December 30, 2020 | 19 minutes read | Tags: Class struggle in Britain, News & Analysis, Bourgeois Politics

2020: Capitalism's Final Crisis

Over the last year we have come to a simple, yet monumental, conclusion: that capitalism is entering a period of breakdown, its final crisis. This article will summarise the political-economic analysis that we developed in 2020, to ready us for the coming years. The fight for our lives is on.

2020: Capitalism's Final Crisis

The Roaring Twenties

Today, the period of the 1920s is associated with hope and a new lease of life. We look back on them as a period of quaint naivety, when people celebrated despite the raging violence of capitalism and in ignorance of the economic crisis and wars to come. It is an idyllic conception of peacetime that many thought would be evoked as we enter the 2020’s, in the century and era of capitalism’s supposed victory.

The 2020s shall have no such peace, faux or otherwise. This first year of the decade has been difficult beyond expression, and almost universally — the pandemic has touched every corner of our lives. Indeed, it seems farcical to think of New Year celebrations now that we can see how little a new number can present us in the way of peace. 2021 will be nothing more than the next day along. As 2019 made 2020, 2020 has made 2021. The last year has shaped our future, and irreversibly so.

Over the last year, we have grappled with what is going on in the world. And in analysing, we have come to a simple, yet monumental, conclusion: that capitalism is entering a period of breakdown, its final crisis. This article will summarise the political-economic analysis that we developed in 2020, to ready us for the coming years.

The fight for our lives is on.

Theoretical outline - What is Crisis?

Let us start by unpacking some key aspects of a Marxist understanding of capitalism.

Firstly, we need to distinguish between crisis and breakdown.

Crisis is recurrent; a cycle of 'booms' and 'busts' is an inherent feature of capitalism. Of course, we cannot be flippant about this; such crises, met with shrugs of inevitability by capitalists, entail very real violence and death. But they do not end capitalism, they are a part of its normal routine. That said, they do certainly change it; a crisis such as the Great Recession of 2008 altered the functioning and trajectory of capitalism irreversibly. But a knock to the system is not death.

Breakdown is the death of capitalism. It is the process of its inherent contradictions, its fundamental problems, that drive it towards its termination. This is a broader historical notion, of the final crisis of capitalism.

Understanding the tendency of the rate of profit to fall is absolutely vital to understanding this historical moment of capitalist breakdown. It is the fundamental reason why capitalism must collapse. In simple terms, the tendency of the rate of profit to fall means that the total rate of capitalist profit will decrease over time.

What is the rate of profit? Simply, the rate of profit is the ratio of profit to total investment. If you were to take the total amount of value produced, and compare that to the amount that was realised as profit, the ratio of the one to the other is the "rate of profit."

Constant capital is the value invested in the means of production, whilst variable capital is the value invested in the hiring of labour power. Labour power is the only source of value generation in a commodity.

So, take for example a production line making phones. It might take 2 hours for a worker to produce a phone. When the production line is made more efficient — say, by the introduction of an automated element — it might only take 1 hour to produce a phone. This increases the amount of phones on the market (as 8 phones could be produced in an 8 hour working day, instead of 4), and allows them to lower the price per unit. The competition, losing out by having higher prices, is forced to automate and otherwise increase their efficiency in order to lower their prices and remain competitive. By transferring more and more of the production process into automation, the ratio between constant and variable capital shifts. As the ratio moves towards greater and greater constant capital (and smaller and smaller variable capital), value generation, and thus surplus value, decreases.

We are not concerned here with the individual capitalist, but the trend of capitalism and its capacity for profit decreasing overall; there is a contradiction here between individual capitalists (who cut production costs and increase productivity by shifting from variable to constant capital) and the capitalist class as a whole.

We can see that this is true; profit is decreasing over the course of capitalist history. You can see this in the below graph, adapted by economist Michael Roberts from Esteban Maito.

