A Mad Marketeer Regrets

“As it is presently constituted global capitalism is inherently unstable. Unless it is reformed radically, the world economy risks falling apart in a replay, at once tragic and farcical, of the trade wars, competitive devaluations, economic collapses and the political upheavals of the 1930s” writes John Gray, a disillusioned 1980s’ Thatcherite, in a recent book.

Reading anything by John Gray these days is a novel experience. Here we have a former free marketeer who now no longer believes in the neo-liberal utopian project he once advocated. Indeed, Gray appears to be in much of a hurry to atone for his previous intellectual sins by informing us that global capitalism is in deep crisis and headed for a fall of catastrophic proportions.

Undoubtedly, it is this paradox which provides a highly stimulating read when you pick up Gray’s latest book False Dawn—The Delusions of Global Capitalism. However, as in the case of George Soros, Gray does not mean the same as us when he talks about global capitalism. He is referring to the current global financial arrangements—free movement of capital around the world or neo-liberalism.

From the outset we should be clear that Gray is not critiquing capitalism per se, only the US-led neo-liberal project which started a couple of decades ago. For Gray, capitalism is assumed to be an eternal system to which there is no alternative; capitalism therefore, needs to be saved from itself. In this respect, Gray can be seen to be in the long line of reformist defenders of capitalism from Keynes right up to George Soros (who, incidentally, has endorsed Gray’s book).

The basis to Gray’s entire thesis is that the neo-liberal project has its roots in the mid-Victorian laissez-faire experiment which in turn has its roots in eighteenth century Enlightenment rationalism. Gray admirably demonstrates that far from being a natural state of affairs (as marketeers like to think) it was organised by the state centrally. The corollary of this is that regulated markets are natural—though this assumption made by Gray is demonstrably false.  

Gray goes further by arguing that Soviet “Communism” was another “false utopia” stemming from the Enlightenment period. Both projects were “universalisms”, which means they aimed at world domination (from a Western perspective) showing complete disregard for diverse cultural needs and values. Subsequently, this century has been littered with “false utopias” from the Enlightenment—the last of which is the US’s ideological drive to create a global free market. Gray says that, in the case of the Soviet Union, this attempt will end with disastrous consequences for humanity:

“Even though a global free market cannot be reconciled with any kind of planned economy, what these utopias have in common is more fundamental than their differences. In their cult of reason and efficiency, their ignorance of history and their contempt for the ways of life they consign to poverty or extinction, they embody the same rationalist hubris and cultural imperialism that have marked the central traditions of Enlightenment thinking throughout its history” (p.3).

We shall return to this theme later.

Product of the crisis
Compared to many pro-capitalist commentators, Gray makes a refreshing change. Whereas the majority, even today, try to explain the financial storms in south-east Asia, Latin America and Russia as purely local phenomena (which may or may not add up to a global problem), Gray at least realises that the problem is inherently global.

However, Gray’s position is ultimately superficial and idealist unlike the Marxist method of historical materialism. This said, he expertly surveys the results of neo-liberalism in countries such as Britain, New Zealand and the US and recounts the all too familiar story of rising inequality, welfare cuts, social exclusion, etc. He adds to this the effects on countries such as Mexico, South Korea and Indonesia of the IMF-imposed austerity/free market measures which are presented as a political/economic panacea despite the fact that such measures are “alien” to these particular “capitalisms” and that the effects on ordinary people’s living standards are terrible.

Although he locates the origins of the neo-liberal project with the death of the post-war Keynesian era, Gray singularly fails to set it in its real theoretical context: the crisis of capitalism.

From a Marxian viewpoint, the OPEC crisis of the early 1970s was the beginning of the current crisis. In other words, world capitalism has been in crisis for nearly thirty years and the re-emergence of the New Right can only really be evaluated as a response to the crisis. This period (especially amongst the advanced economies) was characterised not only by stagflation (simultaneous rising unemployment and inflation) but also by often stagnant or falling growth and profit rates, which in the case of Britain culminated in a financial/fiscal crisis requiring an IMF bailout.

