We are entering a New Age of World Austerity¶

Marxist Analysis · 2026-05-13

Core Argument¶

The central thesis is that the 2008 financial crisis was not a cyclical downturn from which capitalism would recover to "normality", but rather the opening of a new historical epoch defined by permanent austerity, weak recoveries, and intensified class struggle. Sewell argues that the unprecedented state bailouts—totalling an estimated $14 trillion globally—merely postponed a deeper crisis by converting private banking defaults into sovereign debt crises. The working class will be forced to pay for this rescue through savage cuts to public spending, wages, and welfare, marking the end of the post-war era of reforms and the beginning of a period of counter-reforms comparable to the interwar years. The argument is that this objective situation will drive millions toward revolutionary conclusions, but only if Marxist forces are built and connected to the emerging left currents within the labour movement.

Theoretical Grounding¶

The analysis draws directly on the Marxist theory of crisis, specifically the understanding that capitalism's inherent contradictions—the anarchy of production, the barrier that private ownership and the nation-state pose to the further development of the productive forces—periodically erupt in slumps. Sewell situates the 2008 crisis within the longer-term tendency of declining growth rates (the 2000–2009 decade averaged 1.7% annual growth, the worst since WWII) as evidence of capitalism's structural impasse, not a temporary malfunction.

The article deploys Trotsky's analysis of the post-First World War conjuncture as a historical analogue. Trotsky's concept of a "fictitious boom" sustained by state intervention—subsidies, prolonged contracts, currency debasement—is used to explain how the 2008–2010 bailouts created only a temporary and artificial stabilisation that could not resolve the underlying crisis of overproduction. The reference to the Gold Standard constraint on the 1930s is applied to the eurozone today: a single currency prevents weak economies from devaluing, forcing all adjustment onto the working class through internal deflation.

The theoretical framework is fundamentally Luxemburgist and Trotskyist in its emphasis on the exhaustion of capitalism's capacity to develop the productive forces, and on the necessity of working-class power as the only way out. The rejection of reformism is implicit throughout: the period of reforms is declared "at an end", and the ruling class is said to have only one solution—making the working class pay.

Conjunctural Relevance¶

The article was written in April 2010, at a precise conjunctural moment: the immediate aftermath of the Greek sovereign debt crisis, which had exploded in early 2010. Sewell cites specific data points that locate the argument in real time:

Greece: debt-to-GDP ratio of 125%; output falling 2.9% in January 2010 alone; the PASOK government imposing 7% wage cuts and 10% allowance cuts on public sector workers; the EU-IMF bailout package of €26.5bn being negotiated.
Spain: unemployment at nearly 20%; government proposing to raise retirement age from 65 to 67; budget deficit of 11.2% of GDP.
Ireland: public sector pay cuts; budget deficit rising from 11.3% to 12% of GDP despite austerity.
Portugal: public sector wage freeze; one-day general strike in March 2010.
UK: public sector net debt doubled to £857bn; household debt at 181% of disposable income; the 2010 general election approaching with all major parties competing on austerity.

Sewell identifies the eurozone's structural vulnerability as central: the single currency prevents devaluation, forcing internal adjustment that pits each national capitalist class against its workers and against the other member states. The German-French-Italian conflict over the Greek bailout is presented as evidence that the EU cannot resolve its contradictions within capitalism.

The article correctly anticipates that the "age of austerity" would be prolonged, that recovery would be weak (projecting 0.9%–2% growth for major European economies in 2010), and that class battles would intensify across Europe. The Greek general strikes, Spanish protests, and Irish industrial action are cited as the opening phase of this new period.

Where the Argument Continues¶

This article is an early statement of what became a central theme of the RCI's analysis throughout the 2010s. The argument continues in several directions:

The eurozone crisis: IDOM published extensive coverage of the Greek crisis through 2010–2015, including the Syriza government's betrayal of the 2015 referendum result. The analysis of the eurozone as a "vice" for the working class is developed in articles on the Troika, the European Central Bank's role, and the German export surplus.
Austerity in Britain: The article's prediction that "whoever wins the general election" would impose cuts was borne out by the Coalition government's 2010 Emergency Budget. IDOM tracked the strikes of 2011 (the November 30 public sector strike) and the rise of the student movement.
The longer-term crisis tendency: The claim that a new crisis could develop "in the next four or five years" while governments were still struggling with debt was vindicated by the 2014–2015 slowdown, the 2015–2016 emerging market crisis, and the COVID-19 crash of 2020.
The political conclusions: The article's call to "build the forces of Marxism" and connect with left currents within the labour movement is developed in IDOM's analysis of Corbynism, Sanders, and the rise of the left after 2015.

Connections¶

Trotsky, Flood Tide (1921): The direct theoretical source for the concept of a "fictitious boom" sustained by state intervention. Trotsky's analysis of the post-WWI crisis is the historical template.
Trotsky, The Death Agony of Capitalism and the Tasks of the Fourth International (1938): The Transitional Programme's analysis of the decay of capitalism and the necessity of transitional demands is the political framework underlying Sewell's argument.
Marx, Capital Volume 3: The tendency of the rate of profit to fall is the underlying law of motion that Sewell invokes implicitly when he speaks of capitalism "erecting barriers to its own development".
Rosa Luxemburg, The Accumulation of Capital: The argument that capitalism has exhausted its capacity to expand through globalisation echoes Luxemburg's theory of imperialism as a response to underconsumption.
IDOM articles on the Greek crisis (2010–2015): These develop the analysis of the eurozone's contradictions and the betrayal of the Greek left.
Against the Stream episodes: The RCI's podcast has returned repeatedly to the theme of austerity, the crisis of the eurozone, and the political tasks of Marxists in periods of counter-reform.

Key Quotes¶

"The crisis marks the end of an epoch economically and politically. We are now entering the age of austerity."
"The system itself erects barriers to its own development that periodically end in slump. This was no ordinary crisis, after which everything will simply return to normal. Capitalism has entered a blind alley, where the existence of private ownership and the nation state now act as a colossal brake on the development of the productive forces."
"The period of reforms, which largely characterised the previous 60 years, is now at an end. We are now in a period of counter-reforms and brutal attacks, which could possibly last for decades if the working class do not take power into their hands."
"The unprecedented bail-out, the fiscal stimulus and collapsing tax revenues have sent government debt spiralling... Yesterday's financial crisis is turning into today's government debt crisis."
"The eurozone countries in particular are caught in a vice. After the binge comes the hang-over. The Common Market was set up to develop a European-wide market as a means of overcoming the narrow constraints of the nation state. It was an indication that the productive forces have completely outgrown these national barriers."
"Conditions determine consciousness, as Marx explained. On the basis of events, consciousness will be brought into line with the objective situation in an explosive fashion. The titanic events that lie ahead will propel the working class in the direction of changing society."