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The state attempts to rescue collapsing capitalism

Marxist Analysis · 2020-04-30

Core Argument

The central thesis is that the COVID-19 pandemic has not created a new crisis but has violently accelerated a pre-existing structural crisis of capitalism — one rooted in overaccumulation and the exhaustion of the post-war boom's artificial life-support mechanisms. The article argues that the unprecedented state intervention now underway is not a discretionary policy choice but a compelled response to the system's inability to reproduce itself through normal market mechanisms. The state has become lender, consumer, and guarantor of last resort because the capitalist economy can no longer function without direct state underwriting. However, this intervention cannot resolve the underlying contradictions; it merely transfers liabilities to the public balance sheet while the crisis of overproduction deepens. The only rational alternative is a democratically planned economy under working-class control.

Theoretical Grounding

The analysis draws on the Marxist theory of the state as developed by Engels, Lenin, and Trotsky, particularly the concept of state monopoly capitalism — the stage where the state is forced to intervene directly to manage the contradictions between the productive forces and the private ownership of the means of production. The article explicitly invokes Ted Grant's extension of this analysis, arguing that the tendency toward statisation is not a permanent reform of capitalism but a symptom of its decay, which cannot prevent new crises.

The theoretical framework rests on the law of the tendency of the rate of profit to fall, though the article does not deploy the term explicitly. Instead, it describes the mechanism through its concrete manifestations: overaccumulation of productive capacity, the exhaustion of credit expansion as a countervailing factor, and the inability to restore profitability through normal crisis mechanisms (bankruptcy, devaluation of capital) because the scale of collapse would be socially catastrophic. The argument that "too much productive capacity turns into a crisis" is a direct expression of the overaccumulation problem.

The article situates itself within the Trotskyist tradition's critique of both Keynesianism and monetarism as variants of bourgeois crisis management, arguing that the ruling class abandons ideological commitments (Friedman or Keynes) when faced with existential threats to the system. This echoes Lenin's observation that the bourgeoisie will sacrifice its own principles to preserve class rule.

Conjunctural Relevance

The article was published on 30 April 2020, at the peak of the first wave of COVID-19 lockdowns, and its predictions have been substantially confirmed by subsequent developments. The specific data points are striking:

  • US GDP fell at an annualised rate of 4.8% in Q1 2020, with IHS Markit predicting a 27% annualised drop in Q2
  • Eurozone contraction of 3.8% in one quarter, with France at -5.8% and Spain at -5.2%
  • 26 million US unemployment applications, with predictions of 13-17% unemployment
  • Federal Reserve balance sheet expanding from $4 trillion to an expected $8-11 trillion
  • Government debts projected to rise from 69% to 85% of GDP globally

The article correctly identifies that the IMF's baseline scenario was optimistic, assuming the pandemic would be over by summer 2020 with no second wave. The subsequent reality — multiple waves, supply chain disruptions, inflation, and the uneven recovery — has vindicated the article's scepticism.

The geopolitical dimension is also prescient: the article notes the vulnerability of the Global South, where "overcrowding, poor housing and lack of healthcare will create the conditions for a human catastrophe." The uneven distribution of vaccine access and the debt crisis in developing countries have borne this out.

Where the Argument Continues

The article points to several lines of analysis that are developed elsewhere in the IDOM corpus:

  1. The nature of the 2008-09 crisis and the "recovery" that wasn't: The article references earlier IDOM pieces explaining that the post-2008 period was not a genuine recovery but a credit-fuelled postponement of the crisis. This is developed in depth in articles on the long downturn and the limits of quantitative easing.

  2. The relationship between state intervention and crisis: The article cites Ted Grant's 1950s analysis of statisation, which is explored more fully in IDOM's theoretical series on state monopoly capitalism and the Marxist theory of the state.

  3. The political implications for the working class: The article's conclusion — that a planned economy is necessary — is the starting point for a larger body of work on transitional demands, the role of the revolutionary party, and the concrete programme for socialising production under workers' control.

  4. The crisis of reformism: The article's implicit critique of social democratic and Keynesian responses is developed in Against the Stream episodes and articles analysing how labour parties and trade union leaderships have managed the crisis on capital's terms.

Connections

  • Ted Grant, The Unbroken Thread: The article's theoretical framework on statisation and the inevitability of crisis under state monopoly capitalism draws directly from Grant's 1950s writings collected in this volume.

  • Lenin, Imperialism, the Highest Stage of Capitalism: The concept of state monopoly capitalism and the fusion of monopoly capital with the state apparatus.

  • Trotsky, The Transitional Programme: The political conclusion — that the crisis demands not reform but the revolutionary overthrow of capitalism — is the strategic perspective of the Transitional Programme.

  • Engels, Socialism: Utopian and Scientific: The argument that the productive forces rebel against the constraints of private property is Engels' formulation.

  • IDOM articles on the 2008 crisis and the long downturn: These provide the pre-history of the argument that the world economy never genuinely recovered.

  • Against the Stream episodes on COVID-19 and the economic crisis: These develop the political strategy for revolutionaries in the conjuncture.

Key Quotes

  1. "The virus epidemic couldn't have hit at a less opportune time. The world economy never recovered from the crisis of 2008-09... What recovery there was had ebbed, with the economies of Germany, Japan and the UK at the very least already contracting."

  2. "Capitalism is facing a crisis of senile decay. This rotten system should have been overthrown a century ago, but a combination of world war, and the role of reformists and Stalinists gave it a new lease on life."

  3. "The state is now the lender of last resort, the consumer of last resort and the goose that lays the golden eggs."

  4. "'Capitalism without bankruptcy is like Catholicism without hell,' Howard Marks, director of investment fund Oaktree Capital Management LP, said in a letter to shareholders this month... 'Markets work best when participants have a healthy fear of loss.'"

  5. "The increased role of the state in itself is itself a symptom of the rebellion of the productive forces against the constraints of private property, as Engels, Lenin and Trotsky pointed out."

  6. "If too many products are produced, that should merely give workers additional spare time. Only under the warped logic of capitalism does too much productive capacity turn into a crisis."