This is what really lies behind the “casino” economy or the “globalisation” process today. Since it’s increasingly hard to make sufficient profit making things, i.e. manufacturing, “speculation” has increasingly come to dominate. The crisis we see around us is in fact a crisis of the “real” economy. Gray is blind to this because he explains the crisis as a crisis of an “idea” (neo-liberalism) which could be rectified by a change of policy.

Philosophical error
This very basic philosophical error sets the tone for the rest of Gray’s flawed economic analysis. It is precisely because capitalism is a competitive system based upon production for profit that neo-liberalism has appeal. Capitalism is in crisis and here we have a philosophy which strives to reduce wages, costs and social/welfare spending. Gray adds to his own confusion by correctly arguing that alternative capitalist models such as the European social market model will take a battering at the hands of US neo-liberalism as “bad” capitalism tends to drive out “good”:

“In any competition that is waged with the rules of global laissez-faire, that have been designed to reflect the American free market, the social economies of Europe and Asia are at a systematic disadvantage. They have no future unless they can modernise themselves by deep and rapid reforms” (p.78).


“A mechanism of downwards harmonization of market economies is already in operation. Every type of currently existing capitalism is thrown into the melting pot. In this contest the socially dislocated American free market possesses powerful advantages” (p. 78).

Nominally Gray is right. He contradicts himself, however, by suggesting that the US should give up these “powerful advantages” and prioritise global stability instead. About the chance of this happening Gray is rightly pessimistic:

“Yet the replacement of global laissez-faire by a managed regime for the world economy is, at present, nearly as Utopian a project as a universal free market. Such a regime could be established only by the world’s great economic powers acting in concert . . .”

He adds:

“Without active and continuing American endorsement there can be no workable institutions of global governance” (p.200).

This demonstrates both Gray’s strengths and weaknesses, not to mention his apparent confusion. He seems to understand enough about capitalism to realise that neo-liberalism is not going to be stopped by an appeal to “reason” since it reflects the US’s attempts to dominate the world economy. One would be forgiven for thinking that such an implicit admission would be enough to transport him from subjective idealism to a more profound and coherent view of capitalism. Evidently not.

Intellectual swamp
John Gray’s critique of neo-liberalism is rooted in what is effectively an indictment of the rationalist Enlightenment thought in which modern Socialism has its origins. This kind of “anti-rationalist” thinking is very popular today as capitalism’s intellectuals stumble around for new ideas with which to prop up this obsolete system. The most popular expression of this is probably Post-Modernism which denies the possibility of objective knowledge and saves most of its wrath for “ideologies” such as Marxism that dare to explain the real world as it really is.

Gray is not a Post-Modernist but he falls into the current swamp of confused pro-capitalist defenders who in intellectual terms appear to want to take us back several centuries. He fails to understand the true nature of capitalism which is a class-based exploitative society which produces for profit not need and is prone to war and crisis. His initial mistake is to associate the Soviet Union with the thought of Karl Marx and to therefore conclude by thinking that with all its problems capitalism has proved itself to be the only viable system for humankind: “there is no alternative to capitalism only its constantly mutating varieties” (p.195).

One should suppose that he is unaware of the case for real Socialism which is production-for-use via common ownership with democratic control. The Socialist Party stands for world-wide revolution, which according to Gray makes us guilty of the crime of “universalism”. To that charge we plead guilty—we are part of a suffering universal/global working class.

Gray’s analysis of the current crisis via False Dawn and his occasional articles in the Guardian do have some nominal resonance. His argument that a global depression could ensue complete with 1930s-style protectionism and trade wars is a possibility which we could countenance.. So although by default we may agree with some of Gray’s conclusions, his method for understanding not only the current crisis but capitalism itself is woefully inadequate.

Ultimately, Gray is a confused pessimist who argues against the pernicious effects of neo-liberalism without realising that he is really talking about the crisis of capitalism. But we should not allow his pessimism let him off the hook. When it comes to Utopianism he takes the biscuit:

“The growth of the world economy could be a great advance for humankind. It could be the beginning of a many-centred world, in which different cultures and regimes could interact and cooperate without domination or war” (p.196).


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