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Marxism Keynesianism and the crisis of capitalism

Marxist Theory · 2026-05-13

Core Argument

The article argues that the Keynesian and Modern Monetary Theory (MMT) responses to the coronavirus crisis are not a vindication of reformist economics but a desperate, temporary patch on a fundamentally broken system. The central thesis is that state spending and money-printing cannot resolve capitalism's intrinsic crisis tendency — rooted in overproduction and the falling rate of profit — and will merely store up greater contradictions for the future. The Keynesian toolkit, whether deployed by Roosevelt or today's Tories, is a palliative, not a cure. Only the abolition of capitalism through socialist revolution can address the root cause: production for profit rather than human need.

Theoretical Grounding

The analysis draws directly on Marx's crisis theory, specifically the concept that capitalist crises are ultimately crises of overproduction arising from the contradiction between the productive forces and the narrow limits of the market. The article grounds this in the labour theory of value: money is merely a representation of value created through socially necessary labour time, so printing money cannot create real value or demand. It also deploys Marx's distinction between surplus value and wages — workers can never buy back what they produce — to explain why underconsumption is a symptom, not a cause, of crisis.

The article situates itself within the Marxist tradition's long-standing critique of Keynesianism as a bourgeois reformist project. It explicitly contrasts Keynes's class position — "the class war will find me on the side of the educated bourgeoisie" — with the working-class perspective of Marxism. The piece also engages with the historical record of the New Deal, arguing it failed to resolve the Great Depression, which only ended with wartime mobilisation. This places the article in the tradition of Trotsky's analysis of the New Deal as a form of state capitalism that could not transcend the system's limits.

Conjunctural Relevance

The article was written in May 2020, at the height of the first wave of the coronavirus pandemic, and directly addresses the immediate economic response. It cites specific data: UK GDP predicted to fall 15%, Morgan Stanley's forecast of a 30% annualised US fall, 30 million US job losses, and one million UK Universal Credit applications in two weeks. It notes that governments had already exhausted monetary policy (0% interest rates) and fiscal space (high public debts from 2008) before the crisis hit.

The article identifies the specific measures — £330 billion in UK state spending, $2.2 trillion in US central bank measures, $4.3 trillion in state spending — and argues these are not traditional Keynesian demand stimulus but life-support for a paralysed system. It names the political figures promoting MMT (Alexandria Ocasio-Cortez) and notes the irony of a Tory government implementing what the Spectator called "socialism." The piece connects this to the longer trajectory of the 2008 crash, which it argues was merely postponed by decades of credit expansion and Keynesian policies.

Where the Argument Continues

The article leaves several threads open that are developed elsewhere in the IDOM corpus. The relationship between the coronavirus crisis and the longer-term tendency of the rate of profit to fall is stated but not elaborated in depth — this is explored more fully in other IDOM articles on the structural crisis of capitalism. The critique of UBI as a reformist demand that leaves capitalist power untouched is a recurring theme in IDOM's analyses of "left Keynesianism" and is developed in articles on the Green New Deal and basic income proposals.

The article's claim that the 2008 crash was "delayed for decades on the basis of Keynesian policies and a boom in credit" points towards the broader Marxist analysis of fictitious capital and financialisation, which is treated in depth in IDOM's series on the 2008 crisis and its aftermath. The argument that austerity will follow the current spending spree is a prediction that subsequent IDOM articles have tracked empirically.

Connections

The article should be read alongside Marx's own writings on crisis in Volume III of Capital, particularly the chapters on the tendency of the rate of profit to fall and the contradiction between production and realisation. Trotsky's The Death Agony of Capitalism and the Tasks of the Fourth International provides the historical parallel of analysing state intervention in a dying system. For the specific critique of Keynes, Joan Robinson's Economic Philosophy offers a sympathetic but critical account from within the Keynesian tradition, while Paul Mattick's Marx and Keynes provides a Marxist refutation.

Within the IDOM corpus, this article connects to analyses of the 2008 crash, the Green New Deal, and the politics of MMT. Against the Stream episodes on the economic crisis and the limits of reformism develop the same themes in a more conversational format.

Key Quotes

  1. "Money is only a representation of value. And real value is created in production, as a result of the application of socially necessary labour time."

  2. "The state can create money. But the state cannot guarantee that this money has any value. Without a productive economy behind it, money is meaningless."

  3. "Keynes' programme was not one aimed at ameliorating the lives of the working class, but at saving capitalism from its own contradictions."

  4. "The result is that, under capitalism, there is an inherent overproduction in the system. It is not simply a 'lack of demand'. Workers can never afford to buy back all the commodities that capitalism produces."

  5. "At most, Keynesianism and MMT provide a palliative medicine for a chronic disease. But neither can diagnose this disease correctly, nor offer a genuine cure."

  6. "What capitalists give to workers in the form of subsidies and spending today, will be taken away through austerity tomorrow."