POLITICAL STUDIES REVIEW: 2010 VOL 8, 27–39

doi: 10.1111/j.1478-9302.2009.00204.x

Class, Capital and Crisis: A Return

to Fundamentals psr_204 27..39

Peter Burnham
University of Birmingham

The financial crisis that currently threatens the stability of global capitalism is the latest in a long line of similar
episodes stretching back some 200 years. While many orthodox economists explain the crisis in terms of the failure
of the proper operation of the market mechanism, radical accounts see crisis as an aspect of the constitution of
capital and of the process of the accumulation of capital itself. This article explores the extent to which Marx’s
understanding of accumulation and crisis can provide the basis for a general theory of capitalist crisis. It concludes
that the growing and chronic separation between financial (fictitious) accumulation and productive accumulation is
the key to understanding the latest crisis of capital expressed as a global credit crunch. Furthermore, Marx opens the
door to the development of an overtly ‘political’ theory of crisis stressing the ‘capitalist use of crisis’ as a means for
the violent reassertion of the fundamental class relation.

The current crisis of global capitalism has revealed much about the vulnerability both of
the globalisation process and of the economic models pursued around the world with
such ideological certainty following the collapse of the Soviet Union. However, while the
empirical details of the crisis are now well known (for the fullest account see IMF, 2009a),
social scientific explanations of the crisis are relatively scarce. In fact, apart from a crude
version of Polanyian international political economy (IPE) arguing that ‘markets need
states’ and ‘regulation can be good’, orthodox commentators offer little beyond a populist
criticism of liberal market ideology. The principal argument of this article is that as
social scientists we need to offer not simply a description of events (this can be left to the
journalism trade) but a conceptualisation of the set of social relations that comprise the
global political economy which is now experiencing the deepest crisis since the Great
Depression.

Accounts that attempt to explain the present crisis in terms of the ‘unbridled power of
markets’, the ‘greed of investors’, the ‘weakness of politicians’, etc., simply fail to advance
beyond a superficial form of naïve positivism in which externally related factors are
brought haphazardly together in the fashion of popular journalism. Apologetic attempts to
explain away each historically specific and particular crisis of capital as unique and
contingent fall down in the face of recurrent crisis and fundamentally deny the possibility
of offering a generalised theory which, it might not unreasonably be thought, was a
precondition for a social scientific explanation. As Simon Clarke (1994, p. 4) sharply
observes,

the theoretical problem is not to explain the particular causes of this or that
crisis, any more than the task of the scientist is to explain the precise date on
© 2010 The Author. Journal compilation © 2010 Political Studies Association
28 PETER BURNHAM

which spring arrives in any particular year. The task is to explain the regular
recurrence of economic crisis as a normal part of the developmental tendencies
of the capitalist mode of production.
This, of course, is one of the crucial issues that divides orthodox (neoclassical) and radical
Marxist political economy. In orthodox approaches it is assumed that markets tend towards
equilibrium and that crisis is the result of the failure of the proper operation of the market
mechanism (Linder, 1977; Mattick, 1969, p. 57). By contrast, the radical tradition argues
that while the market may be the ‘stage on which all competitive activities are played out’,
the stage itself is set up and bound by the class character of the social structure (Mattick,
1969, p. 54). It is not the market mechanism that explains an apparent ‘equilibrium’ but,
as Paul Mattick (1969, p. 56) argues, it is ‘the accumulation of capital which allows the
market mechanism to appear, at times, as an equilibrium mechanism’. In the radical
tradition, in other words, crisis is integral to economic development – it is an aspect of
the constitution of capital (a social relation based on class exploitation) and the process of
the accumulation of capital itself that produce the characteristic expressions of crisis in
terms of overproduction, under-consumption and disproportionality. The rest of this
article will expand on these remarks in the spirit of Marc Linder’s collective critique of
Paul Samuelson which noted: ‘it is our intention to show the “relevance” of Marxism not
by asserting its revolutionary character in the abstract but rather by demonstrating how it
alone is capable of understanding contemporary capitalism and of explaining why bour-
geois economics cannot’ (Linder, 1977, p. xi).

Orthodox Economics and the Great Evasion

Unlike the contemporary academic division of social scientific knowledge into the
separate domains of economics, politics and sociology, classical political economy sought,
however incompletely, to analyse from the perspective of a totality – of the ‘all-pervasive,
determining supremacy of the whole over the parts’ (Lukacs, quoted in Rosdolsky, 1977,
p. 27). From William Petty to John Stuart Mill the aim of the classical tradition was not
to describe contemporary events but to identify the social classes that comprised society,
define the economic relationships between these classes and discover the laws that
regulated these relationships (Clarke, 1982, p. 19). In other words, by investigating the ‘real
internal framework of bourgeois relations of production’ (Marx, 1976, pp. 174–5), the
classical writers were able to provide a methodological ‘key’ to unlock the seemingly
disparate and chaotic nature of society. William Robertson (1890, p. 104) provides a classic
example of the methodological approach of the classical tradition, arguing that ‘in every
inquiry concerning the operations of men when united together in society, the first object
of attention should be their mode of subsistence. Accordingly as that varies, their laws and
policy must be different’. The limitations of the classical theorists are well known, in
particular their treatment of the social relations of production as technical relations and their
inadequate treatment of the value-form as eternalist and trans-historical (Marx, 1976, p.
174, fn. 34). However, the methodological and holistic focus was continued in the radical
tradition with Marx arguing strongly that ‘in all forms of society there is a certain form
of production which predominates over all the rest, and whose relations determine the
© 2010 The Author. Journal compilation © 2010 Political Studies Association
Political Studies Review: 2010, 8(1)
CLASS, CAPITAL AND CRISIS 29