It is important to recognise that profit does not need to hit zero for capitalism to break down. The rate of profit during the height of British hegemonic power was typically more than 25%. Its decline to 10-15% marked the end of the British Empire. During the Great Depression, US profitability fell below 10% for the first time (the second time was in the 1980s). In 2008, it fell to 12%. During these periods there was deep crisis; we can understand that anything below 10% will undoubtedly cause economic and political instability.

It is difficult to calculate the rate of profit even in times of stability, but by looking at projections from the likes of Roberts, even before we consider the pandemic and related economic factors, we can safely assume that the rate of profit will plummet far below 10% and thus into unknown terrain.

2020: The Crash

And so here we are, looking back at 2020. What happened?

Firstly, we again must acknowledge that the current economic chaos is not uniquely or solely a result of the pandemic, but a build-up waiting to burst. A recession was already anticipated at the end of 2019 and the beginning of 2020, before the pandemic had even started. As Michael Pento has said: ‘The virus was a pin that pricked the stock and junk bond [debt] bubbles. We wouldn't have had stocks fall by 30% if we weren't in an epic bubble. Stock prices have been at a record high of 150% of GDP. They were extremely vulnerable to an external shock...the real crash is coming.

The markers of economic breakdown on an unparalleled scale are plain to see; whilst all crises are unique, the projected scale and implications of this moment are unprecedented. As Ted Reese surmises, ‘Between January and the end of April 2020, small businesses in the US collectively lost 50% of their revenue. Joblessness soared, with 30 million people seeking unemployment benefits after the federal government allowed employers to lay them off.‘

The IMF project a global growth of -4.4% in 2020. By contrast, the 2008 crash led to a fall in global growth of -0.1%. The Bank of England estimated that the first six months of 2020 would see Britain suffer a near 30% contraction — the country’s worst recession since 1709. The Bank of England forecast a 2% contraction in the economy for the final three months of the year, reversing its projection in August of 5.5% growth. The Bank of England said the British economy will be 11% smaller at the end of 2020 than it was at the end of 2019. These are phenomenal factors, but the economic outlook for capitalism looks even worse in the details. Looking beyond growth rates, or lack thereof, and rather at indicators such as interest rates, inflation, currency and so on paints an evermore damning picture.


What are interest rates? Interest rates are, in brief, what it costs to borrow money. Interest rates are the source of profits for banks and other lenders: a bank lends you £100 at a 5% annual interest rate – at the end of the year you owe the bank £105, and they have made £5 profit.

Capitalism’s current predicament is premised on long-term decline in interest rates since 2008.  Falling interest rates started then, and plummeted evermore rapidly leading up to the COVID-19 pandemic. At this point, negative interest rates are rapidly expanding for the first time in history. Negative interest rates are best understood by thinking first of positive interest rates, where you get paid to save/invest, versus negative interest rates, where you pay to save/invest. In your personal bank account, instead of getting interest paid to you, you’ll have that money deducted. We saw the beginnings of negative interest rates at play earlier in the year in oil. The Bank of England is already preparing for negative rates, with interest cut to 0.1% and with further cuts below 0% anticipated in 2021.

Why have interest rates been falling? Because production has shifted from the imperialist triad of North America-Europe-Japan into the peripheries where wage exploitation is more profitable. This is furthered by military aggression and institutions like the World Bank, WTO and IMF. This means that capitalist-imperialists have grown more reluctant to invest in domestic production. Instead, they invest in financial assets, such as branding, intellectual property, stocks and bonds; this is true even in the peripheries, where the trends of capitalism might be delayed but are nonetheless in motion.

As we see greater investment, interest rates fall to remain competitive and asset (or economic resources) values increase. This leads to two consequences: the rising asset values/inflation of asset bubbles, and the piling up of debt. These are two sides of the same coin: for every debtor there is a creditor and every debt is someone’s else’s asset.  Asset bubbles will either gently deflate (via production increase, as investment moves back towards production instead of the financial industry) or burst. Debt mountains will gently erode (via economic growth, as there becomes the possibility of paying debt back) or collapse.  However, productivity has stagnated since 2008 and GDP growth is at an all time post-WW2 low.

