Chris Harman

Zombie Capitalism

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An unstable world

We live in an unstable world, and the instability is going to increase. It is a world where a billion people feel hungry every day, and the hunger is going to increase. It is a world which is destroying its own environment, and the destruction is going to increase. It is a violent world, and the violence is going to increase. It is a world where people are less happy, even in the industrially advanced countries, than they used to be [1], and the unhappiness is going to increase.

Even the most craven apologists for capitalism find it hard to deny this reality any longer, as the worst economic crisis since the Second World War continues to deepen as I write.

The world’s best known banks have only been saved from going bust by vast government bail-outs. Thousands of factories, stores and offices are closing across Europe and North America. Unemployment is shooting upwards. Twenty million Chinese workers have been told they have to return to the villages because there are no jobs for them in the cities. An Indian employers’ think tank warns that ten million of their employees face the sack. A hundred million of the world’s people in the Global South are still threatened with hunger because of last year’s doubling of grain prices, while in the richest country in the world, the United States, three million families have been dispossessed from their homes in 18 months.

Yet just two years ago, when I began this book, the message was very different: “Recent high levels of growth will continue, global inflation will stay quite subdued, and global current account imbalances will gradually moderate,” was the “consensus” among mainstream economists, reported the Bank of International Settlements. The politicians, industrialists, financiers and commentators all agreed. They toasted the wonders of free markets and rejoiced that “entrepreneurial genius” had been liberated from regulation. It was wonderful, they told us, that the rich were getting richer because that provided the incentives which made the system so bountiful.

Trade was going to obliterate hunger in Africa. Economic growth was draining the vast pools of poverty in Asia. The crises of the 1970s, 80s, 90s and 2001–2 were memories we could put behind us. There might be horrors in the world, wars in the Middle East, civil wars in Africa, but these were to be blamed on the short-sightedness of essentially honest politicians in Washington and London who may have made mistakes but whose humanitarian intervention was still needed to deal with psychopathic maniacs. The words of those who saw things differently were ignored, as the media poured out candyfloss layers of celebrity culture, upper middle class self-congratulation and senseless nationalist euphoria over sporting events.

Then in mid-August 2007 something happened which began to sweep the candyfloss away to provide a glimpse of the underlying reality. A number of banks suddenly discovered they could not balance their books and stopped lending to each other. The world’s financial system began grinding to a halt with a credit crunch that turned into a crash of the whole system in October 2008. Capitalist complacency turned to capitalist panic, euphoria to desperation. Yesterday’s heroes became today’s swindlers. From those who had assured us of the wonders of the system there now came one message: “We don’t know what has gone wrong and we don’t know what to do.” The man who not long before had been treated as the supreme genius overseeing the US economic system, Alan Greenspan, of the Federal Reserve, admitted to the US Congress that he still did “not fully understand what went wrong in what he thought were self-governing markets”. [2]

Governments have been throwing hundreds of billions to those who run the banks – and tens of billions to those who run the multinational car firms – in the hope that this will somehow stop the crisis. But they cannot agree among themselves how to do this and even whether it will work or not.

Yet one thing is certain. The moment any part of the global economy begins to stabilise they will forget the hundreds of millions of lives that have been shattered by the crisis. A few months when banks are not collapsing and profits are not falling through the floor and the apologists will be pumping out candyfloss once again. Their futures will seem better and they will generalise this to the world at large with renewed talk about the wonders of capitalism and the impossibility of any alternative – until crisis hits again and throws them into another panic.

But crises are not some new feature of the system. They have occurred at longer or shorter intervals ever since the industrial revolution established the modern form of capitalism in Britain fully at the beginning of the 19th century.

The poverty of economics

The mainstream economics that is taught in schools and universities has proved completely unable to come to terms with such things. The Bank of International Settlements recognises that:

Virtually no one foresaw the Great Depression of the 1930s, or the crises which affected Japan and South East Asia in the early and late 1990s, respectively. In fact, each downturn was preceded by a period of non-inflationary growth exuberant enough to lead many commentators to suggest that a “new era” had arrived. [3]

Nothing sums up the incomprehension of those who defend capitalism as much as their inability to explain the most significant economic episode in the 20th century – the slump of the 1930s. Ben Bernanke, the present head of the US Federal Reserve and supposedly one of mainstream economics’ most respected experts on economic crises, admits that “understanding the Great Depression is the Holy Grail of macroeconomics” [4] – in other words, he can find no explanation for it. Nobel economic laureate Edward C. Prescott describes it as “a ... pathological episode and it defies explanation by standard economics”. [5] For Robert Lucas, another Nobel Laureate “it takes a real effort of will to admit you don’t know what the hell is going on in some areas”. [6]

These are not accidental failings. They are built into the very assumptions of the “neoclassical” or “marginalist” school that has dominated mainstream economics for a century and a quarter. Its founders set themselves the task of showing how markets “clear” – that is, how all the goods in them will find buyers. But that assumes in advance that crises are not possible.