rank and influence of all others’ (Marx, quoted in Rosdolsky, 1977, p. 28; see also Marx,
1986, p. 43). The key to understanding capitalist society therefore was not money, rent or
labour but rather capital itself as a social relation which ‘dominates everything in bour-
geois society – it must form the point of departure and the conclusion’ (Marx, 1986,
p. 44).
The marginalist revolution, of course, put paid to the classical and radical political
economist’s attempt to construct a science of society (for a full account see Clarke 1982;
Matyas, 1985). In its place economics could now be narrowly interpreted as a study of
isolated utility-maximising individuals expressing their subjective preferences in a taken-
for-granted market situation. As Fredy Perlman (1973, p. ix) notes, the ‘replacement’ of
political economy by positive economics actually constituted an omission of a field of
knowledge – a headlong dash from reality – in effect, a great evasion. This left space for
the growth of complementary disciplines, each established in relation to a specific
irreducible type of action – social action (sociology) and political action (political
science). The organic study of law, government and society on the basis of the mode of
subsistence or the social relations of production had now been reduced to a narrow,
fragmented analysis based on an unreflective ‘state/market’ dualism in which all mean-
ingful connection between politics, economy and society had been severed. Links between
disciplines could now only be re-established by awkwardly bringing together externally
related factors with heavy reliance on the language of ‘interactions’, ‘interdependencies’,
‘influences’ and ‘autonomies’. Little wonder therefore that when faced with understanding
and explaining the current global crisis, political scientists and sociologists are largely silent
while orthodox economists point to the exceptional circumstances which, it seems, were
little understood and, we are told, could not be foreseen. However, if neoclassical
economics has largely abandoned the attempt to offer a holistic conceptualisation of
capitalism and crisis, a number of interpretations can be derived from Marx which can at
least begin the task of moving beyond the level of pure description. It should of course
be acknowledged early on that there are a variety of approaches based on a reading of
Marx and that Marx’s crisis theory in particular is subject to a diverse range of inter-
pretations.This contribution does not lay claim to offer a new interpretation of Marx but
rather builds on what has recently been called ‘Open Marxist’ approaches, drawing in
particular on debates conducted within the Conference of Socialist Economists (on Open
Marxist approaches see Bonefeld et al., 1992; Burnham, 1994).

Capital as a Social/Power Relation

The most fundamental theoretical issue raised by the current situation, as noted above, is
that of the relationship between economic development and economic crisis. Not all
orthodox economists have shared the popular neoclassical view that crisis can arise only
as the result of external shocks. As Toni Negri (1988, p. 51) points out, both Keynes and
Schumpeter toyed with the ‘hidden assumption’ that there is no self-equilibrating bal-
ancing mechanism within the capitalist economy. For these writers crisis in one form or
another is therefore an intrinsic element of the economic cycle – although for Keynes
crisis could at least in principle be regulated and subsumed while for Schumpeter crisis
© 2010 The Author. Journal compilation © 2010 Political Studies Association
Political Studies Review: 2010, 8(1)
30 PETER BURNHAM

when properly managed was seen as progressive for capital. However, if the insights of
Keynes and Schumpeter look promising as alternatives to the orthodox platitude that
‘markets tend to equilibrium’, Marx, in his critique of the classical tradition, provides the
fullest account of the relationship between development and crisis, arguing, in brief, that
‘crisis is both the mode and the specific function of capital’s process of production – and
it is totally necessary’ (Negri, 1988, p. 67). To take this statement further it is necessary to
develop at least a rudimentary understanding of Marx’s discussion of the circuit of capital
and its relationship to class struggle and the state.

