Where will the next domino fall

Marxist Analysis · 2026-05-13

Core Argument¶

The article argues that the 2009-2010 conjuncture marks a transition from the initial phase of the financial crisis — centred on private bank losses and the collapse of fictitious capital — into a new and more dangerous phase of sovereign debt crises. The central thesis is that capitalism's inherent instability, temporarily masked by state bailouts and deficit spending, is now expressing itself through the bankruptcy of entire states. Dubai World's default is not an isolated exotic incident but a harbinger: the crisis is "probing for weaknesses" across the global system, and the weakest states — starting with Iceland, then Dubai, now Greece — will be forced into default or austerity. The article claims that the Eurozone's architecture, which denies member states the ability to devalue or print money, makes this dynamic particularly explosive for the European periphery. The argument is that capitalism cannot contain its own contradictions through state intervention alone; the fiscal crisis of the state is the next logical stage of the crisis of overaccumulation.

Theoretical Grounding¶

The analysis draws on the Marxist theory of crisis, specifically the understanding that capitalist crises are not exogenous shocks but immanent to the system's drive for accumulation without regard for social need. The article implicitly relies on Marx's analysis of the credit system and fictitious capital in Volume III of Capital: the Dubai boom was built entirely on borrowed money, representing a vast expansion of fictitious capital detached from any real productive base. The concept of the "fiscal crisis of the state" — developed by James O'Connor in the 1970s and rooted in Marx's analysis of the state as a committee for managing the common affairs of the bourgeoisie — is also central. The state is forced to socialise the losses of private capital through bailouts and deficit spending, but this merely displaces the crisis from the private to the public balance sheet.

The article sits firmly within the Trotskyist tradition's insistence on the inherently unstable and crisis-prone nature of capitalism, rejecting any notion that state intervention or Keynesian demand management can resolve the system's fundamental contradictions. It also reflects the tradition's emphasis on the international character of capitalist crisis: no country is an island, and the fates of workers everywhere are bound together by the global circuit of capital.

Conjunctural Relevance¶

The article is written in January 2010, at a precise inflection point. The immediate panic of 2008-2009 had been contained by massive state bailouts and quantitative easing, but the cost of those interventions was now visible in ballooning sovereign debt. The article names specific data points: UK public debt projected to rise from 46% of GDP in 2006 to 89.3% in 2010; Greece running a deficit of 12.7% of GDP, more than four times the Eurozone's Maastricht limit; Greek foreign debts at 150% of national income. The article identifies the Eurozone's structural flaw — a single currency without a unified fiscal authority, denying peripheral states the classic crisis tools of devaluation and monetary expansion — as a mechanism that will force austerity on the working class.

The geopolitical dimension is also present: the article notes that Dubai World bought P&O and London real estate during the boom, illustrating how Gulf petrodollars circulated through the global system. The reference to the Bank for International Settlements' estimate of $123bn in UAE foreign debt grounds the analysis in the real interconnections of global finance. The article's prediction that "sovereign debt will be the new subprime" proved prescient: the Greek debt crisis erupted in full force later in 2010, leading to the Troika bailouts, the imposition of catastrophic austerity, and the near-collapse of the Eurozone.

Where the Argument Continues¶

The article leaves several threads open. The question of whether the Eurozone can survive the crisis is posed but not answered — this is taken up extensively in later IDOM articles on the Greek crisis, the rise of Syriza, and the 2015 referendum. The article does not develop a concrete political strategy for the working class in response to sovereign debt crises, beyond the implicit call for struggle. This is addressed in subsequent IDOM pieces on the need for a break with the Euro and the nationalisation of the banking system under workers' control. The article also does not explore the implications for the global reserve currency system or the position of the US dollar — themes that appear in later analyses of the 2008 crisis and its aftermath. The reference to Credit Default Swaps as a new form of speculation is noted but not fully theorised; this connects to broader Marxist work on the financialisation of capitalism and the proliferation of derivatives as fictitious capital.

Connections¶

This article should be read alongside:

"Bye, Bye, Dubai?" (IDOM, December 2009) — the companion piece that first analysed the Dubai World crisis in detail.
"The Greek Crisis: A Marxist Analysis" (IDOM, 2010-2015 series) — which develops the analysis of sovereign debt and the Eurozone's contradictions.
Ernest Mandel, Late Capitalism — for the theoretical framework of the internationalisation of capital and the role of the state in crisis management.
James O'Connor, The Fiscal Crisis of the State — for the Marxist theory of state finances under capitalism.
Marx, Capital, Volume III, Part V — on the credit system and fictitious capital.
Trotsky, The Death Agony of Capitalism and the Tasks of the Fourth International — for the tradition's understanding of capitalist crisis as opening revolutionary possibilities.

Key Quotes¶

"Capitalism stalks one country after another, probing for weaknesses and laying the weakest low. This system is inherently unstable. As long as it exists, it threatens all our livelihoods."
"The default of Dubai World is really the national bankruptcy of Dubai. This is the second country after Iceland to be forced into bankruptcy as a result of the crisis of capitalism."
"Will sovereign debt be the new subprime? She points out that banks are being exhorted to hold government bonds as an asset on the grounds that they are safe. There is bound to be pressure on governments to print money and, through inflation, erode the value of the bonds."
"They can't devalue; they can't print money. So, if they remain on the basis of capitalism the government will have to attack the working class – and they are already showing they are prepared to fight back."
"A Greek default would be much more serious than that of Dubai. It would throw the whole of Europe into turmoil."
"The crisis is putting immense pressure on all the countries of the Euro-zone and upon the existence of the Euro itself. It stalks one country after another, probing for weakness and laying the weakest low."