Class Rule: The Depth and Roots of the Current Crisis

Paul Street

July 8, 2011

 The leanness that afflicts us, the object of our misery, is as an inventory to particularize their abundance; our sufferance is a gain to them…

– Mutinous citizen in William Shakespeare’s Coriolanus (1609), Act 1, Scene 1 

As the current epic crisis of capitalism – the first crisis of capitalism in its neoliberal phase – continues, possibly moving back into technical recession, self-satisfied economic elites counsel patience and positive thinking to anxious Americans.  To be sure, capitalist investors and policymakers “have no higher purpose than maintaining the status quo, squeezing profit and privilege out of a decrepit but well protected machinery of power. They know,” radical Canadian political scientist David McNally points out, “that talk of growth, development, and human improvement is idle chit-chat. They understand that their task is to make life worse for the majority.”[1] The crisis must be paid for and the bill isn’t going to be picked up by the opulent few who crashed the economy. An honest slogan for the austerity program that had followed in its wake could read as follows: “Public Sacrifice for Private Plutocracy!” But that isn’t the sort of thing intelligent masters say publicly to everyday people in the nation’s working class majority (officially known as “the middle class”). The language of elites directed at those being screwed over (most of the populace) must be softer and more evasive. The profits system risks losing legitimacy when its wealth-concentrating, misery-spreading essence is too openly acknowledged.2

Post-Panic Pillow Talk From a Financial Coordinator 

So idle chit-chat and people-pacifying pillow talk are still required when it comes to capitalist public relations. Look, for example, at a recent editorial in the July 4th edition of the Chicago Tribune by Jeff Korzenik, a senior vice president and director of regional portfolio management at Fifth Third Bank. Titled “ America ’s 15th Financial Panic,” investment coordinator Korzenik’s Op-Ed is dedicated to the proposition that the current crisis is just another “financial panic” on the model of the many such disturbances in the 19th century.  Its 1791, 1813, 1826, 1837, 1848, 1857, 1864, 1873, 1893, 1894, 1896, 1903, 1907, and 1930  all over again. “Unlike traditional business cycle recessions,” Korzenik tells readers, “panics are characterized by a widespread loss of faith in the banking system, the demise of numerous financial institutions, and a collapse of credit in the economy.” They result at the end of periods of prosperity from an excessive rise in key commodity prices, “the gullibility of the public,” “a general taste for speculating in order to grow rich at once,” “a growing luxury leading to excessive expenditures,” and “excessive leverage in the financial system.”

The good news is that “we have survived 14 prior episodes, and can survive this panic as well.”  The less comforting news, calling for patience and restraint, is that “the route to rebuilding an economy after a panic is slow and painful. Our current recovery will feel far different from recoveries of the past half century. The strong months won’t feel quite right and the weak months will feel as if a second recession is at hand.” Korzenik cites economist Carmen Reinhart to suggest that “convalescence” may take six more years.

The best way to get back to prosperity and high growth, Korzenik argues, is to let the market work its magic, which will slowly bring recovery through a long period of private sector debt reduction and high unemployment. Recovery will be undone if government undertakes ill-advised interventions in the masters’ benevolent economic order. “Policymakers need to grasp this,” Korzenik intones: “The focus must be, if not outright pro-business, at least pro-entrepreneurship and job creation. Recoveries from panics are inherently fragile and legislators must recognize the dangers of disruptive sweeping regulatory and economic initiatives. Changes that might be of slight consequence in a traditional vigorous recovery can strangle a post-panic rebound.” Korzenik ends with same advice the Tribune gave readers amidst the economic slowdown of the late 1850s: “COURAGE! ONWARD!” 3 

Never mind that sweeping financial non-regulation and deregulation is a significant part of what created the latest financial panic in the first place.  Or that government has undertaken a massive economic initiative: the gigantic absorption of bad financial sector debt (Wall Street’s toxic junk) and the transfer of trillions of taxpayer dollars to the very leading financial institutions that did so much to crash the economy.  And never mind that a meaningful recovery that might pay off for ordinary working people sooner than six years would require precisely the sorts of public interventions – jobs programs, labor law reform, expanded social expenditures, and strict regulation and targeting of financial investment – that Korzenik abhors.

