Confronting the wolf

Issue: 123

Chris Harman

Neil Faulkner accused me in our previous issue of not seeing the “wolf” of economic crisis now that it is upon us.1 It is an accusation that, I must admit, mystified me, since only a year ago Jim Kincaid was accusing me of grossly overestimating the crisis-prone nature of the world system.2 The accusation is even more mystifying since it relies on an analysis nearly all of which came from my own writings, reinforced by statistics from the same source (as anyone who looks at his footnotes can tell). If plagiarism is the highest form of flattery, I should be flattered indeed.

The core of my analysis has been that we are faced with a crisis in which neither governments nor big corporations can simply rely on the “creative destruction” of the market resolving as some firms cannibalise others.3 This is leading to intense political and ideological as well as economic crisis as panicking governments turn, with the support of wide sections of capital, to “Keynesian” interventionist policies, including partial nationalisation. The result is that a level of government economic spending, already much higher than in the 1930s, has shot up even further so that the US government deficit this year is set to be 10 percent of GNP—a higher figure than total government spending under Roosevelt in 1936. But, as I wrote, “the major financial and industrial corporations operate on a much greater scale than in the inter-war years and therefore the strain on governments of bailing them out is disproportionately larger.” The bail-outs “are bigger than ever in the past but the pool of debt they have to dispose of is also much deeper”.

This introduces enormous unknowns into the situation, which exacerbate the sense of social, political and ideological crisis while making the forecasting of exact outcomes difficult. “The panicking politicians and terrified capitalists doing the bailing out can hardly avoid clashing with each other as they try to cope with problems they never thought they would face.”

I did suggest it might just be possible “for a state with an economy as big as that of the US” to “prevent recession turning into cumulative collapse” but that this was unlikely to do more than repeat “the Japanese experience” of the 1990s of “a decade and half of paralysis of the economy”. Such a paralysis would have “a devastating impact elsewhere” as “US-based capital” tried “to offload the costs of the crisis on to weaker parts of the system”. And, I added, many of the world’s smaller states do not have the sort of resources even to achieve the paralysis outcome, so that “we could well see multiple examples of the sort of devastating crisis that hit Argentina, causing political turmoil”. “Britain”, I noted, “is especially exposed to the impact of the global crisis”.4 Finally, central to my argument was that even if the bail-outs are partially successful in preventing complete collapse, the cost of recouping what the banks have lost will lead to attacks on the wages of employed workers and welfare expenditure.

So what is Neil’s gripe against me? Insofar as I can follow it, my mistake has been that I am not willing to join with him in proclaiming “the beginning of a new epoch of global slump”. Note the word “epoch”, which is not one to apply to something that lasts a decade, like the American slump of the 1930s, or a decade and half, like Japan in the early 1990s. It cannot be of “limited duration”, according to Neil—which presumably means it will be of unlimited duration, ie will last forever. “We are witness”, he tells us, “to perhaps the greatest crisis in the history of the system.” By refusing to use such catastrophist language I am doing “nothing to challenge the sense of powerlessness and paralysis that afflicts many workers, including many activists, in relation to the recession”.

Yet Neil, while criticising me, is not himself prepared to put all his money on the catastrophist position. His phrasing, note, is that this is “perhaps” the greatest crisis—which implies that perhaps it is not. Similarly, he insists at one point that the money poured into the banking system by the British government has had “no apparent economic effect” and that the “$2 trillion” put into the US banks by Treasury secretary Timothy Geithner was “ineffective”. Yet this completely contradicts his own assertion a few paragraphs earlier that “capitalism’s leading finance ministers and central bankers have, since September-October 2008, prevented a global meltdown”. He can’t have it both ways. I prefer to try to be consistent and to examine the evidence in a critical way, even if it means admitting that, like Marx, Engels, Lenin, Trotsky5 and Rosa Luxemburg in their time, I cannot foresee in detail how a crisis as serious as this is going to develop.

Marxist analysis is about more than rhetoric. It is about scientifically carrying through “the concrete analysis of concrete situations”, as Lenin put it. That is not possible without some care for facts. Unfortunately, Neil does not show such care. He exaggerates in order to justify complete catastrophism. He argues, for instance, that “the global asset bubble” of “$290 trillion…completely dwarfs the $1.9 trillion of state bail-outs since the crisis began”. The implication is that the $1.9 trillion has somehow to cover the cost of the 290 trillion—an obvious impossibility. But this assumes all the assets are of negligible value. They are not. Many of us, for instance, are still paying mortgage payments on homes in a way that justifies the valuation of at least some bank assets. What matters is the assets whose price is not justified in this way. The figure for these is big, may get bigger as the recession deepens, and may quite likely mean governments will have to return once more to trying to prop up the banks. The latest estimate is just over $4 trillion dollars; even if, as seems likely, this too turns out to be too low, the real figure will not be Neil’s hundreds of trillions.

He similarly gets carried away when he writes of “the Chinese economy” being “now in freefall”. I am sorry but, although some 20 million Chinese workers have reportedly lost their jobs and growth is considerably down on last year, the economy is far from being in “freefall” at the time of writing and, in fact, is expected to grow by 6 percent on the basis of a huge government stimulus. I have argued that Chinese capitalism cannot sustain its levels of accumulation and growth indefinitely in the face of falling profit rates and a dependence on exports to sell goods which Chinese workers and peasants cannot afford to buy.6 Still less can it be a locomotive for the rest of the world system. But its growth continues for the present.