The key point here, then, is this: we have an asset value bubble about to burst and a debt mountain about to collapse. And the options for gentle diffusal have vanished.

We can see proof of this inevitability in the fact that Britain faces £40bn a year tax rises to stop debt spiraling. Starting with £40bn next year, tax raises will continue to increase by +£40bn each year (£80bn in 2022, £120bn in 2023 and so on). To quote the Institute of Fiscal Studies, ‘government borrowing was set to reach  350bn, or 17 per cent of gross domestic product, this year, the highest level in peacetime in more than three centuries.’

Why must we care about interest rates and inflation? Roberts states that ‘it has become a conventional wisdom that moderate inflation is good for capitalist production; as against hyper-inflation nor deflation’. But the implications are much bigger. Lifting the economy out of recession usually takes a 4-5% base interest rate cut, as managed by central banks like the Federal Reserve in the US or the Bank of England. 4-5% is a historic figure — this is typically the amount by which  central banks cut the basic lending rate to attempt to bring an economy out of recession.

The current rate set by the bank of England is 0.1%. In the US and across Europe base rates are currently already at zero, having been cut by around only 2%. Central banks have said that going negative would make the banks unviable. The very notion of a cash economy is at risk: if that goes, there will be nothing left.

Ted Reese notes that capitalism is launching ‘for the first time in its history into a crisis of worldwide hyperinflation, since rates will have to start going back up to re-incentivise bond holding and sustain the tax base. But debt-to-GDP — already at record highs and rising — will surge, and so the tax base will continue to shrink; bondholders will realise that what they are owed cannot be repaid and increasingly transfer their funds into hard assets, especially precious metals. The only way to avoid hyperinflation is for states to default on their debt through hyperdeflation – which the record bailouts imply they are understandably trying to avoid – but that would happen after hyperinflation anyway.’ In short; hyperinflation, and its deathly implications for a cash/monetary economy, are on the horizon.

Meanwhile, the dollar continues to wane. The US dollar has lost more than 96% of its purchasing power since 1913, and due to the challenges made by primarily the EU, Russia and China, continues to fall. Russia and China are leading the charge on dedollarisation, with the amount of dollar transactions between them falling below 50% for the first time this year and the euro gaining around 30% of their transactions, higher than any other currency. No successful transition from the dollar to another currency could happen without hyperinflation, war, or both; after spending decades cementing the dollar  as the global currency, the US will resort to any means necessary to avoid giving up its economic hegemony.

And we have yet to even mention Brexit. As our analysis indicates, the ramifications on Britain’s economy will be huge and damningly negative. With services, 80% of the British economy, unprotected, the financial sector that has kept Britain’s imperialist economy alive will plummet.

After World War Two, it was the US that saved capitalism, such as by pumping money into western Europe via the Marshall Plan". Às Anthony Monteiro argues, now ‘there is no capitalist nation that can save capitalism’. To again quote Reese: ‘If all these converging factors – near-zero prices, flat productivity growth, unsustainably high debt, zero interest rates, exhausted currencies – do not constitute a final breakdown of the system, then what will?’

Capitalist Response to Economic Crisis

“Surely capitalism will survive this? It always has, after all.”

This argument needs to be addressed materially. Yes, capitalism has survived thus far. But we must look at the specific avenues available to capitalism right now and assess its current viability, rather than assume it will always survive. Capitalism has existed for only a brief part of humanity’s history, and shall not exist forever. It will, eventually, break down — the question is whether that time is now.

Henryk Grossman argues that where there is lack of sufficient surplus value for accumulation, we enter breakdown. Grossman identifies  four broad solutions to falling profit and the breakdown it causes. Roughly, these are: 1. destruction of constant capital (war), 2. war on labour-power (lowering wages), 3. exporting capital or 4. increasing productivity.

