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2010 The World Crisis of Capitalism and Perspectives for the Class Struggle

Marxist Perspectives · 2010-09-03

Core Argument

The central thesis is that the 2008 financial crisis was not a liquidity crisis but the expression of a fundamental, structural crisis of overaccumulation that had been building for thirty years. Woods argues that the methods used to postpone the crisis during the boom — cheap credit, globalisation, and the incorporation of China into the world market — have now exhausted themselves and are actively deepening the downturn. The bourgeoisie cannot restore profitability without a massive assault on living standards, but the working class is too strong and too organised to accept this passively. The result is a prolonged period of social instability, revolutionary convulsions, and counter-revolutionary threats, in which the decisive question is the crisis of working-class leadership.

Theoretical Grounding

The analysis is rooted in Marx's theory of capitalist crisis, particularly the role of credit as a factor that artificially expands the market beyond its normal limits but cannot abolish the underlying contradiction between production for profit and the limited consuming power of the masses. Woods draws on Marx's refutation of Say's Law — the notion that supply creates its own demand — and applies it to the contemporary "Efficient Market Hypothesis," showing that bourgeois economics has merely recycled old errors.

The argument also deploys the Marxist theory of the nation state as a barrier to the further development of the productive forces. Globalisation is presented not as a transcendence of capitalism's contradictions but as their reproduction on a world scale: the entry of China, Russia, and India into the world market temporarily boosted profitability through access to vast reserves of cheap labour, but the commodities produced must ultimately be sold on foreign markets, generating new tensions between overproduction and underconsumption.

The political framework is explicitly Trotskyist. Woods invokes Trotsky's Transitional Programme to argue that the crisis of humanity reduces to the crisis of proletarian leadership, and he draws on Trotsky's analysis of the organic tendency of trade union leaders to fuse with the capitalist state. The discussion of revolutionary waves — the Iranian Revolution, the Thai uprising, the Kyrgyz insurrection — is structured around the Bolshevik experience of 1917, with the July Days and the Spanish Revolution's "two black years" used as historical analogies to explain why revolutionary movements ebb and flow without being defeated permanently.

Conjunctural Relevance

The article was written in 2010, at a moment when the initial panic of 2008 had subsided but the promised recovery had not materialised. Woods identifies several specific conjunctural features:

  • The Greek sovereign debt crisis as the trigger for a broader crisis of the Eurozone. He notes that German and French banks had lent heavily to Greece, meaning that a Greek default would threaten the entire European banking system. The EU's trillion-euro rescue fund is described as a delaying mechanism, not a solution. Woods predicts that Greece will eventually default and may be forced out of the Eurozone, triggering a social crisis comparable to Germany in 1923.

  • The transformation of private debt into public debt. The bailouts shifted liabilities from bank balance sheets to state balance sheets, producing a fiscal crisis that is now used to justify austerity. Woods cites Japan's public debt rising from 65% of GDP in 1990 to 200% in 2010 as an indicator of the global scale of the problem.

  • The exhaustion of the Chinese growth model. The massive expansion of Chinese manufacturing capacity, built on cheap labour and export dependence, cannot be absorbed by the domestic market. The resulting trade imbalances fuel protectionist sentiment in the United States, threatening the globalised division of labour that sustained the boom.

  • The Venezuelan Revolution at a crossroads. After eleven years of the Chávez government, Woods identifies a dangerous combination of popular exhaustion and bourgeois resilience. The September 2010 elections are presented as a moment when the question of power will be posed directly: either the revolution moves to expropriate the bourgeoisie, or the counter-revolution will strike.

  • The Iranian Revolution of 2009. Woods treats the Green Movement as a genuine revolutionary uprising that came close to overthrowing the regime during the Ashura protests of December 2009. He argues that the movement's decline was due to the absence of revolutionary leadership, not the inherent strength of the Islamic Republic.

Where the Argument Continues

The article leaves several threads that are developed elsewhere in the IDOM corpus:

  • The Greek crisis is followed through subsequent articles tracking the trajectory of Syriza, the 2015 referendum, and the capitulation of the Tsipras government. The prediction that Greece would default and face a social crisis comparable to 1920s Germany is revisited in later analyses of the "humanitarian crisis" and the rise of Golden Dawn.

  • The Venezuelan Revolution is the subject of sustained analysis throughout the 2010s, with IDOM articles tracking the 2012 elections, the death of Chávez, the Maduro succession, and the economic collapse. The warning about the danger of counter-revolution is developed in the context of the 2014 guarimbas and the 2019 Guaidó offensive.

  • The crisis of the Euro is explored in depth in subsequent World Congress documents and in Alan Woods' The Crash of 2008 and the Marxist Theory of Crisis, which provides a more systematic treatment of the relationship between credit, fictitious capital, and the tendency of the rate of profit to fall.

  • The Iranian Revolution is revisited in articles marking the tenth anniversary of the 2009 uprising and in analyses of the 2017-2019 protest waves, where the same question of leadership is posed.

  • The Chinese working class is the subject of a growing body of IDOM analysis as strike waves and labour unrest intensify in the 2010s, with particular attention to the 2010 Honda strikes and the Foxconn suicides mentioned in this article.

Connections

The article should be read alongside:

  • Trotsky, The Transitional Programme — the theoretical foundation for the argument that the crisis of humanity is the crisis of proletarian leadership.

  • Trotsky, Trade Unions in the Epoch of Imperialist Decay — the analysis of the organic fusion of union bureaucracies with the capitalist state.

  • Alan Woods, The Crash of 2008 and the Marxist Theory of Crisis — a more systematic treatment of the theoretical questions raised in this article.

  • Marx, Capital Volume III, Part V — on the role of credit and the distinction between the crisis of overaccumulation and crises of liquidity.

  • Engels, Socialism: Utopian and Scientific — on the contradiction between the socialisation of production and private appropriation, which provides the underlying framework for Woods' argument about the nation state as a barrier.

  • Lenin, The State and Revolution — on the relationship between the state and the capitalist class, implicit in the analysis of the bailouts and the transformation of private debt into public debt.

Key Quotes

  1. "They used low interest rates to avoid recession. Without this there would have been a recession sooner. But now the recession is far more serious than it would have been otherwise. Marx explains the role of credit in capitalism. It serves to artificially expand the market beyond its normal limits. But borrowed money must be paid back with interest. It does not remove the fundamental contradictions of capitalism. All it does is delay the crisis, but exacerbate it when it comes."

  2. "The bourgeois partially overcame the first contradiction by increasing credit (which they can't do any more). They managed temporarily to solve the second contradiction through globalization – a massive increase in world trade, a general reduction of tariffs, and the intensification of the global division of labour."

  3. "The period we are now entering will not be like the last period. Not only can the bourgeoisie not afford any new reforms. It cannot afford to maintain the reforms that were conquered in the past. There is plenty of money for the banks, but not for hospitals, schools or pensions."

  4. "Trotsky wrote in The Transitional Programme that one can reduce the crisis of humanity to the crisis of leadership of the proletariat and its organizations. That remains the case today."

  5. "In all countries the trade unionists are desperately trying to do deal with the capitalists. They want a peaceful life. They want to get a deal that they can sell to their members. But in these times the bourgeois have nothing to offer except cuts and more cuts. Therefore we can predict that even the most right-wing union leaders will be forced to struggle, or else be pushed aside."

  6. "The Marxists must tell the truth to workers, and the truth is, as Trotsky explained to the Spanish Communists in 1931, that even the stormiest strikes settle nothing fundamental. Through strikes the workers will learn lessons. We must explain that there is no solution to the fundamental problems while capitalism exists. The only solution is for working class to take power."