School of Social & Political Sciences

Karl Marx has often been presented as a relic of the 19th century, whose outdated ideas say little of relevance to the modern world. That belief was shattered with the 2008 global financial crisis, when many of Marx's key ideas were vindicated

The 2008 Financial Crisis saw the global economy come close to a collapse in a matter of months. Millions lost their jobs. Overnight, families lost their homes, savings and livelihoods with nothing to fall back on. How could a crisis of this extent take place so unexpectedly? Enter: the man with nineteenth century Germany's most impressive beard: Karl Marx.

Considered one of history's most influential, revoluntionary, and controversional thinkers, Marx's major work was his critique of Capitalism. This critique spanned at least three books, five (extended) esssays, and several articles. It was Marx's belief that the contradictions and tensions inherent in Capitalism made crashes (like the one in 2008) an inevitability, and that these tensions were ultimately that would lead to its demise through revolution (another inevitability, according to Marx). How did he come to such conclusions? Can this theory, born in the 1860s, really help to explain events like the Global Financial Crisis?

One of the most compelling features of Marxist thought is the breadth of disciplines that it draws from in its attempt to understand. Marx explored how economics, ethics and social ideology are weaponised by the elite in order to seize and maintain power. Marx maintains that any systems of politics, morality or ideology (what he terms the superstructure of a society) ultimately stem from the given system of production present in society (the substructure). 

"... my view that each special mode of production and the social relations corresponding to it, in short, that the economic structure of society, is the real basis on which the juridical and political superstructure is raised and to which social forms of thought correspond; that the mode of production determines the character of the social, political, and intellectual life generally ..."

Marx believed that material conditions, and the processes used to achieve such conditions (in other words, the distribution of goods and services) are ultimately what create the social structures and power dynamics of a given community. The 2008 global financial crisis and its aftermath laid bare these dynamics, and that if Marx had been there to see it, he would have had a field day ... or possibly an aneurysm. 

Looking back on the decade leading up to the 2008 financial crisis, we can plainly see a number of the flaws that Marx identified with capitalism in action. 

It is widely agreed that a central cause of the crisis was practice of subprime mortgage lending. This involved banks and other financial institutions offering loans, typically to individuals with poor credit histories, based on an adjustable-rate mortgage. In practice, this meant banks were able to offer initially low, attractive interest rates to sign people on, but were soon after able to increase these rates significantly, which they justified due to the increased risk taken on by providing loans to those with poorer credit. This approach to economics, in which investment is increasingly diverted to speculative financial products, rather than reinvested into the means of production (what we would now label 'Financialization'), is something that Marx describes in terms of 'Fictitious Capital', as opposed to 'Real / Productive Capital', which is money spent on physical assets that add to the means of production, such as machines and labour.

Marx viewed an increase in Fictitious Capital as an inevitable sympton of Capitalism's endless drive for accumulation, which in turn increases instability in economic systems, by detaching the value of capital from the physical realities and limits of its production, which ultimately leads to crashes. In 2008, the distribution of subprime mortgages artificially boosted the values of houses, by detaching their actual value (based on the real-world supply) from the value of speculative assets linked to them. Pretty soon, many of those tied into these adjustable-rate mortgages, who had never actually been able to afford their house, defaulted, the market was flooded with their old homes, house prices crashed, and ... we all remember the rest (- just kidding, I was 4). 

Many consider the most troubling aspect of the global financial crisis to be its aftermath. More specifically, the bailouts. The US Government alone spent somewhere in the region of $498 billion (yes, billion) to bail out the very banks who had caused the crisis. These were "actions of necessity, not choice" according to Larry Summers, US economic advisor at the time. They had to be. How else could governments, designed to enact the will of the people, take their citizen's money and give to the very organisations who had caused the whole mess? The answer is simple for Marx: morality is not objective, instead it is a tool used to further the interests of the elite. Why bailout the banks? Because under the Capitalist system of the time, it was 'right'. Again, for Marx, pillars of the superstructure are ultimately shaped and used by the ruling class of a society to further their power. Not only through fabricated morality, but by constructing ideology (ruling ideas) as well. 

"These individuals composing the ruling class possess among other things consciousness, and therefore think. Insofar, therefore, as they rule as a class and determine the extent and compass of an epoch, it is self-evident that they do this in its whole range, hence among other things rule also as thinkers, producers of ideas, and regulate the production and distribution of the ideas of their age: thus their ideas are the ruling ideas of the epoch."

Throughout and after the financial crisis, British newspapers largely avoided discussing the bailouts and ensuing austerity in a 'negative' light, instead using neutral language. By 2010, the same newspapers even began discussing these measures and the prevailing austerity as 'unavoidable'. If you're going to oppress people, convincing them it is for their own good is a useful step. 

Thankfully for Marx, this was not a total success on the part of the elites. Their action were not forgotten, and tensions between the victims and the preprators came to a head in 2011, with the Occupy Wallstreet movement. What started as a small protest group in New York City, quickly grew into a global movement, attempting to push back against wealth inequality and corporate influence in politics. While this level of class consciousness and unification of the working class would have been sure to bring tears of joy to Marx's eyes, the movement ultimately fell short of what was necessary. Whilst strong in collective spirit, Occupy Wallstreet was ultimately a disorganised campaign, with a lack of clear ends, and little thought given to the means to those ends. For Marx, the ideal for meaningful change in a society began with class consciousness and rejection of the prevailing system, but it necessarily ended with the working-class ('the revolution class') seizing power of the state and dismantling the existing institutions, as well as scrapping the idea of classes together. It does not suffice to simply ask for more from a system that is inherently designed to serve the elite and exploit the proletariat - within this framework, changes will always be trivial and justice for the proletariat is impossible. Justice must be fought for and taken. 

Ultimately, Marx's ideas ring true just as much today, as they did when they were first conceived. The 2008 financial crisis was a stark demonstration of the inherent flaws in Capitalism: the instability that is unavoidable in the face of unending and unregulated accumulation of capital, the willingness of the elite to take from the working people to further their own interests and desires, and the futility of the movements of the working class that do not act in the name of revolution.

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This blog is part of the SPS Student Academic Blog series. You can read more contributions from the series here.

First published: 7 April 2025