The working class must not be left to pay for Wall Street mess

Marxist Analysis · 2008-09-26

Core Argument¶

The central thesis is that the 2008 financial crisis was not an accident of regulatory failure or a one-off market panic, but the explosive manifestation of deep-seated contradictions within capitalism itself. The article argues that the crisis originated in the tendency of the rate of profit to fall, which drove finance capital toward ever-greater speculation, leverage, and fictitious capital as a substitute for productive investment. The collapse of house prices was merely the trigger — the system was already "heavily laden with straw." The working class must not be forced to pay for a crisis created by the capitalist class, and the bailouts represent a naked transfer of wealth upward. The article insists that nationalisation should not be a temporary rescue mechanism for capital but a step toward democratic, planned control of the economy under workers' councils.

Theoretical Grounding¶

The analysis is rooted in Marx's theory of crisis, specifically the tendency of the rate of profit to fall as developed in Volume III of Capital. The article draws directly on Marx's observation that growing concentration of capital leads to a falling rate of profit, which in turn forces capital onto "adventurous paths: speculation, credit swindles, share swindles, crises." This is deployed not as a mechanical law but as a dialectical contradiction — competition forces individual capitalists to increase constant capital (machinery, technology) relative to variable capital (labour), yet surplus value can only be extracted from living labour, so the rate of return on total capital tends downward. The counteracting factors Marx identified (more intense exploitation, cheapening of constant capital, increase in share capital) are acknowledged, but the article argues that in the epoch of monopoly capitalism, these countertendencies have exhausted themselves, forcing capital into the speculative financial sphere.

The analysis sits firmly within the Marxist tradition that rejects both Keynesian reformism (which blames insufficient regulation) and vulgar anti-capitalism (which moralises about greed). Instead, it treats the crisis as an immanent feature of the capitalist mode of production. The article also draws on Lenin's understanding of finance capital as the dominant fraction in the monopoly stage of capitalism, and on Trotsky's method of understanding conjunctural events as the surface expression of deeper structural contradictions.

Conjunctural Relevance¶

The article was written in October 2008, at the height of the acute phase of the global financial crisis. It references specific events: the collapse of Lehman Brothers (15 September), the Bank of America takeover of Merrill Lynch, the $85 billion Federal Reserve bailout of AIG, the JP Morgan Chase takeover of Washington Mutual, and the Lloyds TSB-HBOS merger in Britain. The $700 billion Troubled Asset Relief Program (TARP) was being debated in Congress as the article was written.

The article identifies several conjunctural features that remain relevant:

Leverage as systemic: The average large securities firm was leveraged 27 to 1 in mid-2007, meaning tiny movements in asset prices could wipe out equity. This was not an aberration but the normal operation of finance capital in the monopoly epoch.
The "second financial system": A vast unregulated shadow banking system had developed outside traditional deposit-taking banks, creating systemic risk without regulatory oversight.
The lie of the free market: When crisis hit, the same capitalists who championed deregulation demanded massive state intervention. The article quotes Willem Buiter's argument that if private firms make profits in good times and demand public bailouts in bad times, there is no case for private ownership of these institutions.
Class anger as a political force: The article reproduces at length a prescient Financial Times analysis warning that the crisis would release "class politics" from the bottle, breaking decades of American working-class quiescence. The article notes that even within Wall Street firms, employees were turning on their CEOs.

Where the Argument Continues¶

The article is part of a broader corpus produced by the Revolutionary Communist International (then the Committee for a Workers' International) during the 2008 crisis. It explicitly references several companion pieces:

Alan Woods, "World capitalism in crisis" (26 September 2008) — provides the global strategic overview of the crisis as a systemic breakdown of capitalism.
Mick Brooks, "Bail-out blackmail" (25 September 2008) and "Bradford & Bingley nationalised – let's take the rest" (29 September 2008) — develop the argument that nationalisation should be a weapon for the working class, not a rescue service for capital.
Michael Roberts, "Paulson plan - a kick in the face for capital" (30 September 2008) — offers a more detailed Marxist analysis of the bailout mechanism and its implications for the rate of profit.
Rob Sewell, "Capitalism has failed. Period" (22 September 2008) — a broader political statement on the bankruptcy of the system.

The argument continues in subsequent IDOM articles on the long recession, the Eurozone crisis, and the 2011 Occupy movement (referenced in the 2011 update). The theoretical foundations are developed further in Mick Brooks's pamphlet The Marxist Theory of Crisis, which the article recommends. The broader tradition includes Marx's Capital Volume III, Lenin's Imperialism, the Highest Stage of Capitalism, and Trotsky's writings on the 1929 crash.

Connections¶

Marx, Capital Volume III, Chapter 15 — the classic exposition of the tendency of the rate of profit to fall and the counteracting factors.
Lenin, Imperialism, the Highest Stage of Capitalism — on finance capital and the monopoly stage.
Trotsky, The Crisis of Capitalism and the Tasks of the Fourth International — on the relationship between conjunctural crises and the structural decay of capitalism.
Mick Brooks, The Marxist Theory of Crisis — the most accessible IDOM text on the theoretical debate.
Chrystia Freeland, "Bosses' greed releases class war" (Financial Times, 24 September 2008) — the article the author quotes extensively, itself a remarkable example of bourgeois class consciousness.
Willem Buiter, "Goodbye capitalism American-style…" (Financial Times, 18 September 2008) — the source of the argument for permanent public ownership of deposit-taking banks.

Key Quotes¶

"Marxists understand that historical events don't occur in a vacuum; rather, they are a result of the build up of contradictions within the system. Once the contradictions become sharp enough, a single event is enough to trigger an explosion."
"Marx identified 'increase in share capital' as a factor which can counteract the tendency of falling rate of profit. In the age of huge monopoly capitalism, where 500 companies control 45% of the world's economy, it is hardly surprising that it is increasingly hard to turn a large profit without engaging in 'risky' financial activities (i.e. without gambling other people's money)."
"This growing concentration leads in turn, at a certain point, to a new fall in the rate of profit. The mass of small fragmented capitals are thereby forced onto adventurous paths: speculation, credit swindles, share swindles, crises" (Marx, Capital Volume III, quoted in the article).
"If financial behemoths such as AIG are too large and/or too interconnected to fail but not too smart to get into situations where they need to be bailed out, what is the case for letting private firms engage in such activities in the first place?" (Willem Buiter, quoted in the article).
"It is not acceptable that in the fat years they make huge profits and bonuses, and in the thin years they get bailed out by the rest of us. If we working people were 'leveraged' 27 to one, we'd have bailiffs knocking on the door and removing the furniture; these parasites deserve no less."
"Yes, we should nationalise the banks, but if we pay for them, we should benefit from them: these nationalisations should be carried out as part of a move towards a planned economy, placed under the democratic control and management of local workers' and citizens' councils, for the benefit of the towns and cities they serve, not the profits of the few."