WORLD VIEW:IN NOVEMBER 1857, Karl Marx wrote to Frederick Engels: "The American crash is a delight to behold, and it's far from over." He predicted the financial crisis - the most geographically widespread to have hit 19th-century capitalism until then - would deepen and lead to a complete collapse of Wall Street, writes Paul Gillespie
Notwithstanding his own financial distress, he had never felt so "cosy". Engels himself felt "enormously cheered". The events confirmed their theoretical analysis and political strategy of linking reality to preparedness.
That crisis spurred Marx to complete his economic studies on finance capital and its cycles of boom and bust, clearing the way for the more comprehensive Das Kapital, published 10 years later. It theorised the system as an anarchic, irrational and blind competition, pursuing profit and accumulation.
Credit and production expand in a contradictory way until they can no longer sustain profitability. Then collapse clears out waste, reorganises production and stimulates the capitalist state to amend the rules governing trade, finance and investment. The state's role oscillates between night-watchman and direct intervention, but its power should never be underestimated.
Marx's work has suddenly become popular again in Germany, as a new generation tries to understand the dynamics of these events and how they should be evaluated historically. There are disturbing memories of the 1929 crash and its awful political consequences, coming after the 1922-1923 financial collapse which destroyed German savings. As the crisis unfolded three weeks ago, German finance minister Peer Steinbrück was quick to claim "the US will lose its status as the superpower of the world economic system. The world will become multipolar." It is happening before our eyes. And Steinbrück says "generally we have to admit that parts of Marx's theory are not so bad".
Commentators have been quick to notice, and many to mock, such left-wing schadenfreude, whether directed at the US or capitalism as a whole. Germans especially should be aware of how hubris and nemesis can follow one another - as Steinbrück found out a mere 11 days after saying a bank rescue programme was not needed when he announced a plan to protect German bank deposits.
Although this is undoubtedly a grave crisis for finance capitalism, with deep effects on the real international economy, it is not - as yet - a systemic collapse. The extraordinary speed and depth of the events and the $1.8 trillion response to them, especially this week in the European Union, have helped avoid the meltdown heralded at the weekend by Dominique Strauss-Kahn at the International Monetary Fund meeting in Washington. French president Nicolas Sarkozy, British prime minister Gordon Brown, German chancellor Angela Merkel and Spanish prime minister José Luis Rodríguez Zapatero are taking the lead to create a "refounded capitalism" more capable of withstanding such cyclical shocks by better global regulation.
In an audacious initiative, Sarkozy and EU Commission president José Manuel Barroso are meeting US president George Bush this weekend to seek a G8 summit next month on a new agreement to regulate global finance. Presumably it would include the president-elect. If that is Barack Obama, he will be confronted with a dramatic adjustment of US power to a more multipolar world, for which he is better prepared and which he is more willing to accept than John McCain.
Note that most of these leaders are from the centre right, not the centre left. Centrism is resurrected from the wreckage of radical right-wing deregulation, more than is the left. The argument is about re-regulation rather than redistribution, the public rather than the private interest, transnational against national sovereignty.
So far, that is. The traditional left has had little operational purchase on the crisis other than I-told-you-so utterances about their inherently cyclical nature. Confronted with this international convulsion, "the Left" is for the most part as weak and tame as it certainly is in Ireland. Popular anger here and in the US, for example, is far more radical, but not expressed in such vocabularies. This is a real challenge and also an opportunity for the left - just as it was for Marx and Engels 150 years ago.
But does the left refer to traditional social democracy, which accepts market capitalism but seeks to equalise it; to the "third way" variety popularised by Blair and Brown; or to the "democratic socialism" of post-Stalinist parties? What of more recent green socialism? How to classify the rump of traditional Stalinist parties in Europe, India and elsewhere? Should Chinese and Vietnamese one-state authoritarian capitalisms led by such communist parties be included? Where do the left of South Africa's ANC and the burgeoning variety of Latin American left-wing movements fit in? Is the US Democratic Party part of that family? How do all of these relate to the growing radical or far-left tendencies and social movements drawing on previous bottom-up revolutionary traditions such as Trotskyism and anarchism?
Big events revive these debates, but they need to be reinvented for new times. Conventional sociological post-industrialism accounts rendering left ideologies and movements redundant badly need revision in the light of falling living standards and growing inequalities. So does Fukuyama's notion of the end of ideology and the triumph of market capitalism - as he now admits. Big names too: Keynes, Polanyi, Kondratieff, Galbraith and now Paul Krugman are deployed by social democrats against those who want to resurrect Marx and Engels.
pgillespie@irish-times.ie