The implausibility of the neoclassical model in the face of some of the most obvious features of capitalism has led to recurrent attempts within the mainstream to bolt extra elements onto it in an ad hoc way. None of these additions, however, alter the basic belief that the system will return to equilibrium – providing prices, and especially wages, adjust to market pressures without hindrance. Even John Maynard Keynes, who went further than anyone else in the mainstream in questioning the equilibrium model, still assumed it could be made to work with a degree of government intervention.

There were always challenges to such complacency. The Austrian economist Joseph Schumpeter derided any idea of equilibrium as incompatible with what he saw as the great positive virtue of capitalism, its dynamism. Some of Keynes’s disciples went much further than he did in breaking with neoclassical orthodoxy. Cambridge economists tore apart the theoretical basis of the neoclassical school. Yet the orthodoxy is as strongly entrenched in the universities and schools as ever, pumping into the heads of each new generation a picture of the economic system that bears little relationship to reality. The pressure on students to study the books putting forward such views as if they were scientific texts has led to Paul Samuelson’s Economics and Lipsey’s An Introduction to Positive Economics selling millions of copies.

It is hardly surprising that the economics profession has difficulty coming to terms with those aspects of the capitalist system that have the greatest impact on the mass of people who live within it. The obtuse theorems that fill economic textbooks and academic journals, with their successive algebraic calculations and geometric figures, assume stability and equilibrium, and so have little to say to people worried by the system’s propensity to crisis. One of the founders of the neoclassical school, Alfred Marshall, observed nearly a century ago that the economic theory he believed in was of little use in practice and that “a man is likely to be a better economist if he trusts his common sense and practical instincts”. [7]

Yet what is involved is not just abstract academic scholasticism. The orthodoxy is an ideological product in the sense that it operates from the standpoint of those who profit from the market system. It presents their profiteering as the supreme way of contributing to the common good, while absolving them of anything that goes wrong. And it rules out any fundamental critique of the present system, in a way that suits those with commanding positions in educational structures, connected as they are to all the other structures of capitalism. The radical Keynesian Joan Robinson summed up the situation:

The radicals have the easier case to make. They have only to point to the discrepancies between the operation of the modern economy and the ideas by which it is supposed to be judged, while the conservatives have the well nigh impossible task of demonstrating that this is the best of all possible worlds. For the same reason, however, the conservatives are compensated by occupying positions of power, which they can use to keep criticism in check... The conservatives do not feel obliged to answer radical criticisms on their merits and the argument is never fairly joined. [8]

But even most of the “radicals” usually start by taking the existing system for granted. The arguments of the radical Keynesians like Joan Robinson have always been in terms of amendments to the system, through greater state intervention than that envisaged by the mainstream. They have not seen the system itself as driven by an inner dynamic whose destructive effects are not restricted to purely economic phenomena. In the 21st century it is producing wars, hunger and climate change as well as economic crises, and doing so in ways which threatens the very basis of human life.

Capitalism transforms society in its entirety as its sucks people by the billions into labouring for it. It changes the whole pattern by which humanity lives, remoulding human nature itself. It gives a new character to old oppressions and throws up completely new ones. It creates drives to war and ecological destruction. It seems to act like a force of nature, creating chaos and devastation on a scale much greater than any earthquake, hurricane or tsunami. Yet the system is not a product of nature, but of human activity, human activity that has somehow escaped from human control and taken on a life of its own. Economists write that “the market does this” or “the market demands that”. But the market is only the coming together of the products of many disparate acts of human creative activity, labour. What the economists’ talk disguises is that somehow these have turned into a machine that dominates the humans that undertake such activity, hurling the world in a direction that few people in their right mind would want. Faced with the financial crisis that began in 2007, some economic commentators did begin to talk of “zombie banks” – financial institutions that were in the “undead state” and incapable of fulfilling any positive function, but representing a threat to everything else. [9] What they do not recognise is that 21st century capitalism as a whole is a zombie system, seemingly dead when it comes to achieving human goals and responding to human feelings, but capable of sudden spurts of activity that cause chaos all around.

