The First Tremors - An analysis of the global economic situation

Marxist Analysis · 2026-05-13

Core Argument

Ted Grant argues that the stock market turbulence of October 1997 was not an isolated financial event but the "first tremors" of a coming general crisis of capitalism. The central thesis is that the post-war long boom has exhausted itself, and capitalism has entered a new period of convulsive, crisis-ridden development characterised by overproduction, massive fictitious capital, and the exhaustion of the Asian "tiger" economies as a safety valve for global overaccumulation. The boom of the 1990s, far from proving that the business cycle has been abolished, is shown to be a peculiarly fragile expansion built on the systematic squeezing of labour, speculative bubbles, and the postponement — not resolution — of underlying contradictions. The stock exchange panic is presented as a symptom of processes unfolding in the real economy, not their cause.

Theoretical Grounding

The analysis is rooted in Marx's theory of crisis as developed in Volume 3 of Capital, particularly the proposition that "the last cause of all real crises always remains the poverty and restricted consumption of the masses as compared to the tendency of capitalist production to develop the productive forces." Grant deploys this not as a mechanical formula but as a diagnostic tool to distinguish between different types of crisis — stock exchange "corrections" that clear out fictitious capital (as in 1920 or 1987) versus crises that detonate a general slump (as in 1929). The distinction turns on the state of the real economy: overcapacity, the level of indebtedness, and the degree to which the domestic market has been compressed.

The analysis draws on the Marxist theory of the cycle, rejecting the notion that the business cycle has been abolished by information technology or globalisation. Grant situates the present conjuncture within the longer historical trajectory outlined by Lenin and Trotsky: capitalism ceased to play a progressive role before the First World War, but the post-war boom temporarily extended its limits through credit, deficit financing, and the expansion of world trade. That period is now exhausted, and the same factors that drove expansion have turned into their opposites. The concept of fictitious capital — Marx's M–M' circuit of "money begetting money" without passing through production — is used to explain the speculative mania that characterises the late phase of the cycle.

The analysis also draws on Trotsky's understanding of the relationship between economic crisis and class struggle, rejecting any mechanical correlation between slump and revolution. Grant explicitly warns that the initial effect of a deep slump would be to stun and disorient the working class, and that a significant upturn in struggle would require a period of recovery — as happened after 1929 with the rise of the CIO in 1933-34.

Conjunctural Relevance

The article was written in the immediate aftermath of the October 1997 stock market crash, which began in Asia and spread globally. Grant identifies the specific mechanism: international currency speculators, having forced the devaluation of the Thai baht, triggered a chain reaction across Southeast Asia, then Hong Kong, then Latin America. The crisis exposed the fragility of the "Asian tiger" model — economies with high external debt, inflated stock markets trading at price/earnings ratios above 20, and overcapacity in petrochemicals, autos, and microchips. The article cites specific data: Thailand's external debt at over one-third of GNP in 1995; Indonesia's at over one-half; the Hong Kong stock exchange used as a "milk cow" by fund managers fleeing the region.

Grant situates the Asian crisis within the broader global conjuncture: the US boom had lasted seven years, unusually long by post-war standards; unemployment across the OECD stood at over 30 million even at the "peak" of the cycle; Japan remained mired in stagnation despite pumping $275 billion into its economy; and overcapacity was documented across multiple sectors — the Economist had reported that even if the entire US auto industry disappeared, there would still be too many cars on the market.

The article also identifies the political consequences already visible: the victorious UPS strike in the USA in summer 1997, the election of a Labour government in Britain creating expectations that could not be fulfilled, and the beginnings of a working-class awakening in South Korea and Indonesia. Grant points to China as the decisive unknown — a wave of strikes had already occurred, and the Chinese bureaucracy's grip on power was facing pressure from both economic turmoil and working-class militancy.

Where the Argument Continues

This article is part of a sustained theoretical intervention by the tendency that produced it. Grant explicitly references two earlier documents: "Will There be a Slump?" and "A New Stage in the World Revolution," which laid out the framework for understanding the end of the post-war boom and the onset of a new period of storm and stress. The argument is continued in subsequent analyses of the 1997-98 Asian financial crisis, the Russian default of 1998, and the dot-com crash of 2000-2001. The broader corpus — including Against the Stream episodes and later IDOM articles — develops the political conclusions: the rejection of reformism, the necessity of building revolutionary parties, and the perspective of the working class as the only force capable of resolving capitalism's contradictions through the socialist transformation of society.

The article leaves open several questions that are taken up elsewhere: the exact timing and depth of the coming slump; the specific forms of working-class organisation that would emerge; and the relationship between economic crisis and the rise of reactionary political forces. The analysis of fascism as a possibility in the 1930s but ruled out in the present conjuncture is stated but not fully developed here.

Connections

The article should be read alongside Marx's Capital Volume 3, particularly chapters 30-32 on the role of credit and fictitious capital in crisis formation. Trotsky's writings on the 1929 crash and the rise of fascism — especially The Third International After Lenin and The Struggle Against Fascism in Germany — provide the political framework for understanding the relationship between economic crisis and class struggle. Within the IDOM corpus, the earlier documents "Will There be a Slump?" and "A New Stage in the World Revolution" are essential for the full theoretical architecture. The article also engages critically with bourgeois economists — Galbraith, Greenspan, Soros — and with the "New Paradigm" theorists who claimed information technology had abolished the business cycle. The Business Week articles cited (March and October 1997) provide useful empirical corroboration from within the capitalist press.

Key Quotes

1. "The last cause of all real crises always remains the poverty and restricted consumption of the masses as compared to the tendency of capitalist production to develop the productive forces in such a way that only the absolute power of consumption of society would be their limit." (Marx, Capital Vol. 3, ch. 30, quoted by Grant)

2. "The present gyrations on the stock exchanges are merely a reminder of this fact, like the first tremors which presage an earthquake."

3. "The capitalists have concentrated on squeezing the last ounce of surplus value from the sweat and nervous effort of the workers—what Marx calls relative surplus value. Whereas in the past the capitalists obtained profits from investing in machinery this had a relatively progressive character (indeed, it was the only thing that was progressive about it) it now stands exposed as an entirely degenerate, effete and reactionary system."

4. "The mania for speculation, take-overs, looting the state and generally attempting to get 'something for nothing' is only the other side of the coin of the same phenomenon. It is a confession of historical bankruptcy."

5. "The systematic cutting of the home market through the reduction of state expenditure, 'downsizing', attacks on living standards etc. is preparing the way for a deep slump, probably the deepest since 1945."

6. "The working class will learn in struggle. But the old leaders who have abandoned socialism and capitulated to the pressures of capitalism are incorrigible. They represent the past, not the future."