The class struggle was at least partially displaced from the workplace to the state which became the site in and through which contending parties fought over the social wage. Contrary to appearances, Shaikh and Tonak have argued that the social wage actually represented mostly a redistribution within the working class while the state remained fundamentally an institution for the support and accentuation of inequality produced within what was only an apparently autonomous economic sphere. A crisis only makes the state a more radical instrument for the accentuation of inequality.
In an economic crisis, the state does not prop up final demand through progressive redistribution and debt-financed public employment meant to increase the marginal propensity to consume for the simple reason that there is a more reliable and direct method in a globalized economy to increase investment and therewith effective demand, viz. make investment more profitable by capital-friendly tax, regulatory and labor policies and invite firms not to invest on pains of being wiped out by a competitor who takes advantages of the favorable policy environment. No state steps on the toes of capital in a crisis. This is euphemistically called neo-liberal policy or anti-Keynesian or austerity policy. It simply pro-capitalist policy. This would seem to vindicate Marx, but the problem with this kind of analysis is that it abstracts from the dynamics of the international economy, treating each nation-state as a society in itself. The fundamental dynamic at present is the international jostling over losses in a global downturn. At present, the Chinese state is reacting to the threat the US will force China to suffer more than its fair share of losses. Taking advantage of the panic flight to Treasuries, the US can run up even more debt at a relatively low price. But China officials figures that the debt will not make the US a more productive country in the long run, and will eventually have to be monetized. But the monetization of the US debt will tax China in the form of headline inflation and a decrease in the quality of the payments on US Treasuries. China is trying use whatever leverage it has to cap US debt and stop QE3, but these are the most painless ways out of the crisis for the US. In short, crisis does not play out simply as class struggle but also as geo-political conflict.
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