A world turned against ourselves

There has only been one serious tradition of analysis to attempt to provide an account of the system in these terms. It is that which originated in the writings of Karl Marx and his long-time colleague Frederick Engels.

Marx came to adulthood in the early 1840s, just as industrial capitalism began to make its first, limited, impact on southern Germany where he was born. Engels was sent by his father to help manage a factory in Manchester, where the new system was already flourishing. They shared with almost the whole of their generation of German intellectual youth a desire to overthrow the oppressive Prussian feudal system of class rule presided over by a monarch with despotic powers. But they soon began to grasp that the industrial capitalism that was supplementing feudalism contained oppressive features of its own. Above all it was characterised by an inhuman subordination of the mass of people to the work they did. What Marx was beginning to discover about the functioning of this then-new system led him to undertake a critical reading of its most eminent proponents, political economists like Adam Smith and David Ricardo. His conclusion was that, although the system vastly increased the amount of wealth humans could produce, it also denied the majority of them the benefits of this wealth:

The more the worker produces, the less he has to consume. The more values he creates, the more valueless, the more unworthy he becomes ... [The system] replaces labour by machines, but it throws one section of workers back to a barbarous type of labour, and it turns the other section into a machine ... It produces intelligence – but for the worker, stupidity ... It is true that labour produces wonderful things for the rich – but for the worker it produces privation. It produces palaces – but for the worker, hovels. It produces beauty – but for the worker, deformity ... The worker only feels himself outside his work, and in his work feels outside himself. He feels at home when he is not working; when he is working he does not feel at home.

In his early writings Marx called what was happening “alienation”, taking up a philosophical term developed by the philosopher Georg Wilhelm Frederich Hegel. Marx’s contemporary Ludwig Feuerbach had used the term to describe religion. It was, he argued, a human creation that people had allowed to dominate their lives. Marx now saw capitalism in the same way. It was human labour that produced new wealth. But under capitalism that wealth was turned into a monster dominating them, demanding to be fed by ever more labour.

The object that labour produces, its product, stands opposed to it as something alien, as a power independent of the producer. The more the worker exerts himself in his work, the more powerful the alien, objective world becomes which he brings into being over against himself, the poorer he and his inner world become, and the less they belong to him ... The worker places his life in the object; but now it no longer belongs to him, but to the object ... [10]

As Marx put it in his notebooks for Capital in the early 1860s:

The rule of the capitalist over the worker is the rule of the object over the human, of dead labour over living, of the product over the producer, since in fact the commodities which become the means of domination over the worker are ... the products of the production process ... It is the alienation process of his own social labour. [11]

But Marx did not simply record this state of affairs. Others had done so before him, and many were to continue to do so long after he was dead. He also set out, through a quarter of a century of grinding intellectual labour, to try to understand how the system had come into being and how it created forces opposed to itself.

His works were not just works of economics, but a “critique of political economy”, of the system which other schools of economics took for granted. His starting point was that capitalism is a historical product, arriving where he found it as a result of a dynamic which drove it ever onwards in a process of endless change with “constant revolutionising of production, uninterrupted disturbance of all social conditions, everlasting uncertainty and agitation”. [12] The economic studies of the mature Marx aimed to grasp the nature of this dynamic, and with it the trends in the development of the system. They are the indispensable starting point for anyone who wants to try to grasp where the world is going today.

His method was to analyse the system at different levels of abstraction. In the first volume of Capital he set out to delineate the most general underlying features of capitalist production. The second volume [13] deals with the way in which capital, commodities and money circulate within the system, and the third volume [14] integrates the process of production and circulation to provide more concrete accounts of things like profit rates, the crisis, the credit system and rent. Marx’s original intention had been to produce further volumes, dealing among other things with the state, foreign trade and world markets. He was unable to complete these, although some of his work towards them is contained in various notebooks by him. [15] Capital was, then, an unfinished work in some respects. But it was an unfinished work that accomplished the goal of unveiling the basic processes of the system, integrating into its account the very things ignored by the static equilibrium analysis of the neoclassical mainstream: technical advance, accumulation, recurrent crises and the growth of poverty alongside the growth of wealth.