For Marx, the class relation between capital and labour is already present, already
presupposed, the moment the possessor of money and the possessor of labour power
confront each other as buyer and seller (Marx, 1978, p. 114). As Clarke (1978, p. 42), in
a pivotal contribution, clarifies, it is the concept of class relations as being analytically
prior to the political, economic and ideological forms taken by those relations (even
though class relations have no existence independently of those forms) that makes it
possible for a Marxist analysis to conceptualise the complexity of the relations between
the economic and the political, and their interconnections as complementary forms of the
fundamental class relation, without abandoning the theory for a pragmatic pluralism. Class
relations, in this sense, are of course antagonistic relations. Class struggle therefore lies at
the heart of Marx’s account of accumulation as capital must not only extract surplus from
labour daily in the production process but must also ensure the successful reproduction of
the total social circuit of capital through its three principal forms (money capital,
productive capital and commodity capital).This calls for constant ‘intervention’ from state
managers and for the establishment of various forms of international regime and insti-
tution. If the circuit of capital is understood in terms of struggle and potential crisis then
determinism of all kinds is rejected. Struggle, as John Holloway (1991, p. 71) points out,
by definition is uncertain and leaves outcomes open. In essence this version of Marxism,
based on an understanding of the complexities of the rotation of capital, focuses on
struggles over the imposition of work (and the relationship between monetary and
productive accumulation) and thereby points to the fragility of capitalism as a system of
class domination (Cleaver, 1979).

Capital, as self-valorising value, is therefore to be understood as ‘movement’, as a circu-

latory process, not as a static thing or structure (Marx, 1978, p. 185). Money capital and
commodity capital do not, as in orthodox economics, denote branches of business that are
independent and separate from one another. Rather they are simply particular functional
forms of industrial capital, ‘modes of existence of the various functional forms that
industrial capital constantly assumes and discards within the circulation sphere’ (Marx,
1978, p. 136).Accordingly, this tradition refuses to fetishise either the ‘market’ or the ‘state’.
Instead, focus is on the changing character of the form of the ‘political’ in relation to the
circuit of capital. This presents a powerful alternative to deterministic base/superstructure
images of Marxism. Monocausal economism is replaced with the dialectical notion that
social relations of production only exist in the form of economic, legal and political
relations. It is not simply a case of arguing in Weberian fashion that each of these relations
exercises reciprocal and causative influence. Rather, Marx is at pains to stress that
© 2010 The Author. Journal compilation © 2010 Political Studies Association
Political Studies Review: 2010, 8(1)
CLASS, CAPITAL AND CRISIS 31

antagonistic class relations are always manifest in economic, political and legal forms. In
this way ‘economics’ rests as firmly on ‘politics’ and ‘law’ as vice versa (Meiksins Wood,
1981). The fundamental error of determinist schools is that they understand the social
relations of production in terms of technical economic relations, thereby replicating the
fetishism that Marx’s critique of classical political economy sought to dispel.
In opposition therefore to most approaches in political science, this tradition understands
the ‘state’ as an aspect of a wider and more fundamental set of social relations based on
the separation of labour from the conditions of production. The state should not be seen
as ‘autonomous’ or as ‘determined’ by a supposed ‘economic base’. Rather, the starting
point is that provided by Evgeny Pashukanis (1978, p. 139) who poses the question:
why does class rule not remain what it is, the factual subjugation of one section
of the population by the other? Why does it assume the form of official state
rule, or – which is the same thing – why does the machinery of state coercion
not come into being as the private machinery of the ruling class? Why does it
detach itself from the ruling class and take on the form of an impersonal
apparatus of public power, separate from society?’
Similarly in relation to the market, why do goods and services take the form of
commodities? Why do the products of labour confront each other as commodities?
Marx indicates that our first task is to focus on the relationship between the direct
producers and the owners of production to ascertain how the ruling class secures the
extraction of surplus value. The particular form and mode in which the connection
between workers and means of production is effected is what distinguishes the various
economic epochs of the social structure (Marx, 1978, p. 120). On this basis it is possible
to introduce consideration of the state, since as Clarke (1983, p. 118) clarifies,
the state does not constitute the social relations of production, it is essentially a
regulative agency, whose analysis therefore presupposes the analysis of the social
relations of which the state is regulative. The analysis of the capitalist state
conceptually presupposes the analysis of capital and of the reproduction of
capitalist relations of production, despite the fact that in reality, of course, the
state is itself a moment of the process of reproduction.
The character of the capitalist state, and by implication the international state system, is
therefore to be analysed against the backdrop of the tensions and contradictions inherent
in the development and reproduction of the capitalist mode of production which Marx
lays bare in Capital Volume 1, introducing the notion of the ‘general formula of capital’.

The Circuit of Capital

Capital in its most general form is defined as value that expands itself: ‘the value originally
advanced therefore not only remains intact while in circulation, but increases its magni-
tude, adds to itself a surplus-value, or is valorized. And this movement converts it into
capital’ (Marx, 1976, p. 252). While passing through the sphere of circulation (as money
© 2010 The Author. Journal compilation © 2010 Political Studies Association
Political Studies Review: 2010, 8(1)
32 PETER BURNHAM

capital and commodity capital) there can be a redistribution of value but its magnitude
cannot be increased. Hence Marx identifies the commodity that when purchased can be
used in production to create new value – labour power. In Capital Volume 2 Marx
continues this discussion, emphasising that capital, as self-valorising value, is a movement,
a circulatory process that passes through a sequence of transformations, a series of
metamorphoses that form so many phases or stages of a total process (Marx, 1978, p. 132).
Two of the phases, or forms of capital, belong to the circulation sphere (money capital and
commodity capital), one to the sphere of production (productive capital). As Marx
summarises,
the capital that assumes these forms in the course of its total circuit, discards
them again and fulfils in each of them its appropriate function, is industrial capital
– industrial here in the sense that it encompasses any branch of production that
is pursued on a capitalist basis (Marx, 1978, p. 133, emphasis in original).
Hence, Marx’s basic representation of the circuit:

