John Gray says neocons should take note of philosopher and historian Leszek Kolakowski, who warns against Marxist utopian fantasies

As a political project, Marxism has ceased to matter. The mass parties dedicated to revolutionary socialism that existed in a number of advanced industrial countries during much of the 20th century are now shrunken remnants on the margins of politics. The communist regimes that governed a large part of the world have either collapsed, as in the former Soviet Bloc, or mutated out of recognition, as in China. Contrary to the claims of Marx and his disciples, the working class has not become a globally organised force. Nationalism and religion are as powerful as ever. Marxism continues to exercise an influence in certain sections of the academy, but this is a leftover from the past. Except in Nepal and Peru, where versions of it inspire peasant movements, Marxian socialism is a spent force.

Marxism is no longer a significant factor in politics, but the utopian impulse it expressed has not disappeared. It lives on in the grandiose schemes for universal democracy and a global free market promoted by the neoconservative Right. Marx always scorned those he described as utopian socialists for their naive reliance on the power of ethical ideals, but his vision of a world in which the state and the market have withered away is itself manifestly utopian. In much the same way, neocon thinkers like to represent themselves as hard-nosed realists, but their project of converting the world to an American version of democracy belongs to the same tradition of revolutionary utopianism as Marxism. Many of the older generation of neocons were communists or Trotskyites in former times, and like Marx, they see history as a progressive movement culminating in a single economic and political system. Again, like Marx, they believe that this species-wide system can come about only through revolutionary change.

The collapse of communism has not weakened the utopian impulse, only forced it to relocate to another part of the political spectrum. Given the disasters to which revolutionary utopianism led in the 20th century, it may seem surprising that it continues to exert a powerful appeal, and it is worth asking how this has come about.

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There can hardly be a better starting point for such an inquiry than Leszek Kolakowski's Main Currents of Marxism, now republished in a handsome one-volume edition with a new preface and epilogue. Kolakowski is the greatest living intellectual historian, and a cardinal virtue of this indispensable book is that it analyses Marxism not only as a political project and a social theory but also as an episode in Western philosophy and - above all - the history of Western religion.

As we all know, Marx was a militantly secular thinker who claimed to have developed a new science of history. However, as Kolakowski shows, the roots of Marx's view of the world were in theology and mysticism, not science.

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Marx's thought was shaped by the view of humanity realising itself through history that Hegel inherited from German mystical thinkers, whose thinking had in turn been formed by Christian Platonism. Marx may not have been a strict determinist, and on occasion he was ready to allow that there was nothing inevitable about the triumph of socialism. Even so, his view of history in which humanity achieves at a higher level the unity it once enjoyed (so Marx imagined) in primitive communism is hardly an empirical theory. It is a secular eschatology - a doctrine of human salvation presented in pseudo-scientific terms. Marx certainly enhanced our understanding of history - and in particular, the history of capitalism - but it is not any contribution it made to human knowledge that gave Marxism its powerful appeal. It is the fact that, like revealed religion, it gave history a meaning and held out the promise of salvation to humankind.

Of course, there is far more to Marxism than the thoughts of Karl Marx.

Marxian thinkers have often been at odds, and Kolakowski provides a compendium of the frequently discordant Marxian intellectual tradition.

Pretty well every thinker and intellectual movement of importance is systematically expounded and assessed. Karl Kautsky and Rosa Luxemburg, Paul Lafargue and Georges Sorel, numerous Polish and Austrian Marxists, Lenin, Trotsky and the rest of the Bolsheviks, the Frankfurt School and Ernst Bloch and many others are brilliantly summarised and incisively criticised.

Main Currents of Marxism is an unmatched encyclopaedia of a major passage in Western intellectual history, but the enduring interest of this masterly volume does not come chiefly from the mass of useful information it provides. Instead, it lies in Kolakowski's devastating assessment of Marx's thought. He describes Marxism as "the greatest fantasy of our century... an idea that began in Promethean humanism and culminated in the monstrous tyranny of Stalinism"; and in the new introduction he declares that Marx's philosophy "entailed some practical consequences that would bring indescribable misery and suffering to mankind: private property and the market were to be abolished and replaced by universal and all-embracing planning - an utterly impossible project. It was noticed towards the end of the 19th century, mainly by anarchists, that, so conceived, the Marxist doctrine was a good blueprint for converting human society into a giant concentration camp:to be sure, this was not Marx's intention, but it was an inevitable effect of the glorious and final benevolent utopia he devised."

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This is a severe judgment with which the academic remnant of Marxian true believers will undoubtedly quarrel, but to my mind it is fully justified.

With all their rancorous doctrinal disputes, Marxists have always held to a common project. Marx envisaged a society in which the state, as it had been known in the past, was no longer necessary, but wherever a serious attempt has been made to realise his vision in practice the result has been dictatorship on a grand scale. Kolakowski notes that anarchist thinkers forecast this development, but others also predicted it. Numerous liberal and conservative thinkers understood that the effect of Marx's project would be to reproduce the French Terror on a larger scale. Bertrand Russell understood by 1920 (when he published his remarkable book Theory and Practice of Bolshevism) that Lenin's attempt to bring Marxian socialism to Russia could end only in unprecedented tyranny.

To be sure, there is an enormous academic literature that seeks to exempt Marx from responsibility for the practical result of his theories and which attributes the repressive features of the Soviet system to Russian traditions of despotism and the backwardness of the country. This commonplace view passes over the awkward fact that many of the worst features of the Soviet system were reproduced in other communist countries.

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Poland and Mongolia, China and East Germany had very different histories and levels of development, but they all suffered economic stagnation and pervasive corruption, devastation of the environment and the pervasive power of the secret police when they came under communist rule. The defects of existing socialism were not the results of backwardness. They flowed inescapably from the attempt to realise an impossible project, and they would have been replicated wherever similar attempts were made.

The flaws of 20th-century communist regimes proved in practice what critics of Marxism had long maintained. Despite all his protestations, Marx's vision of communism was a dangerous utopia. That does not mean his thought lacks enduring value, but it is found elsewhere. The Communist Manifesto (1848) is a prescient early account of globalisation, which foresaw that it meant upheaval on a vast scale. Far more clearly than most socialists and professional economists, Marx perceived that capitalism is an inherently revolutionary mode of production. The insight that capitalism is a system of incessant creative destruction is found in other economists - notably Joseph Schumpeter, who developed it in his marvellous Capitalism, Socialism and Democracy (1942) - but it was Marx who first grasped the subversive dynamism of the unfettered market. In conditions of globalisation, the market is an anarchic force of immense power that unleashes conflicts that are extremely difficult to manage.

Strangely - but perhaps predictably - it is not Marx's insight into globalisation that has proved most influential in the period since the end of the Cold War. Instead, it is his expectation of an imminent transformation in human affairs that will unite all of humanity under a single type of regime. The neocon ideologues who are still calling the shots in American foreign policy may not like being compared to Marx, but they share with him the eschatological certainty that a new world can be born only through violence.

The theory of "global democratic revolution" that is being tested to destruction in Iraq is only a right-wing version of the theories of Marx and Trotsky. Like them, it will end in failure, but not before it has added needlessly to the sum of human suffering. If Marxism was the greatest fantasy of the 20th century, it has not altogether lost its power in the 21st.

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John Gray is professor of European thought at the London School of Economics. Main Currents of Marxism , by Leszek Kolakowski, is published by Norton, Pounds 30.00.