Does all this matter, if we all agree the crisis is causing immense pain to the world’s workers and peasants and has thrown capitalism into turmoil? It does, because there is a long tradition of Marxists making catastrophist analyses and drawing ultra-left practical conclusions—as, for instance, happened with a section of the Comintern leadership in 1920-1,7 and again with the Stalinised Comintern of 1929-34. The results have been disastrous, both for the revolutionary left and for the wider working class.

There are hints in Neil’s piece that point in the same direction, and he has written elsewhere8 that the behaviour of the British Communist Party after 1929 provides a model for us now, not noticing with his disregard for facts that its membership fell from 4,500 in 1929 to 2,555 in 1931.9 He sees my practical conclusions as conservative. I actually argued, “Propaganda alone is clearly not enough. Socialists have to try to be present at the myriad points where the pain caused by the recession can lead to resistance—whether it is factory closures, wholesale sackings in call centres, waves of repossessions or the draconian measures imposed on benefit claimants”.10 On top of that I stressed the resistance to the cuts to be expected in the public sector after the next general election.

Neil’s own perspective for resistance is much narrower than this. Almost all of his practical suggestions focus on activity by unemployed workers. Agitation among the unemployed will be important as large numbers of young people are thrown on the dole. That is why I included it in my list of activity. But the long history of revolutionaries agitating among the unemployed shows that continuing organisation—as opposed to spasmodic riots and demonstrations—only involves a small minority of their numbers and cannot have the same impact on the system as, for instance, mass strikes. This was certainly true of the Right to Work marches in the late 1970s and early 1980s. The first march involved 80 people at a time when more than a million were on the dole.11 It was true of the rather larger mobilisations of unemployed by the Communist Party in the 1930s, however effective particular actions were. And it was also true of the most effective unemployed organisations in recent memory, the piqueteros in Argentina in 2001-2.12 What is more, although on occasions the actions of unemployed workers can help precipitate a crisis of the bourgeois state, they do not have the power that comes from being at the point of production to resolve it in a revolutionary direction. That, above all, was the lesson of Argentina.

Things are rather different with struggles of employed workers. The biggest struggle against unemployment in the 1980s was the year long miners’ strike of 1984-5, and the really big struggles in the US in 1930s were those which took place with a degree of very limited economic recovery from early 1933 onwards.

There is a certain logic to Neil’s catastrophist approach that leads him to prioritise agitation among the unemployed over those with jobs. This makes sense if your perspective is that the system is not merely in deep crisis but collapsing. However, if you grasp the multidimensional character of the crisis, with states pouring in huge sums to prevent complete collapse only to face the problem of how to make workers pay for those huge sums, then you will understand that struggles by employed workers remain crucial. Even if the stimuli do eventually lead to a limited degree of economic recovery, past experiences suggest that a partial and shortlived economic recovery in the middle of a painful recession can encourage resistance from workers.13 The perspective then is one of a long period of recurrent and intense class struggles, in which employed workers and their organisations will play a central role. That is why it would be disastrous for revolutionaries, out of impatience, to abandon that terrain.

While I have no doubt about the threat of the wolf to us, Neil writes as if the wolf has already eaten us and all we can do is cause it indigestion.


1: Faulkner, 2009.

2: Kincaid, 2008.

3: Harman, 2009a. All the quotes from me are from this source unless otherwise indicated.

4: Harman, 2009b.

5: For Trotsky’s hesitancy in forecasting the detailed short-term trajectory of an economy in crisis because “it is an equation with many unknown elements” and his refusal to say there could not be a limited “upturn”, see Trotsky, 1969, where he also recognised he had failed to foresee the depth of the crisis that hit the US in the early 1930s.

6: Harman, 2008.

7: When the view that capitalism could not enjoy any respite, however temporary, from crisis led to the disastrous “March Action” in Germany. For a post-mortem on the damage caused by revolutionaries assuming that crisis automatically opened up a prospect of offensive action, see Trotsky, 1921.

8: In a privately circulated document.

9: Frank, 1979, p634.

10: Harman, 2009b.

11: The highly successful rally that marked the end of the march was in the Albert Hall, London, which only holds about 5,000 people. That was an achievement at the time but not a mass movement against unemployment. It was, in effect, a mobile propaganda column aimed at encouraging struggles from employed workers. See the reports in Socialist Worker from 28 February to 27 March 1976.

12: The piqueteros organisations numbered at the high point perhaps 60,000 at a time when there were four or five million unemployed-that is they involved less than 2 percent of the unemployed.

13: Again see Trotsky, 1921 and 1969.


Faulkner, Neil, 2009 “From Bubble to Black Hole: The Neoliberal Implosion”, International Socialism 122 (spring 2009),

Frank, Pierre, 1979, Histoire do l’International Communiste, volume two (Editions de Breche).

Harman, Chris, 2006 , “China’s Economy and Europe’s Crisis, International Socialism 109 (winter 2006),

Harman, Chris, 2008, “Misreadings and Misconception”, International Socialism 119 (summer 2008),

Harman, Chris, 2009a, “The Slump of the 1930s and the Crisis Today”, International Socialism 121 (winter 2009),

Harman, Chris, 2009b, “Brown’s Left Bounce?”, International Socialism 121 (winter 2009),

Kincaid, Jim, 2008 “The World Economy—a Critical Comment”, International Socialism 119 (summer 2008),

Trotsky, Leon, 1921, “Flood Tide”,

Trotsky, Leon, 1969 [1938], “Discussion in Mexico City”, 20 July 1938, in Leon Trotsky on the Labor Party in the US (Merit),