Korzenik naturally diverts attention from the financial sector that employs him, pointing to “a general taste for speculating” and “growing luxury leading to excessive expenditures.”  His emphasis on the supposed pervasive and “general” culture of greed and risk removes focus from the very specific Wall Street machinations – e.g. the truly manic madness of collateralized debt obligations – that led to the massive over-securitization of vulnerable mortgages and a deadly inflation of fictitious capital values far beyond the real value and long-term earning capacity of material assets. Korzenik evades the special agency and culpability of the leading financial institutions, which have maintained a steady lobbying campaign to undermine government’s capacity to legitimately regulate the financial industry (albeit insofar as such regulation is possible in a world of globalized production and finance). The U.S. working- and lower-class majority possesses no power when it comes to investment decisions in “our economy,” in which the top 1 percent owns 40 percent of the wealth and 57 percent of all claims on wealth. 

“The World of the Past Three Decades is Gone”

But the two biggest problems with Korzenik’s reflection are that (a) he drastically understates the scope and scale of the current economic crisis and (b) he (hardly alone among mainstream bourgeois thinkers[4]) it over-states the extent to which this crisis is simply a financial development. We are in the midst of an epic recession, one of the great busts and systemic shakeouts of global capitalism.  This is not just one of America ’s many banking and credit freeze ups.  It is something much bigger than just the United States ’ “fifteenth financial panic” (or nineteenth nervous breakdown). It is a global Great Recession on the model of earlier world slumps in the previous century (1929-1940 and 1973-1982). The number of people who have been thrown out of work, evicted, and foreclosed upon; the amount of personal and institutional financial wealth that has been liquidated; the number and size of businesses that have collapsed (including early on great financial giants like Lehman Brothers, Washington Mutual, American Insurance Group, numerous European and other banks, the once proud American automakers General Motors and Chrysler, subsequently bailed out and taken over by the federal government), and the massive amount of government money (“something on the order of $20 trillion….an amount equivalent to one and a half times the U.S. gross domestic product” on the part of governments in the richest nations)  that has been poured into bailing out “too big to fail” business and stimulating the economy   — all of these have been nearly off the historical charts and more than just incidentally reminiscent of 1929-32.  It wasn’t for nothing that the leading Anglo-American business paper the Financial Times editorialized as follows in March 2009: “The world of the past three decades is gone.”  Introducing a series on “The Future of Capitalism,” the paper’s editors claimed that the economic collapse had “destroyed faith in the free market ideology that has dominated Western economic thinking for a decade.”5 

Beneath and Beyond Financial Crisis

In the current crisis as in previous ones, the conventional mainstream-bourgeois sense of the economic crisis as a strictly financial development hides its rooting (and indeed the rooting of the credit and banking seizure) in the deeper contradictions of the real capitalist economy. Devoid by definition of institutional capacity for the rational coordination of investment with real human needs and use value, the profits system moves historically through booms and slumps every bit as much as people move through waking and sleep. Recurrent phases of exuberant expansion and contraction are locked into the bourgeois mode of socioeconomic management because of an inherent systemic irrationality. In upswings, capitalists are driven by market competition (the only permissible dominant regulator of economic activity under capitalist rule) to invest in factories, buildings, equipment and other “hard” assets beyond the market’s capacity to absorb the goods and services they at a profitable exchange value.  This creates a chronic problem of excess capacity (relative to opportunities for profitable utilization though not relative to actual human need), undermining overall profitability.  At the same time, competition compels capitalists to mechanize production to a degree that undermines their collective capacity to access the ultimate source of profit: the exploitation of living labor power.6

Capitalist firms’ related competitive war to reduce labor costs (a key factor in profitability) also tends to work against the capacity of the market to absorb goods and services to a degree that allows capitalists to maintain properly profitable production operations. This is an “age-old conundrum of capitalism: an accumulation (savings and investment) process that depends on keeping wages down while ultimately relying on wage-based consumption to support economic growth and investment.”[7] The other side of the conundrum is that workers have more bargaining power and can command higher wages – thereby suppressing profits – in an expanding economy, since they are less easily replaced.8 

As these core underlying tendencies (analyzed by Marx in the 1860s) catch up with capital at the end of long expansionist phases (like 1916-1929, 1948-1973, and 1982-2007), investors seek to boost profits through the expansion of consumer debt and a wide and vast array of speculative and financial practices and devices outside production and the accumulation of hard assets. They pressure lenders and central state bankers to cheapen the cost of start-up capital with ever-lower interest rates and cheap money. But the profit-underwriting power of mass household and corporate debt-leveraging and fictitious capital formation – whereby the price of financial assets multiplies far beyond the real world wealth-creating and earning capacities of the productive economy – is limited.  Collapse is inevitable and financial crisis ensues, helping restore the basis for future profitability by wiping out vast swaths of surplus capital and by throwing millions out of work, reducing the bargaining power and cost of currently employed workers and future hires. The benefits to the surviving, more concentrated capitalist elite are considerable and many-sided.  As McNally notes: “By shutting down factories, offices, mines, and mills, [financial] crises purge excess capital from the economy [and]….reduce costs for surviving firms.  Not only do wages fall, so do prices for raw materials and other components.  They also make it easier for these companies to buy up assets like machines on the cheap from bankrupted firms.  Most importantly, by driving competitors out of the market at the same time as costs are lowered, they make it possible for surviving corporations to introduce whole new technologies and production systems that contribute to improved profitability.”9