M − C ( LP + MP ) ... P ... C′ − M′ ( M + m )

In essence, the circuit comprises three stages. First, money capital (M) is exchanged in the
commodity and labour markets for the commodities (C), physical means of production
(MP) and labour power (LP). Money has therefore been transformed into commodities
through the act of circulation (M-C). Second, the newly purchased commodities (MP
and LP) are brought together and set to work in the form of productive capital (P). The
result of the production process is the creation of new commodities (C′) of greater value
than their elements of production. Finally, the circuit enters the phase of commodity capital
where the newly produced commodities are transformed back into money (M′). At the
end of the process, as Marx (1978, p. 127) clarifies, the capital value is once again in the
same form in which it entered it, and can therefore open the process afresh and pass
through it as money capital. It is not the form of the value advanced, but only its
magnitude, that is changed at the end. Capital, in short, appears as a value that ‘passes
through a sequence of connected and mutually determined transformations, a series of
metamorphoses that form so many phases or stages of a total process’ (Marx, 1978, p. 132).
The total process is therefore a circuit.
This, of course, is a very simplified overview of a process that Marx discusses for almost
600 pages in Capital Volume 2. Of particular interest is Marx’s analysis of the problems that
may beset the smooth operation of the circuit. The circuit, he notes, proceeds normally
only so long as its various phases pass into each other without delay. For instance, if capital
comes to a standstill in its first phase (M-C), then money capital forms into a hoard; if
this happens in the productive phase, the means of production cease to function and
labour power is unoccupied; if in the last phase (C′-M′), unsaleable stocks of commodities
obstruct the flow of circulation (Marx, 1978, p. 133). In each of its phases, capital is tied
to a specific form (money, productive or commodity capital) and only after it has fulfilled
the role corresponding to the particular form can it enter a new phase of transformation.
Every delay in the succession thus brings the coexistence into disarray:‘every delay in one
© 2010 The Author. Journal compilation © 2010 Political Studies Association
Political Studies Review: 2010, 8(1)
CLASS, CAPITAL AND CRISIS 33

stage causes a greater or lesser delay in the entire circuit, not only that of the portion
of the capital that is delayed, but also that of the entire individual capital (Marx, 1978,
p. 183).
For our purposes two important points emerge from this very brief overview of the
rotation or circulation of capital. First, the determining purpose, the driving motive
common to all three circuits is the valorisation of value, the basis of which is the
exploitation of labour power. Each particular circuit presupposes the others and although
in reality each individual industrial capital is involved in all three at the same time, the
circuit is a constant process of interruption as capital clothes itself in its different stages,
alternately assuming them and casting them aside (Marx, 1978, p. 109). Hence, capital is
simultaneously present and spatially coexistent in its various phases or modes of existence.
If, however, a breakdown occurs in one part of the circuit, the whole process may be
brought to a standstill. The cycle of accumulation therefore is fraught with the possibility
of crisis at every stage. Since the circuitry of modern capitalism is both intensive and
extensive (in terms of the interpenetration of capitals and the global domination of this
mode of production), the potential for interruption and crisis is immense. Each of the
three phases of the total circuit is prone to disruption (in a multitude of ways ranging
from financial crisis to industrial unrest, overproduction, under-consumption, etc.). At the
most basic level the circulation of capital is undermined by any process that potentially
reunites labour with the means of production and subsistence. This understanding of
capitalism points to the permanence of crisis and the necessity for crisis management both
at national and international levels. Every crisis of capital of course has its own particular
line of development that requires detailed investigation. However, by focusing on Marx’s
analysis of the circuit of capital we are able to analyse the social form of crisis and thereby
begin the task of relating the particular to the general by way of conceptualisation.
Secondly, while discussion of the circuit of capital points to the ‘formal possibilities of
crisis’ (through overproduction, under-consumption and disproportionality), Marx’s insis-
tence on this cycle form as the ‘form of a power relation between classes in struggle’
emphasises that crisis and development are to be seen as ‘complementary poles in what is
now a managed capitalist cycle of domination over labour’ (Merrington, 1988, p. 44). Far
from crisis being seen as a ‘malfunction’ or fetishised ‘systemic breakdown’, Marx opens
the door to a political theory of crisis stressing the ‘capitalist use of crisis’ as a means for
a ‘violent and decisive reassertion of the fundamental class relation’ (Negri, 1988, p. 68).
This is an important contribution to understanding the current situation and will be
developed in the Conclusion.

