Convert a crisis into a revolution by Carlo Morelli was originally published in Scottish Left Review iisue 49 www.scottishleftreview.org

The recession sparked by the credit crunch of 2008 is having such a profound effect that prominent writings from the past are being taken from the bookshelf and dusted down on a daily basis. Not only is Marx’s writing again seeing a revival amongst the general public but Keynes has been rediscovered by policymakers with counter-cyclical government expenditure now the flavour of the month across the globe. The significance of these upheavals should not be underestimated. Marx’s philosophy that quantitative change gives rise to qualitative change resulting in the recognition that ‘all that is solid melts into air’ can be aptly applied to the present crisis. Nothing is now impossible in order to rescue capitalism.

Financial commentators’ optimism in the past period of growth is now only surpassed by their pessimism in the future. Only this time no one can be sure if they are exaggerating. Just one example of the extent of this pessimism can be gauged from the investment discussions currently under-way in the financial press. Buried in the Financial Times finance section in late October 2008 (Financial Times, 25th October 2008, Money section, p.7) was a series of articles on the limitations of with-profits policies for investors. While this arcane discussion, of the losses derived from stock-market investment and the suggestion that investors should incur the Market Value Reductions in order to remove their funds from investment companies, seems irrelevant to all but a tiny minority. However, consider the following; every single individual in the UK who has either a pension based upon stocks and shares, a life insurance policy or an endowment-based mortgage is the group at the focus of this discussion. Norwich Union alone, for example, has over 1.3 million policy-holders of this type of policy. If these policies turn out to be worthless, as the discussion implies, we are seeing the wholesale impoverishment of the better-off working class and the middle classes. Only those at the bottom or very top of the wealth distribution are likely to escape this latest debacle of the financial sector. All those who have attempted to save to improve their position are going to be robbed by the crisis. The polarisation taking place within society as a result of this crisis is going to be drawn very far up the income distribution.

Intellectually too we are seeing a redrawing of the political debate. The Financial Times is probably the most amusing example of this intellectual revolution. The paper has become the leading organ calling for state intervention in the market with Martin Wolf boldly stating “It is time for comprehensive rescues of financial systems” at the beginning of October only being surpassed by the middle of October with its editorial entitled “Nationalise to save the free market”. This revolutionary thinking at the heart of the capitalist establishment is not unchallenged. Readers’ shock and horror is exhibited in its letters such that by the end of October they were stating that the ‘FT’s swing to the left goes too far with Keynes’. (See M. Wolf, ‘It is time for comprehensive rescues of the financial systems’, 8th October 2008, p.17, 14th October 2008, p.16 and J.D. Reitz, ‘FT’s swing to the left goes too far with Keynes’, 25th October 2008, p.10.)

While such twists and turns of the ruling pro-market ideology are hugely amusing they underlie a much more significant development in the divisions over how to deal with capitalism’s crisis. Lenin’s first condition for a revolution, a ruling class unable to rule in the existing way, seems to be rapidly emerging. The current crisis of capitalism is without doubt one in which the old order of neo-liberalism and globalisation is being buried under Keynesianism for Capital. Governments around the globe have focused upon a Keynesianism for Capital but have steadfastly refused to develop a Keynesianism for Labour. So unemployment, repossession and impoverishment will characterise the current recession, while profitability for bankers, hedge-funds and speculators will be underpinned by government guarantee and expenditure.

Lenin argued that revolutions also require a working class that is no longer prepared to be ruled in the same way and a revolutionary organisation capable at channelling revolutionary movements to overthrow capitalism. This leaves those on the left with a challenge; how can they ensure the second and third of Lenin’s three elements can be developed? Fortunately perhaps, resistance to neo-liberalism around the globe has been a recurrent theme of social conflict throughout the past twenty years as globalisation deepened. Whether in Latin American social movements, food protests on a global scale, trade union struggles in European economies or the resistance to US and British led imperialist war in Iraq and Afghanistan working classes globally do not seem readily prepared to be ruled in the same way. The current failure of governments to provide Keynesianism for Labour will undoubtedly intensify these struggles for equality, justice and peace.

The extent to which Labour’s impact is felt on the ruling classes and challenges the agenda of the new-Keynesian governments will be of upmost importance in 2009 as recession emerges. Simultaneously, the challenge for the left is in creating a political representation for the working class which provides an economic alternative to capitalism. The capitalist crisis does in fact resolve two key debates for the Marxist and non-Marxist left during the past twenty years; that of the degree to which globalisation permits a transcending of traditional constraints on economic growth and the extent to which globalisation undermines the role of the state. That globalisation has been predicated upon the growth of speculative investment, investment which would have in other periods led to increases in fixed-capital formation has now become apparent. Financial investments, securitisation and the wider growth of financial markets provided returns to holders of capital while speculative growth continued. Growth could only continue as long as the assets underpinning financial markets were deemed to be rising in value. However, once a halt to rising asset-based financial investments prices occurred the financial sector, and the derivatives market which emerged from it, ensured the financial crisis spread to all sectors of the financial markets. In a globalised financial world financial de-leveraging becomes a transmission belt for the financial crisis moving into the productive economy. The 2008 credit squeeze ensured that previously profitable productive capital now becomes unprofitable. This is what we are now witnessing.

Thus for the left the creation of a politics which places people before profit and planning before the market is of rising importance.

Carlo Morelli is a Lecturer in Economics at Dundee University