Modern financial crises are not autonomous developments independent of the real material economy of capitalist production and distribution. They emerge from the contradictory, anti-social development of the class-based production, distribution, and accumulation system. They prove quite lucrative for many atop that system. And they are hardly trivial events for the masses of people who have never owned a stock portfolio, read the Financial Times, or taken college instruction on neoliberal economics.  Korzenik wants Tribune readers to take comfort in the fact that, “Historically, barring major government policy errors, investors have fared well [during past financial crises].with stable low interest rates offering stability to bondholders and valuation improvements for stock shareholders…. Entrepreneurship remains vibrant, and we have a long history of our greatest commercial enterprises being founded in our most difficult times.”10  

But that’s a viciously top-down perspective, deeply insulting to the masses of ordinary people who seek merely to live at a decent level in exchange for hard work[11] and who lack the resources to ride out and profit from the latest giant slump.  Huge swaths of humanity are running out of ammunition in the war against economic destitution while the masters have “drained the shallow pond of bourgeois democracy” (Lee Sustar) – pale covering for the unelected dictatorship of money – to make the working class majority pay for the crisis their system has imposed on us. The great financial institutions pushed into calamity by capitalism’s systemic contradictions have been saved and kept on life support with good money from central banks.  But to derive this money for the private banks, governments sold bonds in the financial markets – loans that have to be paid back with interest.  To make their payments, the governments are cutting back on public sector wages, benefits, and programs and raising working class taxes even as wealthy citizens and corporations continue to receive giant tax breaks – all to the detriment of the popular majority. It’s a bipartisan necessity, conducted no less by the U.S. Democratic Party and European “social democratic” parties (as in Spain and Greece) than by the more officially conservatives parties of the right (as in England and France).12 

Starve the Left Hand of the State, Feed the Right 

The only real break with “free market ideology” has involved the government decision (made under the command of capital) to spend an unprecedented sum of taxpayer money propping up leading financial and other capitalist firms deemed “too big” and powerful “to fail.”  Even if policymakers actually wanted to introduce neo-Keynesian programs to boost mass purchasing power and provide social and economic security and opportunity for the non-affluent majority, there’s nothing left: government shot its wad on the rich. Imagine that.   To the contrary, public austerity – required to pay off the aforementioned bondholders – is the order of the day even as the under-taxed Few are rewarded with gargantuan public largesse and government continues and even expands the expensive operations of mass policing and incarceration and imperial war against disproportionately non-white poor and working class people at home and abroad. 13   

There’s no paradox here. The bourgeoisie and its servants do not really loathe big government. They hate only what the left French sociologist Pierre Bourdieu called “the left hand of the state” – the parts of the public sector that serve the social and democratic needs of the non-affluent majority. They want to starve and crush those branches of government that reflect past popular victories in struggles for social justice and democracy. But the portions of the state that serve the opulent minority and dole out punishment for the poor are not the subject of their ire. The regressive and repressive “right hand of the state,” comprising the big sections of “big government” that distribute wealth upward and attack those who resist empire and inequality, is not its enemy. It can in fact be expected to grow in accordance with the slashing of left-handed social protections and supports, as the increased insecurity that results can be expected to drive ever more disadvantaged people into the clutches of the military and the criminal injustice system.[14] That is in fact happening today across the capitalist world.15 

 “Our Sufferance is a Gain to Them” 