Credit, Crisis and Fictitious Accumulation

Orthodox explanations of the current crisis begin and end with discussions of ‘asset price
bubbles’, ‘crisis of confidence’ and the need for ‘better regulation’ (for example see IMF,
2009a; McKibbon, 2008). Neoclassical economic theory, as we have seen, does not of
course recognise class exploitation, ‘for the commodities entering the market do not
betray the division of labour and surplus value through the two-fold character of
© 2010 The Author. Journal compilation © 2010 Political Studies Association
Political Studies Review: 2010, 8(1)
34 PETER BURNHAM

labour-power as an exchange-value and as a use-value’ (Mattick, 1969, p. 51). In this

respect it reproduces the limited view of ‘vulgar economy’ criticised by Marx (1981, pp.
953–70) for failing to recognise the implications that flow from understanding capital as
a historically specific form of social relation and thereby remaining trapped in the
estranged and reified world of the trinity formula.
By contrast, Marx’s approach is based fundamentally on seeing capitalism as a system of
production in which ‘the production of things is subordinated to the production, appro-
priation and accumulation of surplus value’ (Clarke, 1994, p. 281). The constant struggle
over what Werner Bonefeld (2000, p. 53; 1995a) terms ‘the integration of labour as a
productive factor into the capital relation’ is the basis for understanding the crisis of capital
accumulation. But, it may be asked, how does this starting point help in understanding the
current crisis which seems at face value to have little connection to labour or class
struggle?
The circuit of capital clarifies that labour power is the source of surplus value. However,
in the transformation of surplus value into profit the illusion arises that it is ‘the entire
capital that gives rise to surplus value and its specific origin, in the extraction of surplus
labour, is concealed’ (Clarke, 1982, p. 92; Marx, 1981, p. 967). Further mystification is
developed by the transformation of profit into average profit and of values into prices of
production and market price. Here, Marx (1981, p. 967) notes, a complex social process
intervenes (the equalisation of capitals) which cuts the relative average prices of com-
modities loose from their values, and the average profits in various spheres of production
from the actual exploitation of labour by the particular capitals involved. The average
prices of commodities now not only seem to differ from their value (from the labour
realised in them) but ‘actually do differ, and the average profit of a particular capital differs
from the surplus value this capital has extracted from the workers employed by it’ (Marx,
1981, p. 967). Ultimately we have interest-bearing capital, which seems to be independent
both of the wage labour of the worker and of the capitalist’s own labour and seems ‘to
derive from capital as its own independent source’ (Marx, 1981, p. 968). Here we enter the
‘bewitched, distorted and upside-down world’ of the trinity formula – the world of vulgar
economics divested of social form and concerned solely with the distribution of profit –
where the sources of wealth appear to belong to completely disparate spheres with not
the slightest connection to living labour.The complex issue of the redistribution of value
among the capitalist class is not to be confused with Marx’s clear statement that the basis
of surplus value is the social relation of capitalist production and ‘its source is the unpaid
labour of the working class’ (Clarke, 1982, p. 101). In his study of the social form of
production Marx stresses that whatever separation develops between the various spheres
of the circuit of industrial capital, the dependence of capital on labour means that capital
will only be reproduced if it succeeds in subordinating labour (Holloway, 2000, p. 181).
This analysis, and in particular the growing and chronic separation between money capital
and productive capital (or between financial and productive accumulation) is the key to
understanding the latest crisis of capital expressed as a global credit crunch.
Credit, in this framework, accelerates the material development of the productive forces
and the world market and seems to enable individual capitalists to overcome monetary
© 2010 The Author. Journal compilation © 2010 Political Studies Association
Political Studies Review: 2010, 8(1)
CLASS, CAPITAL AND CRISIS 35

barriers to accumulation. However, credit is also the principal lever of overproduction and
excessive speculation in commerce and, as such, accelerates violent outbreaks of crisis
(Marx, 1981, p. 572). Credit-sustained accumulation, in other words, ‘rather than elimi-
nating the contradictory unity of surplus value production, constitutes a mode of exist-
ence through which this contradiction can temporarily move without, however, sweeping
away the contradiction’ (Bonefeld, 1995b, p. 189). In conditions of boom, credit appears
to have the ‘magical power of suspending altogether the barriers to the accumulation of
capital’ (Clarke, 1988, p. 107). The constant expansion of credit, however, implies a
weakening of the discipline of the market, a weakening of the discipline imposed by the
law of value (Holloway, 2000, p. 177), which can only ultimately be addressed by
recomposing class relations to exploit labour more effectively as a means of increasing the
surplus value ‘already represented in the money supply but not yet produced by the
workers’ (Bonefeld, 1995b, p. 194). Large-scale credit, in this view, fuels ‘fictitious’
accumulation, that is, ‘the monetary representation of value becomes more and more
detached from the value actually produced’ (Holloway, 2000, p. 176). Sustaining accumu-
lation through debt and its recycling (fed increasingly through deregulated and globally
integrated financial markets replete with new ‘financial instruments’ such as ‘derivatives’ –
swaps, options, futures not based on the trade in physical products [see Panitch and
Gindin, 2008, p. 34]) postpones the restructuring of both inefficient capital and inefficient
workers, consolidating the illusion of an endless upward spiral of economic growth. Of
particular relevance here were the measures adopted around the world, but particularly in
the UK and US, to enable banks to operate in securities markets and non-bank institu-
tions to deal in commercial property lending (Panitch and Gindin, 2008, p. 36).

