Markets routed in global sell-off Its every man for himself

Marxist Analysis · 2008-10-07

Core Argument

The central thesis is that the October 2008 global stock market rout represents not merely a financial panic but the eruption of a classical crisis of capitalist overproduction, the deepest since the 1930s. Rob Sewell argues that the credit system, which had artificially extended capitalism's lifespan by allowing production and consumption to exceed the system's real limits, is now undergoing a violent contraction. The "every man for himself" response from bourgeois governments — nationalising banks while refusing to socialise losses for the working class — reveals the underlying logic: the ruling class will make workers pay to restore profitability. The article claims that this crisis will inevitably reopen the ideological struggle between capitalism and socialism, as even Alan Greenspan is forced to admit.

Theoretical Grounding

The analysis draws directly on Marx's theory of credit and crisis as developed in Volume III of Capital. The key mechanism is that credit allows capitalism to temporarily transcend its barriers by artificially expanding the market — but this expansion is fictitious, since the debts must eventually be repaid. The crisis is therefore a necessary purging of "fictitious capital" (claims on future surplus value that cannot be realised), which restores the conditions for renewed accumulation by devaluing capital and labour-power. The article also invokes Lenin's observation that capitalists will always try to make the working class pay for crises, situating the argument within the Marxist tradition's understanding of crisis as both a destructive and regenerative mechanism for capital, and as a moment of intensified class struggle.

The analysis sits firmly in the classical Marxist tradition, rejecting Keynesian or social-democratic interpretations that see state intervention as a solution. It treats nationalisation not as a step towards socialism but as the state rescuing capital from itself — a point consistent with Marx's analysis of the state as the executive committee of the bourgeoisie.

Conjunctural Relevance

The article was written on 7 October 2008, at the peak of the financial panic following the collapse of Lehman Brothers. It documents specific data points: the Dow Jones falling over 800 points below 10,000; the FTSE 100's biggest percentage fall since Black Monday 1987; the Russian market falling 19%; the MSCI Emerging Markets Index slumping 11%. It notes the collapse of five European banks in as many days, the German bailout of Hypo Real Estate, the forced takeover of Fortis by BNP Paribas, and the Icelandic government's nationalisation of Glitnir as the country faced effective bankruptcy — with the krona falling 45% against the euro.

Crucially, the article identifies the transmission mechanism from financial crisis to real economy: falling factory orders (down 4% in August 2008), rising jobless claims (highest since 9/11), declining retail sales, and falling mortgage applications. It quotes the Financial Times acknowledging that comparisons with 1987 or the dotcom bubble are inadequate — "we must think of 1987 or 1929." The article's conjunctural insight is that the scale and interconnectedness of global finance makes this crisis potentially more dangerous than 1929, even as policymakers are more interventionist.

Where the Argument Continues

This article is part of a sustained theoretical intervention by the RCI during the 2008 crisis. It explicitly references several other IDOM articles from the same period: Mick Brooks's "Bail-out blackmail" (25 September 2008) and "Bradford & Bingley nationalised – let's take the rest" (29 September 2008); Michael Roberts's "Paulson plan - a kick in the face for capital" (30 September 2008); Alan Woods's "World capitalism in crisis" (26 September 2008); and Rob Sewell's own "Capitalism has failed. Period" (22 September 2008). The argument about the credit system's role in artificially extending the boom is developed more systematically in Alan Woods's theoretical writings on crisis, while the political conclusions — that workers must prepare for revolutionary struggle rather than defend nationalised banks — are elaborated in subsequent Socialist Appeal editorials and Against the Stream episodes throughout 2008-2009.

The article leaves open the question of how quickly the crisis would spread to the real economy and how long the slump would last — questions that the RCI would address in later analyses of the "Great Recession" and the subsequent period of stagnation.

Connections

This article should be read alongside Marx's chapters on credit and fictitious capital in Capital Volume III, particularly the sections on the role of the credit system in crisis formation. Lenin's Imperialism, the Highest Stage of Capitalism provides the framework for understanding how finance capital's global reach intensifies crisis transmission. Within the contemporary Marxist tradition, Michael Roberts's work on the tendency of the rate of profit to fall and the long downturn provides the deeper empirical and theoretical context for the 2008 crisis. The article also connects to the broader Marxist debate on whether the 2008 crisis was a "Minsky moment" (a financial crash caused by debt accumulation) or a manifestation of the law of the tendency of the rate of profit to fall — the RCI position, implicit here, is the latter.

Key Quotes

1. "Credit, as Marx explained, allows the system to go beyond its limits. It artificially expands the market, which allows capitalism a further lease of life. However, credit has its limits too. It has to be repaid. We are now witnessing a massive contraction."

2. "All the factors that developed the boom over the past 20 years are now turning into their opposites. The profits bonanza has crashed. The market is contracting rapidly. Consumer spending is falling. The capitalists cannot sell their goods."

3. "There is a classical crisis of overproduction. Only though these crises can the system survive by squeezing out this fictitious capital, and reducing the living standards of the workers."

4. "The crisis will mean a return to the ideological struggle between socialism and capitalism. Many of us thought that struggle was over with the collapse of the command economies, but this is not the case." — Alan Greenspan, quoted approvingly as an unwitting admission.

5. "In a situation like this it's turning out that it's every man for himself," said the Icelandic prime minister — quoted to illustrate how bourgeois solidarity dissolves when the system itself is threatened.

6. "As always, the ruling class will attempt to make the working class pay for the crisis. They will carry through cuts and throw millions out of work to preserve their system."