Each of these four have particular barriers at this juncture in capitalism. :

Destruction of Constant Capital: During an economic crash, large quantities of capital are devalued because they can't be used or sold profitably. This leads to forms of abandonment, such as the abandonment of offices (often by less successful capitalists, leading to richer capitalists taking offices over). This is distinct from the destruction of capital, which is literal: an example is when they pour away unsold milk or burn produce. They need to get rid of existing capital to reduce the over-accumulated mass and make room for new profitable expansions. This destruction of capital has historically been best achieved via war, where destruction is essential. War is a gamble, an endeavour to make their capitalist competitors lose more than they do.

At our current stage of military development, war will either be insufficient to re-energise capitalist accumulation, or it will create a post-nuclear extinction society. Whilst it might provide a technical basis for reinvestment, labour power would be in short supply, and every corner of the earth would essentially be rendered unusable — it would produce  a reality of annihilation like that we've only seen in fictional media. It would restore capital to a kind of Mad Max/Fallout-esque form of primary accumulation after a period of complete collapse at most. Capitalism would still be functionally dead.

Let us presuppose that war could be carried out in a way that does not result in that sort of post-nuclear society. The world market is at full saturation; globalisation has enabled it to reach its limits. For US imperialism, even the hypothetical redivision of the world is no longer a recovery condition. After World War Two (especially since 1971, and even more so since the fall of the USSR & Eastern Bloc), the US dollar has had total market penetration. There is no area of the world for the dollar to expand into that it hasn’t already - it has saturated the world, and yet the trend towards breakdown has continued and led us to this moment anyway. European imperialism could see the waning US and a war as a chance to redistribute the various monopolies at play (if they won, which is questionable), but it would not change the fundamental finity of the capitalist market as a whole.

War on Labour-Power: The war on wages is here, but it will create further unprecedented social unease; the working classes will not be content with ever greater wage cuts, especially in the context of this moment. This is especially true in the peripheries, where the placation of the working classes was barely possible even before now. We can expect resistance, even in the imperial core; the strength of this resistance depends on the labour movement, on us. And so whilst this is actually the least destructive thing capitalists can do for their rule at the present moment, it means fighting us directly.  

Export of Capital: The export of capital has run out of possibilities - it was the very expansion of capital via imperialism that brought us to this moment. Where else can exports go that they don’t go already? To be clear, the export would have to be sufficiently large scale to save capitalism, and such an unsaturated market does not exist.

Increasing Productivity: Increasing productivity of labour power is largely done through the incorporation of new technologies. If capitalists continue with automation, then capital will abolish itself. This is, of course, not sustainable in the long term, as it would require the Green New Deal and the extraction of all of the minerals on the planet to accomplish  for even sections of the Western world, thus hastening climate collapse. Other avenues like new management systems might increase productivity in individual workplaces, but there is no precedent for them being implemented across industries and on the necessary scale to hold back the tide.

One additional way to attenuate the falling rate of profit is super-exploitation, i.e. driving wages below the value of labour-power, which is only possible through intensive political repression. So we may see further dictatorial regimes like those of Modi in India and Duterte in the Philippines. Indeed, we already see rising fascism across the US, Britain, and Europe, as well as an ever-sharpening Tory government who view the Pandemic as an “opportunity.” For this reason and others we have already mentioned, we  should be aware that fascism will continue to advance in the coming times; it  may then seek to facilitate other avenues of profit restoration, such as war. The implications here are as Roberts argues, that ‘it is possible for capitalism to recover and soldier on “endogenously” when sufficient old capital is destroyed in value (and sometimes physically) to allow a new period of rising profitability … capitalism can stumble on or society may eventually fall back into barbarism.’

To be clear, any combination of these avenues, if successfully implemented, could potentially temper the death of capitalism, but they cannot stop it. Paul Mattick argues that any crisis could be the breakdown. As we surge ever forward, ever deeper into contradiction. It is a yank of a fraying rope; it will break, and each yank makes the drop ever more likely. Even if they cannot prevent capitalism’s death, we must understand that the capitalists will still try many, or all, of the above attempts to save it — they will not just give up.