The rolling over of debt involving commercial banks selling repackaged mortgages to
investment banks which were then converted for sale in derivatives markets became so
profitable that it soon encompassed not only different sectors of finance but increasingly
industrial corporations (Panitch and Gindin, 2008, p. 36). In essence, these practices
represented a grotesque extension of Marx’s (1981, p. 572) view of the credit system as
‘enrichment by the exploitation of others’ labour into the purest and most colossal system
of gambling and swindling’. The result of this growing chasm between financial and
productive accumulation was a globally integrated financial system characterised, accord-
ing to Holloway (2000, p. 179), by instability, volatility and fragility, heading at some point
towards a full-scale credit crunch (the destruction of fictitious capital).

So in summary we are left with the following characterisation: as accumulation stagnates

productive capital seeks to overcome barriers to accumulation through increased levels of
borrowing; the expansion of credit in other words is adopted as a measure to postpone crisis
and can of course result in the realisation of ‘super-profits’ as accumulation appears no
longer to be tied to the ‘real’ economy; however, since accumulation based on credit is
feasible only on the expectation of some future extraction of surplus value, the increased
separation between financial and productive accumulation inevitably becomes unsustain-
able in the face of mounting bad debt; the result is a massive destruction of fictitious capital
(credit crunch) expressed as a banking crisis, the destruction of inefficient capital, mass
unemployment and a global downturn; finally, the crunch can only be addressed through
© 2010 The Author. Journal compilation © 2010 Political Studies Association
Political Studies Review: 2010, 8(1)
36 PETER BURNHAM

increased levels of state debt (recapitalisation and appropriate monetary and fiscal policies)
which in turn must be replaced by tighter monetary policies to re-impose at least
temporarily the discipline of the market and so begins a new cycle of class recomposition,
economic development and renewed crisis.The immediate factors precipitating each bout
of crisis will of course be unique, though many look remarkably similar (see Reid, 1982).
However, the underlying and fundamental cause of capitalist crisis is to be found in the
social form of production and rests on the ‘contradiction between the production of things
and the production of value, and the subordination of the former to the latter’ (Clarke,
1994, p. 285).

Conclusion
The events sparked by the outbreak of the US ‘sub-prime’ crisis in August 2007 would
appear to map very closely the crisis-ridden nature of capitalist accumulation outlined
above.The speculative character of capitalist command over labour represented by fictitious
accumulation threatens, as Bonefeld (1995b, p. 195) outlines, insolvency and liquidation for
productive and money capital alike ‘through the failure of one of the extreme poles of the
contradictory unity of productive and money capital. Monetary panic and industrial crash
are two sides of the same coin’. In September 2008, following the default by Lehman
Brothers and the rescue of the US insurance giant AIG, there developed what the IMF
(2009a, p. 2) has termed a ‘huge increase in perceived counterparty risk’ as banks faced large
write-downs, the demand for liquidity jumped to new heights and questions were raised
about the solvency and funding of core financial institutions. Despite unprecedented
government bail-outs and action on both monetary and fiscal policy around the world the
credit crunch quickly affected global economic activity. Overall, global GDP is reported to
have contracted by 6.25 per cent in the fourth quarter of 2008 and to have continued to
fall in the first quarter of 2009 (IMF, 2009a, p. 4).Write-downs on US-based assets suffered
by all financial institutions over 2007–10 will, it is estimated, amount to over $2.7 trillion
with banks requiring additional capital in the order of $275–500 billion in the US,
$475–950 billion in Europe (excluding the UK) and $125–250 billion in the UK (IMF,
2009a, p. 8). Overall, by analysing the key indicators of global activity (real GDP per capita,
industrial production, trade, capital flows, oil consumption and unemployment) the IMF
(2009a, p. 9) has concluded that ‘by any measure this downturn represents by far the deepest
global recession since the Great Depression’. Moreover the recession is not only the deepest
of the post-war period; it is also the most ‘synchronised’ in its effect on virtually all the
advanced economies and many of those classified as emerging or developing.
The response of state managers around the globe has been swift but the depth of the
destruction of fictitious capital is such that the global economy has been slow to recover.
In terms of monetary policy, central banks in many countries have reduced interest rates
to historically low levels and extended the strategy of ‘quantitative easing’ used by the
Bank of Japan in 2001–6 to boost commercial bank reserves through government bond
purchases (IMF, 2009a, p. 41). Diverse, extensive and well-publicised fiscal stimulus
packages have also been introduced in most countries including Germany, Japan, Korea,
the UK and of course the US. In addition the IMF has introduced more flexible credit
© 2010 The Author. Journal compilation © 2010 Political Studies Association
Political Studies Review: 2010, 8(1)
CLASS, CAPITAL AND CRISIS 37

