To understand capitalism, one must understand its innate contradictions, because it is these contradictions that shape it as a holistic and dynamic system while at the same time making it vulnerable. At the macro societal level, the most crucial contradiction for Clarke was the one “between capitalism’s tendency to develop the forces of production without limit and the need to confine that development within the limits of profitability.”

This “limit of the market” is what sets individual capitalists in competition with each other. Squeezing more value out of labor, expanding capitalist production across time and space, and further developing the forces of production does not overcome the barrier — it merely reproduces it at a higher level. This tendency of overproduction in capitalism is foundational for its repeated crises. Overproduction is both the cause and the consequence; it is the essential form of capitalist competition.

Capitalist development occurs in what mainstream economists call cycles of boom and bust. However, it is through Marxian thought that we can fully understand not just the mechanics of this process, but also its causes and its drivers.

Following in the footsteps of Karl Marx, various Marxist thinkers have offered several explanations about how capitalism continued to develop from crisis to crisis into the twentieth century. These thinkers identified the falling rate of profit, underconsumption, and disproportionality as key processes that structured and at the same time undermined capitalism, thus making it more prone to collapse.

The falling rate of profit refers to the fact that, while the absolute mass of profit increases and facilitates capital accumulation, the rate at which this process occurs declines at the same time. In other words, the extraction of surplus value cannot catch up with the growth of the mass of capital.

Underconsumption refers to the inability of the purchasing power of the population to entirely absorb what is produced, thereby creating discrepancies and economic disruption. Finally, disproportionality refers to the unbalanced development across areas and sectors, produced by monopolization and the rise of finance capital, which increases the concentration of fixed capital, hindering its mobility between branches of production.

Clarke critically reviewed these debates, arguing that these explanations were not incompatible with each other and that they all partly accounted for the inherent instability and absence of equilibrium in capitalism. Yet none of them was the principal driver of crisis. The basic reason that makes crisis a sort of normal condition in capitalism, argued Clarke, is ingrained in the basic laws of commodity exchange as identified by Marx in the first volume of Capital.

The separation of purchase and sale in commodity production and the separation of money as an independent form through which value can exist, makes the possibility of crisis “inherent in the commodity form.” For Clarke, the contradiction “between the production of things and the production of value, and the subordination of the former to the latter” cannot ultimately be reconciled. This is the underlying cause of all crises in capitalism.

More importantly, Clarke argued, Marx’s theory of crisis shows us that capitalist expansion in the wake of the destruction that periodic overproduction crises provoke only temporarily resolves the obstacles in the way of capitalism. This comes at the cost of opening the way for bigger, longer, and more destructive crises ahead.

An important implication of this understanding of crisis as a capitalist norm, is that while crisis, in itself, may be a necessary condition for the overthrow of capitalism, it is not a sufficient one. The “limits of capitalism” produce repeated accumulation crises that are ever increasing in intensity. Yet historical change requires historical agency.

This means that the abolition of capitalism cannot occur merely because of its inefficiency and dysfunction as a system. It can only come about through class war and the intervention of the working class.

Capitalism is not merely an economic system, but a historical phase of human development, as Marx and Friedrich Engels demonstrated. As such, it shapes not just the forces of production, but also the relations of production, and consequently the way that societies are organized. It also shapes the way people understand their place within and beyond production, and how they are expected to act their roles.

The modern national state, and consequently the international system, as the force that facilitates capitalist development, operates not through mere force, but also through ideology. State ideologies are laden with their own contradictions, which is again an element that makes them both dynamic and at the same time vulnerable to contestation.

The primary contradiction in state ideology, argued Clarke, is that between the substance of state power, as the power of a particular class, and its form, as the expression of the general interest of society. Liberal political theory and political economy were the main ideological forms through which the domination of capital was equated with the general interest of society in theoretical terms.

This liberal order prevailed in the early phase of capitalist development during the first half of the nineteenth century. Although that order was challenged by the rising intensity of working-class antagonism and shaken by the 1873 economic crisis, it had been restabilized by the end of the nineteenth century, what then became the heyday of European imperialism and colonial expansion.

However, another major contradiction then came to the fore, between the tendency toward internationalization of the capitalist economy and the nationalist nature of the individual European capitalist states. This meant that the period of stabilization could not last long, collapsing in the destructive bloodbath of World War I.

The working class in Europe continued to grow in strength and by the early twentieth century was able to directly challenge capital and threaten the development of capitalism. The success of the Russian revolution and the growing influence of Leninist politics in the labor movements across many countries created new conditions that made the reconstruction of liberalism a more precarious affair.

It was the financial crisis of 1929 and its aftermath, marked by the rise of fascism and the descent of Europe into war, that brought the end of the liberal phase, creating space for Keynesianism to emerge and consolidate its position in the postwar reconstruction era. The corollary to Keynesianism as a theory of economic policy and economic management was a general welfare statist ideology, taking up many suggestions from social democratic reformism.