As McNally notes, “Capitalism’s …spasmodic collapses involve wanton and terrifying binges of sheer mayhem.  In their wake, people are rendered homeless, disease rates ramp up, children suffer and die, and epidemics of physical and psychic trauma are unleashed.”  (McNally might have added that the forces of political authoritarianism are often enhanced.)  This mass suffering is not merely an unfortunate, collateral outcome of the system.  Profits have been restored in the wake of the crisis “largely because working class people have paid for them, through layoffs, wage cuts, reduced work hours, and the decimation of social services.  In the words of a poor rebel in Shakespeare’s Coriolanus,” McNally observes, “‘our misery’ is the source ‘their abundance; our sufferance is a gain to them.’”[16] This is capitalism working quite well on behalf of its only true beneficiaries – elite investors – and at our expense.[17] We will be stuck with such recurrent and deep traumas as long as we acquiesce in the domination of our economy by concentrated capital.  This is not the only or even perhaps the main reason to get serious about confronting capital as such. The profits system is bad enough even when it is booming. The main challenge it poses to humanity (and other living entities) – its assault on livable ecology, already yielding catastrophic results[18] – is actually slowed a bit by economic downturns. Still, the tragic human consequences of the latest epic capitalist slump are sufficiently outrageous in and of themselves – certainly bad enough to justify the emergence of new and global popular movements for the radical restructuring of the economy and society itself.19 

Paul Street ( is the author of many articles, chapters, speeches, and books, including Empire and Inequality: America and the World Since 9/11 (Boulder, CO: Paradigm, 2008); Racial Oppression in the Global Metropolis (New York: Rowman & Littlefield, 2007; Segregated Schools: Educational Apartheid in the Post-Civil Rights Era (New York: Routledge, 2005); Barack Obama and the Future of American Politics (Boulder, CO: Paradigm, 2008); The Empire’s New Clothes: Barack Obama in the Real World of Power (Boulder, CO: Paradigm, 2010); and (co-authored with Anthony DiMaggio) Crashing the Tea Party: Mass Media and the Campaign to Remake American Politics (Boulder, CO: Paradigm, May 2011).  Street can be reached at      


1 David McNally, Global Slump: The Economics and Politics of Crisis and Resistance (PM Press, 2011), 187.

 2 Remember the discomfort the bourgeoisie felt when news got out (belatedly and with the help of Michael Moore) about a 2005 Citigroup memo which acknowledged that the U.S. and other leading global economies were “Plutonomies,” controlled by and working for what Citigroup global strategist Ajay Kapur called “a relatively small group of rich people.”  The already super rich would only be getting fantastically richer in coming years, Kapur projected with approval, tough not without a warning on how the wonderful arrangement could spoil: “RISKS — WHAT COULD GO WRONG? Our whole plutonomy thesis is based on the idea that the rich will keep getting richer. This thesis is not without its risks….the rising wealth gap between the rich and poor will probably at some point lead to a political backlash. Whilst the rich are getting a greater share of the wealth, and the poor a lesser share, political enfranchisement remains as was — one person, one vote (in the plutonomies). At some point it is likely that labor will fight back against the rising profit share of the rich and there will be a political backlash against the rising wealth of the rich. This could be felt through higher taxation on the rich (or indirectly though higher corporate taxes/regulation) or through trying to protect indigenous [home-grown] laborers, in a push-back on globalization — either anti-immigration, or protectionism. We don’t see this happening yet, though there are signs of rising political tensions. However we are keeping a close eye on developments.” That is the sort of candid reflection that smart capitalists prefer to keep private and off the record.See James S. “Citigroup’s Shocking ‘Plutonomy’ Reports – h/t Michael Moore,” Daily Kos (October 4, 2009) at 

3  Jeff Korzenik, “ America ’s 15th Financial Panic,” Chicago Tribune, July 4, 2011, sec, 1, p.19. 

4 “Marx observed in the 1860s that “At first glance…the entire crisis presents itself as simply a credit and monetary crisis.’ He went on to insist on the need to get beyond first glances in order to grasp the deeper dynamics at work…Regrettably, much discussion of the Great Recession has failed to do this, choosing to interpret the slump as a strictly financial event.” McNally, Global Slump, 85. 

5 Financial Times editors, “The Future of Capitalism,” Financial Times, March 8, 2009; Gillian Tett, “Lost Through Destructive Creation,” Financial Times, March 9, 2009; McNally, Global Slump, 13-24. 

6 McNally, Global Slump, 61-84; Karl Marx, Capital, Volume 3: The Process of Capitalist Production as a Whole (New York, International, 1967), 211-266. 

7 John Bellamy Foster and Fred Magdoff, The Great Financial Crisis: Causes and Consequences (Monthly Review Press, 2009), 27. 

8 For a useful survey of different Marxian takes on Marx’s incomplete theory and writings on financial and economic crisis, see Makato Itoh, Value and Crisis: Essays on Marxian Economics in Japan (Monthly Review Press, 1980), 119-149. 

