As the dust of the credit crash clears and the real world recession kicks in, the ideologues of capitalism are scaring themselves with spectres. "He's back," the Times warned its readers on Tuesday over a portrait of Karl Marx. Not only are sales of his masterwork Das Kapital booming, but the virus of the newly fashionable revolutionary has, it seems, spread to the heart of the capitalist camp: the French president Nicolas Sarkozy has had himself photographed leafing through its pages while Marx's analysis of capitalism has been hailed by everyone from the German finance minister to the Pope.
In the US, John McCain has been lashing out at Barack Obama for his supposed "socialism", the High Tory writer Simon Heffer excitedly dubbed the state bail-out of the banks "neo-sovietisation", and the BBC broadcast a prime-time debate last week on whether the crisis signalled the "death of capitalism". Meanwhile the Economist, the Pravda of the neoliberal ascendancy, has been trying to mobilise true believers for a fightback: "Economic liberty is under attack", its current issue thunders. "Capitalism is at bay, but those who believe in it must fight for it."
Of course, they are running ahead of themselves in a panic. If Marx's central ideas about class and exploitation were really taking hold across the western world, you can be sure the mainstream media wouldn't be running quirky, cartoonish pieces and debates about them, but something much more ferocious and alarming.
It's certainly true that the events of the past few weeks have exposed deregulated capitalism as bankrupt and its ruling elites as greedy and inept. But it is the free-market model, not capitalism, that is dying. That is reflected in public opinion: a Financial Times-Harris poll conducted across the advanced capitalist world this month found large majorities believe the financial crisis has been caused by "abuses of capitalism", rather than the "failure of capitalism itself" - only in Germany did the proportion blaming capitalism as a system rise to 30%.
As Sarkozy has pronounced: "Laissez-faire is finished." It is not Marx who has really been rehabilitated in short order, but John Maynard Keynes, out of dire necessity. In the wake of the largest-scale acts of state economic intervention in capitalist history, politicians are now having to make a virtue of it. "Much of what Keynes wrote still makes sense," the chancellor Alistair Darling declared at the weekend, as he announced plans to bring forward large capital projects and the prime minister defended higher borrowing to counter falling demand.
The symbolic significance of this official return to Keynesianism shouldn't be underestimated. It's 32 years since the then Labour prime minister Jim Callaghan bowed the knee to monetarism, nearly three years before Margaret Thatcher came to power, and announced to his party conference: "We used to believe that we could spend our way out of a crisis, but I tell you ... it is no longer possible." Faced with financial collapse and the threat of a full-scale economic depression, such fancies have now had to be consigned to the dustbin of history.
But claims that the current crisis signals the end of capitalism or the birth of a new socialism simply set up a straw man and divert attention from what is in fact at stake. If we're talking about socialism as a systemic alternative, that is clearly not currently on the agenda in the heartlands of capitalism - or elsewhere, with the arguable exception of Latin America. And both its post-communist collapse of confidence and the weakening of the working class as a social and political force make it difficult for the left to take full advantage of capitalism's stark failures.
That has led some, such as the historian Eric Hobsbawm, to conclude that the main beneficiaries of the crisis will be the right, as in the 1930s. There's certainly a danger of growing support for rightwing populism on the back of mass unemployment; but if the new enthusiasm for Keynesian intervention and public ownership can be channelled to protect those most vulnerable to the crash - rather than make them pay the price for it, as now seems more likely - that need not be the case.
What the crisis is bound to do is increase the demand for alternatives both within capitalism and beyond it. It has already discredited the economic model that has dominated the world for a generation at a cost of endemic instability, rampant inequality and environmental devastation. In its defence of free-market capitalism this week, the Economist argued that, in the past 25 years of market liberalisation, hundreds of millions of people have been lifted out of absolute poverty and speculated that this decade may see the fastest growth of income per head in history.
But most of that growth and poverty reduction has been in China's state-directed and still heavily publicly-owned economy, while India's lesser capitalist success story is so grotesquely unequally distributed that the proportion of its children who are malnourished - at 47% a global leader - has remained almost unchanged for a decade. For the rest of the world, growth was faster and far more equally shared in the postwar decades of Keynesianism and socialism.
An opportunity has now opened up for those political leaders prepared to use this meltdown to reshape the economic system, from Obama to Hugo Chávez. It's often said that the left has no alternative model after the implosion of communism and traditional social democracy. But in reality no economic and social model, left or right, has ever come pre-cooked: all of them - from Soviet power to the Keynesian welfare state and Thatcherite-Reaganite neoliberalism - have grown out of ideologically driven improvisation in particular historical circumstances. Marx himself famously offered no blueprint.
Instead, the pressure to respond to economic need - as in the New Deal or postwar Europe - will shape the way the new economic order develops. Already, the forms of intervention have been sharply different from past crises, with bank nationalisations offering a potentially powerful new economic lever. We are no doubt heading into a new kind of capitalism as well as a period of growing support for more far-reaching social alternatives. But what form it takes will be decided by pressure, from above and below.
