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The state of two nations

Marxist Analysis · 2026-05-13

Core Argument

The article argues that the apparent success of the Anglo-American "free market" model of capitalism—measured by higher GDP growth and lower official unemployment—is a hollow boast. The same model that produces superior headline economic figures also generates the highest levels of poverty, inequality, and social immiseration among advanced capitalist economies. The central claim is that this is not a contradiction or a fixable flaw but the normal functioning of capitalism: the system requires inequality to operate, and the Thatcherite model simply dispenses with the social democratic buffers that previously softened its effects. The "success" of British and American capitalism is therefore a success only for the capitalist class, not for the majority of the population.

Theoretical Grounding

The analysis is grounded in the Marxist critique of political economy, specifically the understanding that capitalism's driving dynamic is the accumulation of capital through the extraction of surplus value, not the satisfaction of human need. The article does not deploy the tendency of the rate of profit to fall or overaccumulation as explicit categories, but its argument rests on a recognisably Marxist distinction between the interests of capital and the interests of labour. The critique of "equality of opportunity" as ideological humbug draws on the Marxist understanding that class position is structurally reproduced under capitalism—the "rags to riches" myth is exposed as statistically false. The article also implicitly rejects the Keynesian or social democratic assumption that capitalism can be reformed to deliver acceptable levels of equality, noting that even under New Labour—a nominally social democratic government—inequality worsened. This places the argument firmly in the revolutionary Marxist tradition, which holds that capitalism's contradictions cannot be resolved within the system itself.

Conjunctural Relevance

The article was written in July 2005, at a moment when the Anglo-American model appeared to be outperforming continental Europe and Japan. The US and UK were growing at 3-4% annually while France, Germany, and Japan struggled at around 2%. Official unemployment stood at 5% in the US and UK against double that in much of Europe. This was the high-water mark of the post-dot-com-boom recovery, before the 2008 financial crisis exposed the fragility of the Anglo-American model. The article's data on poverty and inequality is specific to the period: 22% of the British population living below 60% of median income, 23% of children in poverty, 36 million Americans officially poor, 45 million without health insurance. The article names the IPPR (a think-tank close to Blair's government) and the US Bureau of Census as sources, deliberately using official data to undermine official triumphalism. The reference to record oil prices and the fragility of the Asian boom shows an awareness of the global interconnectedness of capitalist crises, even if the article does not develop this into a full analysis of the world economy.

Where the Argument Continues

The article ends with a gesture toward "another debate" about planned production, but does not develop it. This is a characteristic limitation of shorter polemical pieces: the positive case for socialism is asserted rather than argued. The argument continues in Michael Roberts' broader body of work on Marxist economics, particularly his analyses of the tendency of the rate of profit to fall and its role in explaining capitalist crises. Readers should consult his later articles on marxist.com, especially those dealing with the 2008 crash and its aftermath, where the fragility of the Anglo-American model predicted here is empirically confirmed. The article also connects to the broader IDOM corpus on the nature of the state under capitalism, the critique of New Labour, and the impossibility of "socialism in one country" or reformist solutions within capitalism.

Connections

  • Michael Roberts' later work on the 2008 financial crisis, which vindicates the article's implicit warning that the Anglo-American model was built on unsustainable foundations.
  • Marx's Capital, Volume 1, on the absolute general law of capitalist accumulation: the tendency for wealth to concentrate at one pole and misery at the other.
  • Engels' The Condition of the Working Class in England, for the historical precedent of using official data to expose capitalist hypocrisy.
  • IDOM articles on New Labour and the "Third Way", which develop the critique of Blairism as a variant of capitalist management rather than a break from Thatcherism.
  • Against the Stream episodes on inequality and the limits of reformism, which extend the argument into the current conjuncture.

Key Quotes

  1. "The US and British capitalists are gloating about how their economies are currently growing at 3-4% a year while Europe's big capitalist economies and Japan are hardly managing 2%. However, there is another side to this. Two recent reports show that the US and Britain also hold the record for the highest levels of poverty and social inequality. Capitalism only works for some."

  2. "So it seems the Thatcherite 'free market' model of capitalism that both Bush and Blair espouse is working over the 'social market' models presided over by Chirac, Schroeder and Koizumi. Doing away with decent pensions, health benefits, privatising transport, housing and education and ending any regulation of employers and businesses, while imposing draconian labour laws on workers, seems to work best for capitalism. What a surprise!"

  3. "The first argument is right. Capitalism does not work properly if the capitalists must finance a welfare state with decent pensions, housing, health service, schools, transport and living wages and proper labour laws. Those capitalist countries that continue to have at least some of these basic necessities, like France, Sweden or Germany are doing poorly in capitalist terms. Those that have hardly any of these things are doing better. But all are doing poorly compared to the needs of the majority."

  4. "The reality is that under capitalism, if you are poor or even just average that's the way you are going to stay 99 times out of a 100. And if you are rich, you can bet you are going to stay that way."

  5. "Planned production, where investment and growth do not depend on rewarding a small clique of rich with profits for their 'risk-taking', is feasible. Indeed, it would be more productive as resources would go to those who contributed the most, and not to the unproductive layers of capitalist society that clog up productive potential (the bankers, advertisers, marketing, accountants, lawyers and 'entrepreneurs')."