After repetition over more than a quarter of a century by mainstream economists, ministers, the World Bank and International Monetary Fund, neo-liberal platitudes have been forgotten. Today, we just aren't hearing about the efficiency of markets, the importance of balanced budgets or, better, budget surpluses.

Less than a year ago, Kevin Rudd reassured Australian business that he was a fiscal conservative. But last week the Labor Government decided that valour was the better part of discretion by speeding up expenditure on public infrastructure from the Future Fund. Again, this was designed to reassure corporate Australia: Labor will do whatever it takes to secure growth and, especially, their profits.

In the face of the global financial crisis, a prolonged and careful assessment of how to spend the billions of dollars in the fund on competing projects was set aside. It was necessary to get the money flowing to make up for the rapid anticipated slow-downs in Australian investment, consumption and income from the export of minerals to China.

The Reserve Bank board, on which the head of Treasury sits alongside several corporate heavyweights, has the same fears as the Government. So it slashed the official interest rate by a whole 1 per cent on Tuesday, for the first time since 1992.

Australia is following a pattern set in the United States, Britain and other countries in Europe. This looks like Keynesian economics, where the government steps in to sustain growth and make up for the deficiencies of markets. Already Republicans in the United States and conservatives elsewhere are expressing concerns about creeping socialism, as governments take over some failing banks and promise to regulate the rest much more closely. There is bound to be even more overt state involvement in economic activity as the crisis deepens.

It must be noted, however, that neo-liberal policies of liberating markets, privatising, corporatising and contracting out state activities, were mainly designed to put the pressure on workers who actually produce the wealth on which profits are based.

In Australia, the Howard government's market-freeing activities went hand-in-hand with a bigger role for government in policing the population in general and unionists in particular.

Even heavy-duty state intervention is unlikely to solve the world's current economic problems for two reasons.

Firstly, the problems are not simply financial. More transparency and better regulation of banking won't deal with the underlying issue which is the rate of profit across the entire economy.

During the long boom, capital intensive investment meant that outlays on employing workers declined compared to business spending on machinery, equipment, buildings, raw materials and other goods used in production.

Yet it is only the labour of workers that creates new value. The rate of profit fell and the period between the mid 1970s and the early 1990s saw the deepest global recessions since the 1930s. Profit rates have recovered somewhat, largely thanks to neo-liberal policies that squeezed more work out of employees and, especially in the United States, led to declining real wages.

Even so, the rate of profit did not recover to the levels of the long boom.

So those who own and manage corporations often prefer to invest in speculative financial assets rather than activity that produces real goods that people need. Most of the transactions on financial markets are a zero sum game: players only gain at each other's expense. While the US finance sector only realised 10 per cent of total corporate profits in 1980, the figure was 40 per cent in 2007.

So developments in the real economy explain the speculative frenzy that led to the credit crunch. The financial crisis is bringing that underlying problem to the surface.

Capitalism has a tendency to break down that which is expressed in deep crises like the current one. As Henryk Grossman put it in 1929, before the stock market crash,

''Capitalist production is characterised by insoluble conflicts. Irremediable systemic convulsions necessarily arise from the immanent contradiction between value and use value, between profitability and productivity, between limited possibilities for valorisation and the unlimited development of the productive forces.''

Financial regulation and even an expansion of state ownership, which conservatives label socialism, can't overcome this tendency. Governments will soon demand that everyone tighten their belts. Unemployment will rise, while employers and governments try to drive wages down.

In Australia, this will be easier because Rudd and Julia Gillard have promised not to touch key elements of John Howard's industrial relations laws. These include secret ballots for strikes, restrictions on union officials' ability to talk to their members at work, and the ban on pattern bargaining, that is, industry-wide campaigns.

The alternative is a real socialism in which workers replace production for profit with production to fulfil human needs and the despotic structures of all corporations with democratic control over workplaces and society as a whole. Now that neo-liberalism has ceased to be common sense, it is worth considering.

This article is based on the Deutscher Lecture which Rick Kuhn, Reader in Political Science at the Australian National University, will deliver in London on November 7. His book, Henryk Grossman and the recovery of Marxism, won the 2007 Deutscher prize.