The Wall Street Crash and the Great Depression Lessons for today

Marxist Analysis · 2026-05-13

Core Argument

The article argues that the 1929 Wall Street Crash and the ensuing Great Depression were not historical accidents or the product of speculative excess, but the necessary expression of capitalism's internal contradictions — specifically, a crisis of overproduction rooted in the system's drive for profit. The central thesis is that the current crisis, triggered by COVID-19, is structurally analogous: a long-gestating overaccumulation crisis whose surface trigger merely ignited a deeper, unavoidable slump. The article further contends that the New Deal did not resolve the Great Depression — only the destruction of productive capacity in the Second World War did — and that Keynesian state spending, while temporarily stabilising, cannot overcome capitalism's fundamental contradiction between social production and private appropriation.

Theoretical Grounding

The analysis is grounded in Marx's theory of crisis, particularly the concept of overproduction as a phenomenon unique to capitalism: not an excess of goods relative to human need, but an excess relative to profitable sale. The article draws on the Marxist distinction between productive capital (invested in actual production) and fictitious capital (claims on future surplus value, such as shares bought on margin). The tendency for share prices to outstrip the earnings potential of underlying productive assets is identified as a key mechanism of crisis — a point that connects to Marx's analysis of credit and speculation in Volume III of Capital.

The argument also deploys the Marxist understanding of the state as an instrument of the capitalist class as a whole. The New Deal is analysed not as a progressive reform in its own right, but as a strategic intervention by a fraction of the ruling class to stabilise the system when individual capitalists could not act collectively. This sits within the tradition of Marxist state theory associated with Engels, Lenin, and later Trotsky's analysis of Bonapartism and state intervention.

The article's treatment of class consciousness — the lag between objective crisis and subjective radicalisation, the conservative inertia of workers initially stunned by unemployment, and the eventual explosive militancy as conditions stabilise — draws directly on Trotsky's 1932 analysis of the relationship between economic crisis and working-class struggle.

Conjunctural Relevance

The article was published in September 2020, at a moment when global stock markets had partially recovered from their March 2020 crash, yet real economic indicators pointed toward deep depression. The author explicitly connects the COVID-19 lockdowns to the 1929 crash as triggers, not causes, of a crisis rooted in the preceding decade's overaccumulation.

Key conjunctural claims include:

• The high level of overproduction built up in the world economy over the previous decade (2010–2020) will not be quickly overcome, especially since the class balance of forces rules out a Third World War — the historical mechanism that resolved the 1930s depression.
• Government debts were already at "sky-high levels" following the 2008 crisis, limiting the scope for Keynesian-style deficit spending. The article predicts sovereign defaults and "massive austerity" as the likely trajectory.
• The period between crisis onset and working-class radicalisation will be "much shorter" than the 1930s, given the anger accumulated over the previous decade of austerity and stagnation.
• The ruling class response — trillions in state spending — mirrors the New Deal in intent but faces structural limits that the 1930s did not, because the starting point of debt is far higher.

The article explicitly names the Bank of England's predictions of "the worst depression for over 300 years" as evidence that bourgeois economists themselves recognise the severity of the conjuncture.

Where the Argument Continues

The article leaves several questions open, which are developed elsewhere in the IDOM corpus:

• The precise mechanism by which the current crisis will unfold — the article draws parallels but does not provide a detailed periodisation of the post-2008 overaccumulation cycle. This is developed in other IDOM articles on the 2008 crash, the long depression, and the tendency of the rate of profit to fall.
• The political strategy for revolutionaries in the current period — the article ends with the perspective that "the ground is being prepared for the worldwide socialist revolution" but does not elaborate on transitional demands, united front tactics, or the relationship between the revolutionary party and the mass organisations. These questions are taken up in IDOM articles on the united front, the transitional programme, and the tasks of revolutionaries in the trade unions.
• The specific role of China in the current crisis — the article focuses on the USA and the 1930s parallel but does not analyse how the current crisis interacts with the shift in the centre of gravity of global accumulation toward China. This is addressed in other IDOM pieces on the global economy and interimperialist rivalry.
• The question of war — the article notes that the absence of a Third World War is a key difference from the 1930s, but does not explore the possibility of regional wars or the geopolitical dynamics that might substitute for a general war. This is developed in IDOM's coverage of Ukraine, the South China Sea, and interimperialist tensions.

Connections

• Trotsky, The Crisis of World Capitalism (1932) — the article's analysis of the lag between economic crisis and working-class radicalisation draws directly on Trotsky's argument that unemployment initially suppresses militancy, which erupts only when the economy begins to stabilise.
• Marx, Capital Volume III, Part V — the distinction between productive and fictitious capital, and the analysis of credit as a factor that both extends and intensifies crises, is the theoretical foundation for the article's treatment of the 1920s speculative bubble.
• John Kenneth Galbraith, The Great Crash 1929 — the article engages critically with Galbraith's account, accepting his empirical description of the crash's mechanics but rejecting his failure to explain why the crash was necessary.
• Keynes, The General Theory of Employment, Interest and Money — the article treats Keynesianism as a limited, historically contingent response to crisis, not a solution to capitalism's contradictions. The quote from Keynes himself — that only war conditions could prove his case — is used to underscore this.
• IDOM articles on the 2008 crisis and the long depression — these provide the missing periodisation of the current cycle of overaccumulation, which the 2020 article gestures toward but does not develop.
• Against the Stream episodes on the global economy and the tendency of the rate of profit to fall — these expand on the theoretical mechanism that the article invokes but does not fully elaborate.

Key Quotes

1. "As Marx explained, every boom under capitalism develops inevitably into crisis. At root, this is since production is organised for profit, and profit only. This profit comes from the surplus value produced by the working class, above that which it receives in the form of wages."

2. "In the late 1920s, capital investment was slowing down, as markets were increasingly saturated. Even during the peak of the boom, unused manufacturing capacity was up to 20%. So why invest in expanding production, if it was not profitable to use existing capacity?"

3. "The only way for the ruling class to eliminate this 'excess capacity' was to close down factories and lower prices. This introduced deflation into the economy, since the unemployed could not afford to spend."

4. "Rexford Tugwell, one of the architects of the New Deal, summed up the situation: 'I do not think it is too much to say that on March 4 we were confronted with a choice between an orderly revolution – a peaceful and rapid departure from past concepts – and a violent and disorderly overthrow of the whole capitalist structure.'"

5. "Even Keynes himself commented that the New Deal had been unsuccessful in ending the depression: 'It is, it seems, politically impossible for a capitalistic democracy to organise expenditure on the scale necessary to make the grand experiments which would prove my case — except in war conditions.'"

6. "Trotsky summed up the situation in 1932 thus: 'The years of crisis have thrown and are throwing the international proletariat back for a whole historical period. Discontent, the wish to escape poverty, hate for the exploiters and their system, all these emotions which are now suppressed and driven inward by frightful unemployment and governmental repression, will force their way out with redoubled energy at the first real signs of an industrial revival.'"