie, the huge mortgage insurers, had lent 50 times as much as their assets. That's leverage!"

3. "Speculators had built up claims of $62trn in credit default swaps (a kind of derivative, a sort of bet) on the two firms. By way of comparison the whole world's output in 2007, the fruit of 6½bn people's labour, is estimated at $53trn!"

4. "Nothing's can cost too much to bail out the rich from their own stupidity."

5. "The financial system is unstable because capitalism is unstable. The system is unplanned, and only thing linking people's economic activity is the exchange of money."

6. "Panic, convulsion and the lurch from hysterical speculative boom to the depths of despair are not accidental. They are rooted in the system. 1929 could be re-run at any time. It could be re-running now."