9 McNally, Global Slump. 82. 

10 Korzenik, “ America ’s Fifteenth Financial Panic.” 

11 McNally makes an interesting distinction between capitalists and everyday people under the “perverse logic” of a production and distribution system based on private profit and exchange value instead of human use value and the common good.  “As a rule,” McNally notes, “when capitalists enter the market, their purpose is entirely foreign to the motivations of most people.  For most of us, money is a means to get commodities that sustain life.  We sell a commodity (usually our labor power), get money in return, and use that money to buy commodities to consume.  Put as a simple formula, we are regularly engaged in the cycle C-M-C, where C represents commodities and M stands for money.  The whole point of engaging in the market, therefore, is to procure the commodities that make life possible.  But things are very different for a capitalist enterprise.  For a business, the operative principle is M-C-M’.  The capitalist begins with money (M), then buys commodities (C), such as machines, raw materials, and labor power, with which to produce new commodities (like bread or jeans) that are sold for money (M’).  Money, not commodities for consumption, becomes the end goal of production.  But that only makes sense for a capitalist if the second sum of money is bigger than the first, which is why it is designated as M’. Otherwise the capitalist would simply be going through the whole cycle of investment only to come out with the same sum of money with which he began.” McNally, Global Slump, 73. 

12 Lee Sustar, “Crisis and Class Struggle in the Age of Austerity,” speech given at “Socialism 2011” Conference, International Socialist Organization, Chicago, IL, July 3, 2011. 

13 Sustar, “Crisis and Class Struggle.” For examples of early and fantastic left-liberal hopes of social democratic Keynesianism on the part of Obama, see Paul Krugman, “Franklin Delano Obama,” New York Times, November 10, 2008; Robert Kuttner, Obama’s Challenge; America’s Economic Crisis and the Power of a Transformative Presidency (White River Junction, VT: Chelsea Green, October 2008). For Kuttner chastened by Obama’s neoliberal reality in office, see Robert Kuttner, A Presidency in Peril: The Inside Story of Obama’s Promise, Wall Street’s Power, and the Struggle to Control Our Economic Future (Chelsea Green, 2010). 

14 On the “left” (social, egalitarian, democratic, and inclusive) versus the “right” (regressive, militaristic, and repressive) “hand of the state,” see Pierre Bourdieu, Acts of Resistance (New York, NY: Free Press, 1998, pp. 2, 24-44; John Pilger, The New Rulers of the World (London: Verso, 2002), pp. 5, 116; Paul Street, Empire and Inequality: America and the World Since 9/11 (Boulder, CO: Paradigm Publishers, 2004), pp. xiii-xiv. 

15 McNally, Global Slump, 117-121. 

16 Ibid., 5, 81-82. 

17 Paul Street , “The (Profits) System is Working: CEO Pay Soars While Worker Pay Stalls,” ZNet (April 6, 2011) at 

18 For unpleasant sources and details, see Paul Street, “Biggest Issue of Our Time is the Biggest Loser in the 2011 Budget ‘Deal,’” ZNet (April 20, 2011) at For deep eco-Marxian analysis, see John Bellamy Foster, Brett Clark, and Richard York, The Ecological Rift: Capitalism’s War on the Earth (Monthly Review, 2010). 

19 To quote Dr. Martin Luther King near the end of his life: “As we talk about ‘Where do we go from here,’ we [must] honestly face the fact that the movement must address itself to the question of restructuring the whole of American society.  There are forty million poor people here.  And one day we must ask the question ‘Why are forty million poor people in America ?’ And when you begin to ask that question, you are raising questions about the economic system, about a broader distribution of wealth.  When you ask that question, you begin to question the capitalistic economy…We are called upon to help the disadvantaged beggars in life’s marketplace.  But one day we must come to see that an edifice which produces beggars needs restructuring.  It means that questions must be raised.  You see, my friends, when you deal with this, you begin to ask the question, ‘Who owns the oil?’ You begin to ask the question, ‘who owns the iron ore?’ You begin to ask the question. ‘Why is it that people have to pay water bills in a world that it two-thirds water?’…When I say question the whole society, it means ultimately coming to see that the problem of racism, the problem of economic exploitation, and the problem of war are all tied together.  These are the triple evils that are interrelated.” Dr. Martin Luther King, “Where Do We Go From Here?” Presidential Address to the Southern Christian Leadership Conference, 1967, reproduced in Testament of Hope: The Essential Writings and Speeches of Martin Luther King, Jr., ed. James M. Washington (HarperSan Francisco, 1986), quotation from 250.

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