instruments which, it is hoped, will triple its lending resources to $750 billion (IMF,
2009b, p. 1). In short, as in the 1980s but now on a much larger scale, Keynesianism has
been resurrected through an explosion of government debt around the world. In the UK
for example, the £1.3 trillion of loans, capital injections and guarantees made available to
banks and building societies is calculated to push the public sector net debt to £1.4
trillion by 2013 – this represents approximately 80 per cent of GDP (Hosking, 2009;
Kirkup, 2009). The central government net cash requirement increased from £2.8 billion
in 2001–2 to £153 billion for 2008–9 with the sale of gross gilts increasing from £13.7
billion to £146.4 billion over the same period (HM Treasury, 2009, p. 7). Even without
the occurrence of an outright funding strike – where markets stop buying government
debt – the cost of debt servicing will fall heavily on public services at a time when
unemployment exacerbates collapsing tax revenues. By July 2009 unemployment in the
UK had risen to over 2.4 million – its highest level since 1995 – with a figure of 3 million
predicted by early 2010 (Sunday Times, 2009).
Those charged with managing the global circuits of capital hope that ‘economic adjust-
ment’ or ‘correction’ will sufficiently recompose class relations to stabilise the relationship
between financial and productive accumulation. This recomposition is both ideological
and material, involving the repression of the working class through (usually accepted)
reductions in public services, lower wages, repossession, unemployment and reduced access
to credit, and represents one clear aspect of the ‘capitalist use of crisis’ to reaffirm the
supremacy of capital and the stark reality of the ‘cash nexus’. As Negri (1988, p. 75)
argues, with characteristic flamboyance, ‘working class power must not be permitted to
destroy work, and, with it, society as a productive series of functions, organised according
to the wage system, profit and violence’. Economic crisis re-establishes the law of value
and does not necessarily indicate a general crisis of the capitalist system. Rather it ‘proves
capital’s ability to reorganise, in global and collective terms, the network of power
relations that constitute its material base’ (Negri, 1988, p. 77). In the case of the current
crisis the extent of the dissociation between money and exploitation, and the mountain
of speculative practices and bad debt that this engendered, may have pushed state
managers to the limit in terms of devising strategies to refloat the global economy. The
IMF (2009a, p. 26) is candid in its assessment that room for further macroeconomic policy
support has dwindled as ‘interest rates have approached the zero bound, fiscal policy faces
rising concern about long-term sustainability, and reserve buffers are being depleted’.
However, as Martijn Konings and Leo Panitch (2008, p. 238) point out, the crisis has not
yet resulted in any significant delegitimation of key financial institutions and internation-
ally it appears to be ‘contained within the mechanisms through which American financial
hegemony is constructed rather than result in challenges from imperial contenders’.
Instability, in other words, is likely to be ‘treated as a technical problem rather than as a
deep social crisis’ (Konings and Panitch, 2008, p. 238). The current crisis may have
threatened to politicise capitalist social relations and place on the agenda a public debate
(both moral and substantive) about the nature of money, capital and the role of the state,
but this threat appears to have receded alongside the introduction of measures to stabilise
global finance. Strategies to depoliticise the management of the current crisis will of
course be necessary until there is a temporary global upswing. In this respect orthodox
© 2010 The Author. Journal compilation © 2010 Political Studies Association
Political Studies Review: 2010, 8(1)
38 PETER BURNHAM

economics plays a critical role in obscuring the contradictory basis of capitalist production
and denying that the relationship between accumulation and crisis is internal and nec-
essary rather than external and contingent. Marxist approaches focus our attention on this
fundamental relationship and by conceptualising the social form of production offer, not
a perpetual justification of capitalism, but an understanding that its social relations are
historically specific and thereby, in principle, transitory.
(Accepted: 29 July 2009)

About the Author

Peter Burnham is Professor of Politics and International Studies at the University of Birmingham. He was
previously Professor of Politics at Warwick University. Recent publications include Class, Power and the State in
Capitalist Society (edited with P. Wetherly and C. Barrow, Palgrave Macmillan, 2008). He is currently researching the
politics of monetary policy making in Britain in the 1970s.
Peter Burnham, Department of Political Science and International Studies, University of Birmingham, Edgbaston,
Birmingham B15 2TT; email: p.burnham@bham.ac.uk

