The economic crisis is more than two years old. I like to call it the Second Great Contraction, to borrow a term from a mainstream economist, to distinguish it from other postwar economic downturns.

Notwithstanding the "good" reports on GDP, employment and personal consumption growth, there is plenty of reason to be uneasy about the economy.

Investment is sluggish, trillions of dollars in real and fictitious capital have disappeared and will not return, and exploitation increases and wages fall. The housing crisis has eased a bit, but the foreclosure rate and the number of houses underwater are still enormous. Consumer spending remains low as households begin to work off their debt. State and local government spending is declining, even though it should be increasing to counter downward economic pressures. Income inequality is worsening, debt levels remain enormous, manufacturing is limping along; export growth is weak and poverty is ratcheting up, particularly in the racially oppressed communities and among single moms.

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

The one indicator that shows some rebound is – you guessed it – corporate profits, especially in the financial sector. With no shame, management committees at the biggest financial institutions are awarding themselves a huge payout in salary and bonuses. Just when you thought the criminals on Wall Street might lie low, they come out in the open and flaunt their new wealth with supreme arrogance.

By most standards, 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.

Many mainstream economists fail to appreciate that the Second Great Contraction is different in its origins, magnitude and resistance to quick fixes, compared to earlier crises.

If history is any guide, the return to normality following a crisis of this kind will be slow. And still within the realm of possibility is not only a new downturn – a double dip, as it is called.

Furthermore, because of the hyper-connectivity of global markets, the power of bondholders/finance capital, the socialization by taxpayers of losses of "too big to fail financial institutions," and the buildup of external and internal debt in most countries prior to and after the crisis, one can't rule out a financial crisis breaking out in one or a few countries and potentially spreading worldwide.

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

So far the financial crisis has been contained here, but no one should sleep soundly. The notion that it "can't happen here" has been pulverized by 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" are the new clarion calls of deficit hawks worldwide. As if it didn't get enough, the investor/finance class wants more surplus value from the working class and people in the form of lower living standards and fewer social benefits.

Here there is talk of social security and Medicare reform. And the current budget gives the green light to discretionary spending cuts. What is missing in the dialogue is any talk of a deep going change in the tax structure, reductions in the military budget, and a debt moratorium for ordinary Americans and state and local government.

As long as this out of the conversation, the solution to indebtedness will fall on working people and the poor.

To make matters worse, the endless talk of fiscal responsibility conceals the underlying causes of the crisis: income inequality, the rise of finance and financial liberalization, 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.

No solution to the nation's economic and financial woes that doesn't address these fundamental causes of the dire economic situation stands "a snowball's chance in hell" of succeeding.

Financialization

From the standpoint of the top layers of financial institutions – Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo – the current legislative struggle over financial regulation is but one battle, albeit a crucial one, in an ongoing struggle to fully restore themselves to the preeminent position they occupied in the global economy for the past three decades.

After sitting at the pinnacle of power, seeing their wealth multiply exponentially, and shaping the dynamics and contours of the world economy, they are not about to easily yield – or even slightly diminish – their power and privileged position.

Call the financial czars here and elsewhere whatever you like, but they are well aware of their class interests. What is more, they are mindful that the New Deal hemmed them in for roughly four decades. Admittedly none of them starved, but neither did they enjoy the nearly unchallenged political and economic sway as they have in recent decades.

If finance capital is able to reconstitute its power, the prospects of working people here and elsewhere are bleak. If, on the other hand, its power is progressively curbed, as it can be in the course of successive and contentious struggles, the future of the multiracial working class and its allies is far brighter.

Tough regulation and reduction in bank size are critical, but not enough.

In a larger sense the struggle is to change the whole social structure of governance and process of accumulation. For more than three decades, the main contours, dynamics and interrelations of the U.S. economy were shaped by finance capital and an exploding and nearly autonomous financial sector.

In previous periods of capitalist development, financial bubbles occurred at the peak of the business cycle. Today, however, financial bubbles are better seen "as manifestations of a longer-term process of financialization, feeding on stagnation rather than prosperity."

In contrast to conventional wisdom, the severe erosion of the manufacturing sector was not a product of financialization, but the other way around in the early going. New conditions and contradictions – intense price competition, entry of new producers in the global marketplace, high unit labor costs in American manufacturing relative to their counterparts elsewhere, and the consequent difficulty of maintaining adequate levels of profitability in the 1970s – combined with de-regulation and a recession (engineered by the Reagan administration) to stimulate the flight of capital out of the manufacturing and other sectors of the real economy.

Most of it ended up in speculative channels, while some went to plant relocation in countries abroad where costs were cheaper. The center of economic gravity shifted from industry to finance and over time the wheels of financialization, greased by both parties, brought the country to ruin, the likes of which we haven't seen since the Great Depression.

Much of what is now taking place in the political arena is driven by the battle to reconstitute the economy and along what lines - labor or capital. Or said another way, the corporations or the people.

