The economic crisis is nearly two years old. I like to call it the Second Great Contraction, borrowing a term from a mainstream economist, to distinguish it from other economic downturns of the last few decades.

This crisis is different in its origins, magnitude and resistance to quick fixes, compared to earlier crises.

Despite the optimistic rumblings on upticks in production, employment and personal consumption, there is plenty of reason to be uneasy.

Investment is sluggish, and trillions of dollars in real and fictitious capital have disappeared.

Wages are falling and exploitation is increasing.

The housing crisis has eased a bit, but the foreclosure rate and the number of houses underwater (people owing more than the house is worth) are still enormous.

Consumer spending remains low as households are still up to their necks in debt.

State and local government spending is declining, even though it should be increasing to counter downward economic pressures.

Income inequality is worsening.

Poverty is ratcheting up, particularly in the racially oppressed communities and among single mothers.

Export growth is weak. And no one should expect China to become a buyer of last resort in global markets.

The one indicator that shows some rebound is corporate profits, especially in the financial sector.

With no shame, management committees at the biggest financial institutions are awarding themselves huge payouts in salaries and bonuses. Just when you thought the criminals on Wall Street might act a little sheepish, they flaunt their new wealth with mind-blowing arrogance.

From a working class perspective, the recovery falls somewhere between modest and stalled.

To say the economy is getting back on its feet is to look at the economic indicators selectively.

If history is any guide, the return to normality following a crisis of this kind will be slow here in the U.S. and elsewhere. And still within the realm of possibility is a new downturn – a double dip, as it is called.

Furthermore, no one should rule out a financial crisis breaking out in one or a few countries and then spreading worldwide. The hyper-connectivity of global financial markets, the irrational behavior of major financial investors (while seemingly rational on an individual level, it can be catastrophic on a system-wide level), and the buildup of external and internal debt in most countries prior to and after the crisis – all these factors create a world economy vulnerable to a generalized financial crisis.

Capitalism, says Marxist David Harvey, doesn’t resolve crises so much as it moves them around.

So far the crisis has been contained in the U.S., but no one should sleep soundly. The notion that it “can’t happen here” has been pulverized by recent events.

Even if it is contained, the mushrooming of debt is becoming the new instrument to bludgeon working people worldwide, as is evident in Greece. “Tighten your belt and rein in your expectations” is the new clarion call of deficit hawks around the world. Never satisfied, the investor/finance class wants to further redistribute income to their advantage.

Here in the U.S. there is talk of Social Security and Medicare “reform.” And the current federal budget gives the green light to discretionary spending cuts. What is missing is any talk of a deep-going change in the tax structure, reductions in the bloated military budget, and a debt moratorium for ordinary Americans and state and local governments.

As long as this is out of the conversation, the burden of paying off deficits will fall on working people and the poorest among us.

To make matters worse, the focus on fiscal responsibility conceals the underlying causes of the crisis: income inequality, the rise of finance capital and financial deregulation, the hollowing-out of the manufacturing sector, the undermining of working-class power, the entry of new competitors in the global economy, and chronic overproduction in world commodity markets.

Measures that don’t address these fundamental causes do not stand a snowball’s chance in hell of lifting the economy and millions of working people of all races and nationalities out of the quicksand.




Sam Webb
Sam Webb

Sam Webb is a long-time writer living in New York. Earlier, he was active in the labor movement in his home state of Maine.