Robert Kurz notes that key indicators of the final crisis, as opposed to a typical crisis, include the growth of unproductive labour (which is labour that is broadly distinct from the production process, such as police, security, legal system, banking, accounting, licensing authorities, insurance — growth of these sectors is certainly a feature of present-day capitalism), and the growth of state debt (which is currently reaching a level unparalleled in history). What’s more, we can observe an inability to utilise technology to reap further profitability. Can 3D printing, AI, nanotechnology and other technologies be exploited? Perhaps. But to the extent that capitalism can get over this world-historic breakdown? Doubtful. Sooner or later capitalism has to go, and it simply is not holding enough cards to match the task in front of it.

Some may remain unconvinced, perhaps believing that despite the odds, the history of inaccurate predictions of breakdown will repeat itself and capitalism’s talent for resurgence will save it yet again. Firstly, the evidence above refutes this; again, the depth and totality of this present moment is utterly unparalleled. The Great Depression was unprecedented, but came at a point in capitalist development where multiple avenues were viable for its resurrection. Those avenues are, at this time, dead ends.

But let us hypothesise. Perhaps capitalism will reassert itself, in some route we have not considered. That possibility is not at odds with the fact  that the processes at play right now are those that mark its death. Even if one is not convinced that the current crisis  will be sufficient to end capitalism, it is incontrovertible that what is happening now is leading to that death.

We are not yet able to call time-of-death, but can plainly see that capitalism is terminal. The ecological factors alone provide a deadline that we did not know existed for most of the twentieth century; that alone determines the finality of our situation. Even without any of the factors discussed so far, the climate crisis bodes societal collapse within this century.. So whilst there is the (ever-shrinking) possibility of re-accumulation and re-stabilisation, we must remember that Marxism fundamentally articulates the finity of capitalism. Capitalism will end; it cannot last forever. As history marches, the odds get worse for capitalism and its viability depletes.

2021: Turmoil and Resistance

We may well be tempted to throw our hands in the air and claim that it is impossible to work out what will happen. But this would be a deeply un-Marxist response; our dialectical method requires not only interrogation of the past to understand the present, but also an interrogation of the future, in which we are fundamentally invested. Ours is the position of futurity.

The classes of capitalism are playing chess, and we’re in the end game. Capitalism cannot win. If we play the right moves, we can secure a checkmate and defeat it. But if we don’t, or if capitalism has a final trick up its sleeve, then we risk stalemate — everyone losing. If that happens, we even have the possibility that our opponent, confronted with no winning move, tosses the board into the air, scattering and destroying it and every piece on it. Then there are no winners, not even a legal draw, only total destruction. But if we play right, if we understand the game,the board and our opponent, we might just win this.

We will see all sorts of arenas emerge. The developing economies (Brazil-Russia-India-China-South Africa, or BRICS) do not have their own peripheries to support accumulation, and they are increasingly unable to grant economic concessions to their working and middle classes. The global revolt has already started. Last year there were mass anti-austerity movements in Chile, Colombia, Sudan, Kenya, Algeria, Haiti, Iraq and Lebanon. In November 2020, 250 million workers in India, or 3% of the world’s population, marched alongside red flags in the largest general strike in history. It’s worth noting that the anti-imperialism of this century will be qualitatively different to the post-war era, when it was principally centred on the peasantry and national liberation. But now, as Torkil Lauesen summarises: ‘The development of the productive forces in the Global South provides them with much power. If they throw a monkey wrench in the global chains of production the imperialist countries will get hurt. The industrialization of the Global South has created a much more promising base for the development of socialism than the national liberation struggles did. There is no reason to be pessimistic. We need to start to organize and prepare for the changes to come.

The flip side of this development is the transformation of class structure in the imperialist core, as the welfare state is being hollowed out and the material privileges of the labour aristocracy slowly eroded, broadening the prospect of future revolutionary struggles. The possibility of a truly mass base, rather than only the ‘oppressed of the oppressed,’ is paramount for us in Britain. What is more, in our current era of communicative capability, awareness of global struggle and responsibility of replication will be vastly increased. The ripples of revolution will spread faster than ever before.