Labor is prior to, and independent of, capital; that, in fact, capital is the fruit of labor, and could never have existed if labor had not first existed; that labor can exist without capital, but that capital could never have existed without labor! (Abraham Lincoln)

A New New Deal

The Obama administration's immediate challenge will be to revive the economy. The question is how? Where will economic dynamism come from in the near term? What change in political and economic structures and property relations are necessary?

Part of the answer is massive fiscal expansion, that is, large injections of money from the federal government into the is no answer to growing joblessness.

According to conventional wisdom and mainstream economists, near-full employment and healthy profit rates are the normal condition of a capitalist economy. Perhaps that was the case at an earlier stage of capitalism's development, but not now. Indeed, one has to wonder what the long-run prospects of U.S. and world capitalism are.

The collapse of Lehman Brothers and the near meltdown of the financial system announced the death knell of capitalism, as we know it. What the future holds no one knows for sure, but it does look dim for working people if the economy is allowed to run its course.

It is hard to draw any other conclusion, given the fragility of the world economy, the incredible debt that has built up worldwide, overcrowded and hypercompetitive world markets, the emergence of the Asian tigers and now the BRIC countries – Brazil, Russia, India and particularly China, the entry of hundreds of millions of people into the workforce, and the resistance of many sections of the capitalist class to structural economic change.

New model of economic governance

What is needed is a new model of political-economic governance at the state and corporate level that favors working people, the racially and nationally oppressed, women, youth, seniors, small business people and other social groupings.

This new model of governance won't be socialist, but like the New Deal, it would make substantial inroads into corporate power, profits and prerogatives; democratize state and quasi-state structures like the Federal Reserve; give communities, workers and small businesspeople a say in corporate decision-making, encourage small and medium size businesses and new forms of social property such as cooperatives; place energy, finance and transportation in the public domain; demilitarize and green the economy; deepen and extend equality, and reconfigure our government and nation's role in world affairs.

Furthermore, militarism and militarization of the economy are incompatible to a peaceful world and a people friendly economy.

Yes terrorism is a problem, but projecting U.S. military power overseas and frightening the American people is no solution; its solution requires police action, intelligence sharing, and a more just world.

In any event, class and democratic struggles over the direction of the economy will intensify and will be resolved ultimately in the political arena. These struggles and capitalism's growing incompatibility with human aspirations and the future of the planet will reveal the new necessity of socialism.

Socialism

Socialism has its material roots in the inability of capitalism to solve humanity's problems. Working people gravitate toward a radical critique of society out of necessity, out of a sense that the existing arrangements of society fail to fulfill their material and spiritual needs.

Thus, the gravitation towards socialism expressed in public opinion polls is closely connected to the end of an era in which U.S. capitalism was relatively stable and provided reasonable economic security.

Economic crises alone, however, do not prepare the soil for revolutionary change, though they're important. The soil is prepared via the cumulative impact of a series of crises (economic, political, social, cultural, and moral) taking place over time that together erode people's confidence in capitalism's capacity to meet humanity's needs and sustain life on our planet.

Our vision of socialism is a work in progress.

At the end of his life, Engels wrote, "To my mind, the 'so called socialist society' is not anything immutable. Like all social formations, it should be conceived in a state of flux and change."

We should take this to heart. Our socialist vision should have a contemporary and dynamic feel; it should be rooted in today's conditions and experience. It should be brought in line with current realities, trends, and sensibilities. It should reflect our values, traditions, and culture. It should be multi-racial, multi-national, and multi-lingual. It should welcome immigrants.

If it has an "old or foreign" feel, people will reject it.

In the 20th century the Soviet Union became the universal model of socialism. This universalization came at a price – it narrowed down our ability to think creatively and "outside the box."

The transition to socialism will mark an end to one stage of struggle and the beginning of a new one, distinguished a qualitative expansion and deepening of economic security, working class and people's democracy, egalitarian relations in every sphere of life, and human freedom in both a collective and individual sense.

I don't frame the matter in this way to replace the more traditional notion, in which the transition to socialism is distinguished by a revolutionary shift of class power from the capitalist class to the working class and democratic movement. What I want to do is to correct one-sidedness in our thinking.

A transfer in class power – which will more likely be a series of contested moments during which qualitative changes in power relations in favor of the working class and its allies take place rather than "the great revolutionary/to the barricades day" – is absolutely necessary, but it is not a sufficient condition for a successful transition to and consolidation of socialism.

In fact, a singular emphasis on the question of class power (a means), at the expense of social processes and social aims (economic improvement in people's lives, working class and people's democracy, rough equality, and freedom and solidarity), can lead – did lead – to distortions in socialist societies.

Socialism fully develops only to the degree that working people are empowered and participate in every aspect of society. Working class initiative, a sense of real ownership of social property, and a democratic and participatory socialist state are foundational aspects of socialism.

