Is the economic crisis over?

Beware of talk of better economic times around the corner. We may be over the worst of it; we may have avoided a 1930s-type Depression; but it’s quite another thing to suggest that we are on the road to recovery.

Yes, there have been some indicators that show improvement in the economy; but we shouldn’t read too much into them (as the business press does).

After all, there are more signs that suggest that we haven’t reached bottom yet, that the recovery is still not in sight; and that more government intervention is necessary.

Unemployment hasn’t peaked, even though the official rate is nearly ten per cent. Poverty is growing, and among the long-term poor, the crisis is dire. Manufacturing is hemorrhaging jobs – none more so than the auto industry. Banks, as quiet as it is kept, hold mountains of toxic assets. Debt is nearly off the charts. Credit markets are far from fluid. Business investment is off. And housing prices continue to fall and foreclosures rise.

On a global level, signs of renewed economic activity are few. Maybe the best we can say is that the decline of the economy is slowing down, thanks to massive government intervention, but hasn’t bottomed out.

If this is so then three questions follow: first, when will the economy hit bottom? Second, when will the economy begin a vigorous and sustained renewal? Third, is the economic crisis reconfiguring the geography of economic power on a global level?

On these questions there is no consensus.

Some say that the economy will bottom out soon to be followed by a recovery early next year. Other economists are more pessimistic. Citing the enormous piling up of debt over the past 20 years, overcrowded world commodity markets, technological displacement, capital flight, downward pressures on profitability, and so forth, they predict little economic bounce for some time to come.

Months ago it was said that the downturn could be “L-shaped” rather than “V-shaped.” In other words, the crisis begins with a steep decline in economic activity followed by long period of economic stagnation.

I suspect that this is what will happen, thus making sustained government and people’s intervention an imperative. In my view this should take at least three forms:

First, more economic stimulus: the economy is underperforming and nearly 30 million workers are unemployed or underemployed and that number hasn’t peaked yet.

Second, restructuring is imperative. The old economic model that rested on bubble economics, cheap labor, financial manipulation and speculation, deregulation, capital outsourcing, environmental degradation, and so forth, has to be replaced by a new model that expands and restructures the productive base and is “people and nature” friendly.

Finally, the economy has to be democratized. The wizards of Wall Street and inside the Beltway failed miserably, in fact, so miserably those economic decisions that affect the welfare of millions shouldn’t rest in their hands.

The resistance to such measures will be massive. It will take a labor-led coalition far bigger than what exists now to drive the process.

Furthermore, even in the event that such a coalition materializes and pushes through such measures, the organically embedded economic contradictions and crisis tendencies of capitalism will erupt in one form or another. There is no such thing as a crisis-free capitalist developmental model. Sooner or later, it exhausts its potential and gives way to sharp and ultimately irresolvable contradictions located at every level of the capitalist economy.

In the meantime, the struggle for immediate public sector jobs and relief should command our attention. We, along with the labor movement, the nationally and racially oppressed, women, youth and others, have to help the unemployed find their voice and forms to express their demands and organize their struggle.

In addition to articulating class wide demands, we have to argue for special measures that address the catastrophic situation in the African American, Latino, Asian American, American Indian, immigrant, and other minority communities. The lack of jobs is at the heart of this dire situation, but it also includes malnutrition and hunger, poor health care, shabby housing, high dropout rates, homelessness, racial profiling, police brutality, criminalization, and so on.

The job crisis requires special discussion and initiatives with our allies. They should be concrete and realistic.

As for the impact of the current crisis of capitalism on the geographical distribution of economic power on a global level, it is enormous and consequential. While the U.S. and European market economies report negative growth rates, the economies of the emerging giants – China, India, and Brazil – are expanding this year and this trend will continue at a faster rate next year. If this trend continues – and there is no reason to think that it won’t – the implications and consequences will be profound and long lasting.