Bonfire of Illusions by Alex Callinicos

In 2008 the world changed both economically and politically.

In the autumn of 2008 Alex Callinicos saw the world going through a major transformation with the three decade long era of neoliberal consensus coming apart. His book is a succinct analysis of, and intervention in, that situation. The book contains two theses (the so-called twin crises) plus a conclusion.

The first thesis, the economic argument, is that 2008 saw not merely an unsolvable rupture in neoliberalism, but the opening up of a fundamental fault-line in capitalism itself. Callinicos sketches the now familiar contours of the crisis: a credit-fuelled boom across the world which came to a sudden halt when the assets constituting bank securities, such as the now infamous sub-prime mortgages, nosedived in value. After the collapse of the Lehman Brothers investment bank in September 2008, further banking insolvency was prevented only by a wide-ranging nationalisation of losses and the provision of state subsidies to banks, all of which led in turn to burgeoning state deficits, requiring tax rises and government expenditure cuts. These measures, in tandem with diminishing credit to business and consumers have led to sustained recession across the world.

While the features of the immediate financial crisis are well known, Callinicos wishes to stress the crisis of capitalism itself. In short, he argues that the rising organic composition of capital in the last half century has pushed down the average rate of profit. In conjunction with that, he argues that the increase in the power and independence of finance capital has made the world economic system less stable with ever more frequent credit booms and crashes.

Turning to his second thesis, the political argument, the year 2008 also saw a symbolic event which ended the neoliberal “end of history” myth, namely that only those states adopting the Washington consensus could succeed in the modern world. In the summer Russia used its military superiority to reverse and humiliate Georgia’s own military attempt to re-establish rule from Tbilisi in the two breakaway Russian speaking regions, Abkhazia and South Ossetia. Despite Georgia’s sycophantic pro-Americanism, the Bush administration shied away from a confrontation with Russia in the bear’s own backyard. The US might be the most powerful state in the world, but the continuing vitality of authoritarian state capitalism - principally in Russia and China - proved the future not to be entirely American.

The financial implosion of 2008 plus the growing power of states not committed to neoliberalism all signalled the rebirth of the the proactive political state. Neoliberalism had sought a state that would only enforce contracts and suppress militant opponents of capital, but otherwise the market would rule. Yet, in 2008 the capitalist financial system could only be saved by the state, in the US, but particularly in Britain.

The rise in the proactive state in both West and East has proved the weakness of the world’s other form of state formation, the confederal system of the European Union. The financial crisis has shown that it is the state, not pan-European structures, that has the power to decide and intervene; thus the future of Europe will be more determined in Berlin than in Brussels.

For me, the weakest part of the book is the conclusion where Callinicos argues that the solution to the world's woes is the complete abolition of the market in favour of planning directed through workers’ councils, even if he does admit, citing Marx’s Critique of the Gotha Programme, of some gradualism after the working-class has seized political power. In such a slender volume Callinicos does not have the space to back-up his argument and his conclusion appears more like a piece of propaganda. And while I don’t in principle oppose the outcome Callinicos wants, I think his binary choice - crisis capitalism or rule by workers’ councils - simplistic and unrealistic for people today.

That said, I think the book is well worth reading and learning from.

CALLINICOS, Alex, Bonfire of Illusions, Polity Press 2009.


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