Clarke understood Keynesianism as a project of class collaboration, albeit one that was made possible through class war and increased working-class power. The postwar economic boom was based on pervasive state intervention that restructured capitalist production. It did so technically through the proliferation of Fordist methods, socially through the expansion of public health and education, politically through the welfare system, and financially through the Marshall Plan and the Bretton Woods system.

On the one hand, the intensification of the labor process to meet the new demands of capital was a burden upon the working class, with consequences that included the need for enhanced adaptability to new technology and production methods as well as greater labor mobility, including the uprooting of communities. On the other hand, workers were rewarded with improved living standards, the extension and rationalization of welfare, public housing, and a comprehensive system of social security that competed the socialization of the reproduction of the working class.

This “socialization of consumption” was a sort of substitute for the non-socialization of production, but it did achieve the aim of integrating the working class into the capitalist order. Rising wages within a stable industrial relations framework, beyond the achievement of broad societal stabilization, were also instrumental, Clarke argued, in “overcoming the barriers to accumulation presented by the limited mass market that had impeded recovery, and precipitated the crash, after the First World War.”

Keynesianism was not only the policy framework that allowed the postwar boom. It was also the ideology that purported, though expansionary policies in wages and public spending, to resolve the contradictions inherent in capital accumulation. This was supposed to have banished the problem of overproduction that brought crises, depressions, and wars while sustaining a healthy, educated, and contented labor force.

However, by the 1970s, Keynesianism had reached its limits, as the growth of the world economy, stimulated by the expansion of credit, resulted in unchecked overaccumulation of capital that brought inflation. Unable to deliver on its promises, Keynesianism started to lose its legitimacy among an emboldened, strengthened, and frustrated working class, resulting in a wave of militancy.

The established political leadership teams of the working class felt threatened by this autonomous rank-and-file mobilization. Instead of using it to challenge capitalist domination, those leaderships sought instead to merely enhance their role in the Keynesian consultative apparatus. The result was the defeat of the working class, the rise of the New Right, and the overall shift in the balance of class forces that allowed, facilitated, and entrenched the new ideology of monetarism.

In the UK, the end of Keynesian fiscal expansionism and the turn to the “market,” along with the restriction of the money supply to arrest the deterioration of the international balance of payments, began when the Labour Party was still in office with James Callaghan as prime minister. But it dramatically intensified when the Conservatives returned to power with Margaret Thatcher as their leader in 1979.

Under Thatcher, cuts in public expenditure became the new norm, with stringent financial and bureaucratic control of public services, including cash limits to control public expenditure and the increasingly discriminatory provision of welfare benefits. Monetarism had no new intellectual or analytical strengths — its key premise about the perceived “allocation efficiency of the market” was old and naive.

However, Clarke argued, it did master ideological power because it articulated, in a mystified yet still influential form, the growing popular opposition to the bureaucratic and authoritarian forms of the capitalist state. It also provided a theory about the failure of Keynesianism and of militant trade unionism.

The ideology associated with politicians like Thatcher basically made a virtue out of necessity, putting a positive spin on the crisis measures undertaken and turning them into a new ideology of state regulation. As Thatcher’s triumphant refrain had it, “there is no alternative.”

The political form of Keynesianism survived but its substance did not as neoliberalism became consolidated in the 1980s and ’90s. Capital and the state exploited and exacerbated the divisions within the working class and managed to gradually reimpose “the rule of money.” Yet the capitalist crisis of 2008, comparable in its magnitude to the one in 1929, was followed by the pandemic crisis of 2020, both of which were dealt with through massive state intervention in the economy.

In the former case, the goal of intervention was to rescue the financial sector; in the latter, it was to prevent the collapse of production. The experience of 2008 and 2020 demonstrated the limits of neoliberalism as a state ideology purporting to offer “allocative efficiency” of the market. The ease with which (for example) the states of the European Union bent the neoliberal economic governance rules in the early 2020s, having considered them ironclad only a decade previously, was a demystifying moment.

The world in the mid-2020s differs significantly from the picture in the 1980s and ’90s. Technological and communication advances and processes of industrialization and de-industrialization across areas and regions have produced major economic and geopolitical shifts. Yet the essence of capitalism as an inherently contradictory and crisis-laden socioeconomic system remains the same. The recently augmented restrictions upon global trade, which now threaten to develop into a full-scale tariff war, are ultimately expressions of the underlying conflict for supremacy in the world market.

Simon Clarke would have probably insisted today that we cannot predict the future, and thus we cannot know whether a new temporary balance of power or an alternative state ideology injecting new conjunctural legitimacy into capitalism will emerge.  At the same time, however, he would have pointed out the fundamentally irresolvable nature of capitalism’s crisis, and reminded us of Rosa Luxemburg’s famous dictum: the future of humanity is either socialism or barbarism.