(The following article is from the October 1-15, 2008, issue of People's Voice, Canada's leading communist newspaper. Articles can be reprinted free if the source is credited. Subscription rates in Canada: $25/year, or $12 low income rate; for U.S. readers - $25 US per year; other overseas readers - $25 US or $35 CDN per year. Send to: People's Voice, c/o PV Business Manager, 133 Herkimer St., Unit 502, Hamilton, ON, L8P 2H3.)

By John Case, People's Weekly World Newspaper, Sept. 19, 2008 (abridged)

It's easy to become apocalyptic contemplating the vast sums of wealth being destroyed in the unfolding financial crisis gripping Wall Street. The economic Tsunami unleashed there will soon reach every corner of the U.S. Indeed globalization will insure that few in the world will escape suffering.

     Every emerging crisis facing workers, from food to energy to health to retirement to manufacturing decline to declining real incomes, will be aggravated and amplified. Already unemployment stats are rising above 6 percent in many states. No one knows how far-reaching the damage will be, but nation-wide unemployment exceeding 10 percent is now likely. And 2009 may be the worst year since 1981-82, if not since 1929.

     A global panic is not yet inevitable, but not unlikely either. All the inequities and conflicts that threaten peace will intensify.

     The interventions by the Federal Reserve and the U.S. treasury department have been dramatic and unprecedented in many ways. Against hysterical and ignorant criticism from the free-marketers in their own party, Ben Bernanke and Henry Paulson appear to have drawn the correct conclusions, albeit at least 8 years after the they were due - that a measure of socialism is the only, repeat only, course that can avert global catastrophe.

     The only question is: will it be enough socialism to stay the dragon of worldwide depression and the fires of war that would surely follow in its wake. Bernake and Paulson have clearly been reading Hyman Minsky and Charles Kindleberger - latter day closet Marxians and "long wavers" - and they GET IT: When markets fail, the chaos that follows is NOT self-correcting, and governments MUST act. This is a profound fact that neo-classical economic training - which tends to pay virtually no attention to history - tends to ignore; thus many, but fortunately not all, economists simply cannot believe the scale of the dangers at hand, nor do they have the intellectual or scientific tools to evaluate them. I do not argue that mathematical models are not important, even mandatory in developing economic and social policy. But seeing the big picture requires careful attention to economic history, which gives abundant evidence that raw capitalism is NOT a stable system.

     Recent history gives solid examples of how smart socialization is the only corrective. Sweden, for example, confronted financial collapse in the 1990s by nationalizing its banks and absorbing the toxic bubble before selling the institutions back in a more carefully regulated environment. Japan, on the other hand, allowed its Real Estate market to collapse without intervention 20 years ago, and they have not recovered growth rates since.

     When Bernanke subsidized the bailout of Bear Stearns creditors, but not its stockholders; when Paulson effectively took control of Fannie Mae and Freddie Mac WITHOUT compensation to the stockholders; when the Fed seized 80 percent control of AIG - the largest business insurer in the world - at a paltry price of 87 Billion (the company earlier this year reported over a trillion dollars in assets); when the government is now considering a new "Resolution Trust" company over 1,000 times bigger than the one that nationalized the savings and loan assets 20 years ago - economically speaking, a new outbreak of socialism and social democracy is on the agenda!

     Unfortunately, even a healthy dose of socialism is not going to reverse the collapse of the credit/mortgage bubble. Nothing can stop that. But doing everything possible to avert panic and catastrophe for literally billions of people around the world in the process, putting much increased public investments in the right place - the pockets of the people - and truly enacting the needed transparency reforms in financial markets to forestall disaster, these items are life and death matters.

     However, there is, in my opinion, more to this financial crisis than a debate over how much socialism is required. There is a key shift in the world balance of forces taking place, reflected first of all in the global distribution of capital, and the consequent division of world labour. The United States, it is now clear, spent most of the first decade of the 21st Century wasting huge sums in fictitious investments; while the Chinese, on the other hand, spent the decade investing in infrastructure and production. The Beijing Olympics - an astounding and splendid success despite efforts of many enemies to demean them - are the most striking counterpoint in the world to the decadent US mortgage "security" market. In a fitting irony, the former CEO and founder of A.I.G, Hank Greenburg, let it slip that many of AIG's assets will almost certainly be purchased by Chinese corporate or sovereign wealth funds.

     Last, but hardly least, previous major historical shifts in the wealth of nations have always been associated with war. As we exert all efforts in our communities and workplaces to help and defend each other against the certain hardships that immediately face us, it is the challenge of our times to find or build the paths of cooperation, the institutions and strong expressions of working class solidarity that can save us from the peril of another world war. 40 million died in WWII to give the birth of the United Nations the chance of life. Let's not go there again! Let's NOT succumb to the temptations of apocalyptic terrors and fear.