Lenin wrote,

... socialism cannot be reduced to economics alone. A foundation – socialist production – is essential for the abolition of national oppression (in our context racial and national oppression), but this foundation must also carry a democratically organized state, a democratic army, etc. By transforming capitalism into socialism the proletariat (working class – SW) creates the possibility of abolishing national oppression; the possibility becomes reality "only" – "only!" – with the establishment of full democracy in all spheres.

Note the weight that Lenin attaches to democracy and working class initiative. Do we share his view? To a degree, but I would argue that re-centering working class and people's initiative, democracy, and needs at the core of our socialist vision is a necessary corrective.

While the political leadership of communist, socialist and left parties and social movements is indispensable, in the past, our understanding of our leading role came close to substituting ourselves for the wide-ranging participation and leadership of masses of people and for a vibrant public space in which these same people gather, compare ideas, and take action.

The struggle for socialism will bring a broad and diverse coalition with varied outlooks and interests into motion. And while we fight for the leadership of the multi-racial, multi-national working class in this coalition and for its deep imprint on the political process, we also combine that with the search for broad strategic and tactical alliances. At times this dual task will cause tensions, sometimes strongly felt ones, but the resolution of these tensions is condition for radical change.

Finally, the socialist economy of the 21st century should give priority to sustainability, not growth without limits. Socialist production can't be narrowly focused on inputs and outputs, nor should purely quantitative criteria be used to measure efficiency and determine economic costs. New socialist production (and consumption) models are imperative. Both must economize on natural resources and protect the planet and its various ecological systems. The future of living things that inhabit this earth will depend on it.

Environment

That said, we cannot wait for socialism to address the dangers of climate change and environmental degradation. That must be done now. We are approaching tipping points that if reached will give global warming a momentum that human actions will have little or no control over.

The planet is now warmer than it has been since the end of the last glacial age roughly 12,000 years ago, and if this pattern continues it will result in catastrophe for humanity. Both governments and peoples must take emergency measures now or the planet's future is in doubt. It is easy to make a case that climate change is the preeminent challenge to humankind in the 21st century.

Global warming is not new. In 1750, the level of carbon dioxide in the atmosphere – the main cause of the rise in global temperatures – measured 280 molecules of carbon dioxide for every one million molecules in the air. Today, it is 387 parts per million (ppm), largely because of industrialization, urbanization and consumerism – all of which were cradled and shaped by capitalism.

The quantity of greenhouse gases in the atmosphere increased gradually since 1750, but it spiked upward in recent decades as carbon dioxide and other greenhouse gases poured into the atmosphere at a feverish pace as a result of "human forcing," which are human activities that "affect the energy balance and temperature of the Earth," as opposed to natural forcing (volcanoes, change in the sun's radiation, etc,).

At one time the Intergovernmental Panel on Climate Change (IPCC) believed that carbon dioxide could rise to 450 ppm in the atmosphere (roughly increasing average global temperature by 2 degrees Celsius) without doing significant harm. New research suggests that this is far too optimistic. A rise of carbon dioxide to 350 ppm in the atmosphere brings us into the danger zone. But, as mentioned, we are already at 387 ppm.

The old calculation failed to take account of amplifying feedback factors. An increase in the earth's temperature, for example, causes the melting of ice and snow, which in turn results in less reflection of sunlight back into space and, instead, its absorption by the land and ocean and, consequently a further rise in the average global temperature.

This new scientific finding, says climate scientist James Hansan, makes it imperative to "immediately recognize the need to reduce atmospheric carbon dioxide to 350 ppm in order to avoid disasters for coming generations."

If we continue to produce and consume as we have over decades (business as usual), the Earth will be warmer than it has been since 3 million years ago.

So what's the big deal? The great ice sheets will melt and eventually sea levels could rise as much as 80 feet. The frozen northern tundra will thaw and release tons of methane into the atmosphere. Whole ecological systems will collapse and species, unable to migrate or adapt to new conditions fast enough, will become extinct. Violent storms will become commonplace. Water vapor (a major cause climate change feedback) will increase. And more.

At some point, human intervention will be unable to slow down and stop this process. Obviously civilization as we know it will change drastically.

While responsibility rests on every nation, for each contributes to the planet's warning, it doesn't rest equally. The main polluters of the atmosphere as well as the land and water are the core capitalist countries.

China issues more carbon into the atmosphere now in absolute numbers. But when measured on a per capita basis the United States is still the main culprit.

Moreover, when considered as a cumulative process (which most people fail to consider) over nearly three centuries, the leading polluters are the United Kingdom and the United States.

These findings argue for an accelerated transition to new energy sources and sustainable development. We could begin with an immediate carbon tax that would penalize those with the largest carbon footprint – big corporations – while also making a case for the elimination of coal production and expansion of alternative energy sources.

More fundamentally, global warming and the various forms of environmental degradation are a compelling argument for the new urgency of socialism – a society that privileges people and nature.

Photo by AFL-CIO, courtesy Flickr