References
Bonefeld, W. (1995a) ‘Monetarism and Crisis’, in W. Bonefeld and J. Holloway (eds), Global Capital, National State and the
Politics of Money. Basingstoke: Macmillan, pp. 35–68.
Bonefeld, W. (1995b) ‘Money, Equality and Exploitation’, in W. Bonefeld and J. Holloway (eds), Global Capital, National
State and the Politics of Money. Basingstoke: Macmillan, pp. 178–209.
Bonefeld, W. (2000) ‘The Spectre of Globalization’, in W. Bonefeld and K. Psychopedis (eds), The Politics of Change.
Basingstoke: Palgrave, pp. 31–68.
Bonefeld, W., Gunn, R. and Psychopedis, K. (eds) (1992) Open Marxism, Volume 1. London: Pluto Press.
Burnham, P. (1994) ‘Open Marxism and Vulgar International Political Economy’, Review of International Political Economy,
1 (2), 221–31.
Clarke, S. (1978) ‘Capital, Fractions of Capital and the State’, Capital and Class, 5, 32–77.
Clarke, S. (1982) Marx, Marginalism and Modern Sociology. London: Macmillan.
Clarke, S. (1983) ‘State, Class Struggle and the Reproduction of Capital’, Kapitalistate, 10/11, 113–30.
Clarke, S. (1988) Keynesianism, Monetarism and the Crisis of the State. Aldershot: Edward Elger.
Clarke, S. (1994) Marx’s Theory of Crisis. London: Macmillan.
Cleaver, H. (1979) Reading Capital Politically. Sussex: Harvester.
HM Treasury (2009) Provisional Debt Management Report 2009–10. London: Crown.
Holloway, J. (1991) ‘In the Beginning Was the Scream’, Common Sense, 11, 69–78.
Holloway, J. (2000) ‘Zapata in Wall Street’, in W. Bonefeld and K. Psychopedis (eds), The Politics of Change. Basingstoke:
Palgrave, pp. 173–95.
Hosking, P. (2009) ‘Taxpayers, brace yourselves: Darling will cost us dearly’, The Times, 21 April. Available from: http://
business.timesonline.co.uk/tol/business/economics/budget/article6135986.ece [Accessed 30 May 2009].
IMF (2009a) World Economic Outlook: Crisis and Recovery. Washington DC: International Monetary Fund.
IMF (2009b) ‘IMF Moves to Boost Resources to Combat Global Crisis’, IMF Survey Magazine, 6 July. Available from:
http://www.imf.org/external/pubs/ft/survey/so/2009/NEW070609A.htm [Accessed 7 July 2009].
Kirkup, J. (2009) ‘Britain’s National Debt to Reach £1.4 Trillion under 2009 Budget’, Daily Telegraph, 22 April. Available
from: http://www.telegraph.co.uk/finance/financetopics/budget/5202037/Britains-national-debt- [Accessed 30 May
2009].
Konings, M. and Panitch, L. (2008) ‘The Politics of Imperial Finance’, in L. Panitch and M. Konings (eds), American Empire
and the Political Economy of Global Finance. Basingstoke: Palgrave Macmillan, pp. 225–52.
© 2010 The Author. Journal compilation © 2010 Political Studies Association
Political Studies Review: 2010, 8(1)
CLASS, CAPITAL AND CRISIS 39

Linder, M. (1977) Anti-Samuelson, Volume 1. New York: Urizen Books.

Marx, K. (1976) Capital Volume 1. Middlesex: Penguin.
Marx, K. (1978) Capital Volume 2. Middlesex: Penguin.
Marx, K. (1981) Capital Volume 3. Middlesex: Penguin.
Marx, K. (1986) The Grundrisse (MECW, Volume 28). London: Lawrence and Wishart.
Mattick, P. (1969) Marx and Keynes. London: Merlin Press.
Matyas, A. (1985) History of Modern Non-Marxian Economics. London: Macmillan.
McKibbon, R. (2008) ‘What Can Cameron Do?’, London Review of Books. Available from: http://www.lrb.co.uk/v30/n20/
mcki01_.html [Accessed 30 May 2009].
Meiksins Wood, E. (1981) ‘The Separation of the Economic and the Political in Capitalism’, New Left Review, 127
(May–June), 66–95.
Merrington, J. (1988) ‘Introduction to Marx on Cycle and Crisis’, in T. Negri (ed.), Revolution Retrieved. London: Red
Notes, pp. 43–6.
Negri, T. (1988) Revolution Retrieved. London: Red Notes.
Panitch, L. and Gindin, S. (2008) ‘Finance and American Empire’, in L. Panitch and M. Konings (eds), American Empire and
the Political Economy of Global Finance. Basingstoke: Palgrave Macmillan, pp. 17–47.
Pashukanis, E. (1978) Law and Marxism. London: Pluto.
Perlman, F. (1973) ‘Introduction: Commodity Fetishism’, in I. Rubin (ed.), Essays on Marx’s Labour Theory of Value. Montreal:
Black Rose, pp. ix–xxxviii.
Reid, M. (1982) The Secondary Banking Crisis, 1973–75. London: Macmillan.
Robertson, W. (1890) Works, Volume II. Edinburgh: Thomas Nelson.
Rosdolsky, R. (1977) The Making of Marx’s Capital, Volume 1. London: Pluto.
Sunday Times (2009) ‘Unemployment Jumps to 2.4 Million’, 19 July. Available from: http://business.timesonline.co.uk/tol/
business/article6719076.ece [Accessed 19 July 2009].

© 2010 The Author. Journal compilation © 2010 Political Studies Association

Political Studies Review: 2010, 8(1)