The Coming Failure of the Social Safety Net

[Omaha Steve]

http://www.counterpunch.org/labotz03182008.html

The Economic Crisis, Labor and the Left

By DAN LaBOTZ

The world appears to be on the verge of an economic crisis and, if it turns out to be as serious as some think, one that could rival or exceed the great panics of the late nineteenth century and the decade long Great Depression. The crisis began with unscrupulous mortgage lending on an enormous scale, leading to mass housing foreclosures, then to a collapse of the securities backed by sub-prime mortgages, and finally became a crisis of the banks that held those securities. Over the past weekend government and banking officials worked out J.P. Morgan's buy out of Bear Sterns, one of the most important U.S. banks which stood on the verge of collapse, a development that threatened to unleash an international financial crisis.

This may turn out to be only another recession, painful as those are, but if it turns out to be a genuine depression, what are we on the left prepared to do? What will this crisis mean for the American working class? What should be the response of the U.S. left? What can be learned from the experiences of the past and how can those lessons be applied to the present challenge?

A Common Recognition of the Danger

The crisis that faces us is now clear to all, even if President Bush-like President Herbert Hoover after the Crash of 1929-denies that the economy is in danger. Already several months ago Lawrence Summers, Secretary of the Treasury in President Bill Clinton's administration wrote in an opinion piece in The Financial Times warning that, "Even if necessary changes in policy are implemented, the odds now favor a US recession that slows growth significantly on a global basis. Without stronger policy responses than have been observed to date, moreover, there is the risk that the adverse impacts will be felt for the rest of this decade and beyond."

John Lipsky, the number two official of the International Monetary Fund said this week that government policy makers must be prepared to "think the unthinkable." One presumes that by that he means a collapse of the world economy.

Robert Brenner, the UCLA economic historian, wrote recently in the leftist journal Against the Current that, "The current crisis could well turn out to be the most devastating since the Great Depression." He concludes his article writing "because banks' losses are so real, already enormous, and likely to grow much greater as the downturn gets worse, that the economy faces the prospect, unprecedented in the postwar period, of a freezing up of credit at the very moment of sliding into recession-and that governments face a problem of unparalleled difficulty in preventing this outcome."

A Crisis for Ordinary People

There is a common understanding of the serious nature of the crisis, even if no agreement on ultimate causes and consequence, among a range of people with quite different politics. Not only do banks, governments, and international financial institutions face a crisis, so do the working people of the world. The crisis has tremendous potential to cause widespread suffering because it is taking the form of a crisis of stagflation, that is simultaneous economic downturn and rising prices.

FULL story at link.

[Better Believe It]

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2. So long to the Permanent Republican Majority

Hello to the New New Deal Democratic Majority