Using Marx today

For these reasons, any account of the world system today has to begin with basic concepts developed by Marx. I try to outline these in the first three chapters of this book. Some readers from a Marxist background might regard the account as redundant. But the concepts have often been misunderstood within the Marxist camp as well as outside it. They have been seen as competing with the neoclassical to provide an equilibrium account of price formation and then faulted for failing to do so. [16]

One reaction has been to drop key elements in Marx’s own analysis, keeping it only as an account of exploitation and of the anarchy of competition. Another, apparently opposed, reaction has been an almost scholastic approach in which competing interpretations pore over texts by Marx and Hegel. It is often as if Marxist theory had been ambushed by its opponents and retreated into a theoretical bunker of its own, just as detached as they are from the real world. For this reason I have felt it necessary to expound the basic concepts in a way which is (I hope) easy to follow, showing how they describe the interaction of the underlying forces that determine the direction of capitalist development. I have left detailed discussion of other interpretations to footnotes. I have, however, felt it necessary to deal with the most common objections to Marx’s account from mainstream economists in Chapter Two, since anyone who studies economics at school or university will have their views inflicted on them. Readers who have been lucky enough to escape that fate are welcome to skip this chapter.

Where the incompleteness of Marx’s own account does matter is in coming to terms with changes in capitalism since his death. Things he only refers to in passing in Capital – the growth of monopolies, the intervention by states in capitalist production and markets, the provision of welfare services, war as an economic weapon – have become massively important. Marxists in the first decades of the 20th century were forced by circumstances to debate some of these matters, and there was a new burst of creative thinking in the 1960s and early 1970s. I attempt to draw from such discussions the concepts needed to “go beyond Capital” and fill in gaps in Marx’s own account of the system (Chapters Four and Five). The rest of the book then tries to come to terms with the development of capitalism over the last 80 years, from the great slump of the inter-war years to the crisis causing turmoil across the world as I write. The account must be not simply one of economic processes, but at every stage of how the interaction of capitals and states on a world scale gives rise to wars and civil wars, hunger and environmental disaster, as well as booms and slumps. Nuclear weapons and greenhouse gases are as much a product of alienated labour as car factories and coal mines.

A note on the book

The instability of the capitalist economy has had its impact on the writing of this book. I set about writing the first draft when what I call “the great delusion” – the belief that the capitalism had found a new way of expanding without crises – was at its height in late 2006. I viewed another economic crisis as inevitable, in much the same way that someone living in a city built on a seismic fault line knows it is at some point going to suffer an earthquake. But I did not pretend to be able to predict when this would happen, or how destructive it would be. My aim, rather, was to update my Explaining the Crisis of 25 years ago, taking into account changes in the system since, but repeating the basic conclusion that its blind rush forward would have devastating repercussions for people’s lives through the rest of this century, creating immense social and political crises with potentially revolutionary implications.

But one of these blind rushes had its effect as I was finishing a 150,000-word draft. The credit crunch of August 2007 turned into the great crash of September–October 2008, leading one apologist for the system, Willem Buiter, to write of “the end of capitalism as we knew it”. [17] Many details about the system which I treated as part of the present were suddenly in the past, and everywhere there was an urgent demand for an explanation as to what brought this crisis about. I had no choice but to update and restructure what I had written, shifting the emphasis in some of the chapters towards the end of the book from what was going to happen over the decades to come, to what was happening in the here and now. In the process I cut about a third of the words out of the draft, removing a good deal of empirical detail in an effort to make the whole book more accessible. Anyone interested in greater detail can find some in the 15 articles on economics I have written for the journal International Socialism over the last two decades, while some of the theoretical arguments are articulated more fully in Explaining the Crisis.


I owe thanks for reading and making comments on my excessively long and disorganised draft to Tobias Brink, Joseph Choonara, Alex Callinicos, Neil Davidson, Jane Hardy, Mike Haynes, Rick Kuhn, Matt Nichter and Mark Thomas. Thanks are also due for comments on some of the preparatory material that appeared in International Socialism to Tom Bramble, Sam Friedman, Mehmet Ufuk Tutan, Thomas Weiss and others, and for information on profit rates to Robert Brenner and Andrew Kliman. I also have a huge intellectual debt to many other people. Pride of place goes to what I learnt in my youth from Mike Kidron and Tony Cliff. Along with that there has been the stimulus over the years from the works of dozens of others who have maintained the tradition of Marxist economic analysis from the late 1960s to the present – Riccardo Bellofiore, Henry Bernstein, Dick Bryan, Terry Byers, Guglielmo Carchedi, François Chesnais, Gérard Duménil, Alfredo Saad Filho, Ben Fine, John Bellamy Foster, Alan Freeman, David Harvey, Peter Gowan, Claudio Katz, Jim Kincaid, Costas Lapavitsas, Istvan Meszaros, Fred Moseley, Geert Reuten, Anwar Shaikh, and many others. Some I have been able to listen to and converse with, most I have never met, and a few I disagree with strongly. But all in one way or another have helped shape my conclusions.