Although various theorists contend specifics, the broad trend seems to be for capitalism to reach a historical impasse in terms of profit somewhere in the middle of this century. Samir Amin, Immanuel Wallerstein and others have been pointing to the mid-21st century as that impasse  for decades. That said, we should understand the death of capitalism, or perhaps more specifically the period of transition out of capitalism (into what, we shall see), as protracted. As Amin put it, ‘the transition from capitalism to world socialism will be long, very long even.’ John Smith states that ‘this crisis is still in its early stages, will endure for decades, is inescapable, and inevitably leads to wars and revolutions. What is not inevitable is the outcome of coming battles that will determine not merely the future of humanity, but whether humanity has a future.’

The factors we have explored allow us to make such predictions, but the nature of politics allows for untold variables. War may well be pursued, and we must make every attempt to prevent it; it could well pronounce the death of life itself, or speed up the decline of capitalism. Likewise, ecological disaster and its acceleration could rapidly increase the speed of transition. Civil society ( culture, social norms and so on) might keep capitalism on life-support for longer than we expect. The lack of provision that capitalism increasingly necessitates will render stark class battles, battles that workers may win or lose.

It is a checkmate for capitalism. But what about us?

We Hold the Future

Dark days are coming. Darker, perhaps, than any that we have seen thus far. This is not a joke, roleplay, game, nor a fantasy. This is the reality we are flying into, and every one of us needs to be ready. There is no half-assing this; you’re fighting tooth and nail, or not fighting at all. Your call.

We must prepare. We must recognise that we are situated in the imperialist core, in Britain — a weak link in the chain. We must build our base, build our social force across the masses, and build our capacity to both weather the gathering storm and drive forward amidst it. This must be done with adamant urgency — it is, by far, our most important task.

We must reconsider how we analyse the world in this light. This is a new era, with new implications; when we look to analyse inter-imperialist rivalries, economic policy or military maneuvers, we must do so in the knowledge that these are the hopeless efforts of capitalism not to thrive but to survive. And indeed, a dying monster can be most brutal.

We must build resilience. Capitalism is dying, and the bourgeois class have successfully conferred their morbidity onto us. We suffer amidst their terminality. We must reject it, for the working and oppressed people of the world will live. Just as capitalism is predicated on us, socialism is born in us too; if humanity is to survive in any form, it is in us. The capitalists will die; the question, the fight, is whether we shall die with them. Resilience is personal and collective, and must be developed so we can withstand.

We must practice against the capitalist realism that incarcerates us with the impossibility of alternative. It is still hard to comprehend that this is happening, but that is what is in front of us. We must face the end of the world. Capitalism is totalising in its reach, holding every aspect of this world, the planet itself, in its violent grip. Without falling into accelerationism and rejecting every hint of violence, we must follow Frank Wilderson’s challenge to accept the death of this world in order to fulfil the world of life ahead of us. As Abou Farman offers, the future could be imagined growing out of an apocalyptic end. ‘What if we imagined the future from the end rather than imagined the end as the future?’

Though it may be daunting and terrifying beyond anything we can comprehend, we must find solace in the simplicity of this task: an unrepentant, unrelenting pursuit of love and life.

Appendix - Further Reading

John Smith – Why Coronavirus could Spark a Capitalist Supernova

Mike Davis - The Monster Enters

Abou Farman - Termanility - The Ticking

Hortense Spillers - Apocalypse Now and Then

Ted Reese - Socialism is now an economic necessity

Prolekult Podcast: A review of Marxist writing on the final crisis

Michael Roberts - Crisis or Breakdown?

Michael Roberts - COVID and inflation

Michael Roberts - World Rate of Profit: A New Approach

Torkil Lauesen - The Principle Contradiction

Black Agenda Report - Has Covid-19 Initiated the Final, Fatal Crisis of Capitalism?