A note on figures and terms

Anyone attempting to explain economic changes has little choice but to use the statistical information provided by governments, business organisations and international institutions like the Organization of Economic Cooperation and Development (OECD), the United Nations Conference on Trade and Development (UNCTAD), the World Trade Organisation (WTO), the World Bank and the International Monetary Fund (IMF). This book is no exception. But readers should be warned that some of the most commonly used figures can be misleading in important respects.

Figures for economic growth, in particular, are not as clear cut as they sometimes seem. The growth they usually measure is of marketed output. But a lot of the human labour that adds to people’s well-being is not marketed. This is true of the domestic labour of women and, to a considerably lesser extent, men. It has also been true historically of much of the family labour on peasant land. The result is that there is a false impression of increasing wealth as households begin to pay for things they used to produce outside the market – when a housewife gets a job and buys ready to cook meals, or when a peasant family pays someone else to build a shed on their land where previously they would have done the job themselves.

Such changes lead the usually provided figures to give an increasingly distorted picture with growing marketisation and the feminisation of paid labour in recent decades. The officially provided figures also exaggerate the real rate of growth of the things that satisfy human need by counting in output things like financial services which merely move wealth from one pocket to another – again a particularly marked phenomenon in recent decades. [18] Finally measurements of output per head cannot be equated, as they are all too frequently, with human welfare, since the output is always unevenly distributed between classes. Nevertheless, for want of anything better, I have had to use such figures.

A brief explanation of some of the terms I use. Generally “West” and “East” are used in the way they were in the Cold War decades of the last century, with “the West” including Japan. “Third World” and “Global South” refer to the poorer parts of the world which were relatively unindustrialised for most of the 20th century, as do the phrases “developing” or “underdeveloped countries” used with some of the statistics. The “Communist countries” are those with systems similar to that of the USSR before 1991. “Productive capital” is that employed in industry or agriculture, as opposed to that in finance and commerce. Finally, capitalists are assumed to be male, since 99.99 percent of them were until only a couple of decades ago, while the workers they exploit have always been of both genders. I provide a glossary in an attempt to make the material more accessible both to those fortunate enough not to have studied mainstream economics and to those who are not yet familiar with Marxist writings.

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1. For a summary of the various attempts to measure happiness, see Iain Ferguson, Capitalism and Happiness, International Socialism, 2:117, 2008.

2. Washington Times, 24 October 2008.

3. Bank of International Settlements, Annual Report, June 2007.

4. Quoted in Randall E. Parker, Introduction, Economics of the Great Depression (Edward Elgar, 2007), p. x.

5. Quoted in as above, p. 95.

6. Interviewed in Randall E. Parker, Economics of the Great Depression, p. 95.

7. Alfred Marshall, The Principles of Economics, 8th edition (London 1936), p. 368.

8. Joan Robinson, Further Contributions to Economics (Oxford 1980), p. 2.

9. See, for instance, Gillian Tett, Curse of the Zombies Rises in Europe Amid an Eerie Calm, Financial Times, 3 April 2009.

10. Karl Marx, Economic and Philosophical Manuscripts of 1844, available at

11. Karl Marx and Frederick Engels, Collected Works, Vol. 34 (London, Lawrence and Wishart, 1991), p. 398.

12. Karl Marx and Frederick Engels, Manifesto of the Communist Party, available at

13. Put together by Engels from manuscripts Marx left in an incomplete state.

14. Also edited by Engels after Marx’s death.

15. Available today as the Grundrisse, Theories of Surplus Value, and Marx’s Notebooks for 1861–3.

16. This is the basis of the so-called “transformation problem”.

17. Willem Buiter, Financial Times, 17 September 2008.

18. Arun Kumar provides a very useful account of how the conventional figures provide a distorted view of India, in Flawed Macro Statistics, in Alternative Economic Survey, India 2005–2006 (Delhi, Daanish, 2006).

Last updated on 05 April 2020