The current global crisis is likely to be the most serious seen since the 1930s. The immediate origins of the turmoil in “sub-prime” mortgage lending to the working poor in the United States, notably women and people of colour, are telling. They encapsulate key contradictions of contemporary capitalism and cut through the mirage of debt-fuelled working class integration in a context of sharply rising exploitation and inequality. By the end of this year, at least one in ten workers in developed countries will be without a job, affecting not only the livelihoods of people living in these countries but also those around the globe who are dependent on remittances from them. In the poor countries of the Global South, made vulnerable by growing integration into the circuits of international accumulation and the erosion of social protections during three decades of ruthless capitalist globalization, the worldwide downturn in aggravating what were already crisis conditions.In order to help get a handle on the crisis and its implications, Upping the Anti conducted interviews on the subject with leading radical thinkers in Canada. David McNally is the author of a variety of works of Marxist theory and analysis, including Another World Is Possible (Arbeiter Ring, 2008). Sam Gindin and Leo Panitch have collaborated on numerous analyses of contemporary capitalism and the American imperial state, for example Global Capitalism and American Empire (Merlin Press, 2005) and are currently completing a major study on the subject. All three teach political economy at York University in Toronto. Aidan Conway conducted and edited these interviews in March, 2009.

David McNally

Can the economic crisis that is unfolding be understood as a financial crisis – a product of the “paper” economy or does it have deeper origins in the “real” economy of production, trade, and income distribution? How much sense does this distinction make?

One way of thinking about this is to ask why a financial crisis (which began, to be sure, in the US real estate market) has turned into a full blown economic slump, featuring the meltdown of manufacturing corporations. After all, the collapse of financial institutions in recent decades, such as the savings and loans crisis of the early 1980s, or the crash of the Long Term Capital Management hedge fund in 1998, did nothing of the sort. Financial crises trigger general economic slumps only when the underlying conditions of capitalist accumulation and profitability are fragile. And that was the case this time. In my view (developed at length in a forthcoming issue of Historical Materialism) global capitalism has been faced with deepening problems of over-capacity and declining profitability since the Asian Crisis of 1997. So, when the credit crisis started to unfold in August 2007, the world economy was highly vulnerable to any destabilizing shock that might emerge. But while a financial meltdown triggered the crisis, the latter has much deeper roots in the sphere of capitalist production, accumulation, and profitability.

As for the distinction between the “real” and the “paper” economies, a fair bit of caution is necessary. After all, the capitalist economy is inherently a monetary one – and this means that credit markets always play a crucial role. Buying, selling, lending, and borrowing are inherent in capitalist production and circulation. Consequently, money and credit are entirely central to “real” processes of production and exchange. At the same time, it is important to distinguish actual assets (be they means of production or hoards of money) from what Marx calls “fictitious capital,” such as stocks, bonds, mortgage-backed securities, and most derivatives. All of these fictitious capitals are claims to future wealth – wealth that may or may not ever materialize. In principle, fictitious capital allows an increase in the rate of accumulation by letting firms receive money today (which they can invest) in return for a share of future profits. But when paper claims on future profits become inflated beyond any reasonable prospects they become instruments of speculation that create asset bubbles. And in the run-up to this crisis we witnessed an extraordinary growth of paper claims to future wealth, claims that were clearly not sustainable. The result is the financial meltdown we have experienced now for more than a year. But I want to reiterate: this is not simply a financial crisis. It is a global crisis of profitability and over-accumulation tethered to a credit crisis.

Two final points on this. First, it is often said that finance has been a disciplining factor in the restructuring of capital in the neoliberal period. This is certainly true. But, contrary to quite a few claims, this does not mean that finance is “autonomous” of capital as a whole. Neoliberal wage compression (and the raising of the rate of exploitation of labour) would not have been possible without the whole gambit of processes that created lean production systems – retooling, computerizing and robotizing, shedding labour, breaking down older systems of shopfloor resistance, and so on. Finance aided and abetted these processes, but it did not create them. Moreover, these were global processes that involved the spatial reorganization of world manufacturing – and the enormous growth of manufacturing capacity in East Asia. It follows, secondly, that the crisis is not global simply because finance is international. The crisis is global also because manufacturing has become globalized in the neoliberal period as never before.

Even the mainstream financial press is diagnosing the end of the so-called “free market” experiment as governments of all stripes intervene massively in the market, dabble in bank nationalization, and embrace deficit-spending. How accurate is this assessment?

We miss the historical and social significance of this crisis if we do not recognize that key pillars of neoliberalism have collapsed – dogmatic free market ideology, gung-ho privatization of state assets, rhetorical (and sometimes real) pledges to avoid government deficits, professed hostility to Keynesian policies of fiscal stimulation by government (even if “military Keynesianism” was in fact practiced in the US much of the time). Now, as the state intervenes on a massive scale, there is a huge loss of credibility for the dominant ideology of the last 30 years – and the left should not underestimate the importance of this. There are ideological and political openings for the left the likes of which we have not seen in a very long time.

At the same time, neoliberalism was simply a set of ideological and policy prescriptions designed to restore capitalist profitability. If different policies are needed to preserve capital in a moment of crisis, then capitalists will readily embrace them. Moreover, other pillars of neoliberalism – the “law and order” agenda, the increase of police and “security” powers, crackdowns on migrant workers – not only remain entirely intact, but are generally being intensified in response to the crisis. So, this is a moment of real instability and uncertainty for the ruling class. It is abandoning key elements of neoliberalism and intensifying others. Classical neoliberalism is for the moment in shambles. But it is impossible to say what policy configuration will replace it, as this will largely be determined by the class and social struggles of the next few years. Capital will want a refashioned neoliberalism, a sort of post-neoliberalism. But social explosions of the sort we have seen in France, Greece, Iceland and parts of Latin America mean that it is by no means certain that they will get their way.

As for the state, it was always central to neoliberalism. Militarism, restrictive immigration policy, “free trade” agreements, exploitation of the Global South, anti-union laws, liberalization of finance, neoliberal education policy – all of this and more involved the use of harsh and intrusive state powers. But during this period the state was by and large allergic to nationalizing large chunks of the financial system and turning to massive stimulation of the economy. These are major shifts induced by the crisis. And, I repeat, they have opened up new ideological and policy debates – about the appropriate uses of public powers and resources – that were largely dormant in recent decades.

As the economic crisis deepens and spreads, references to the Great Depression of the 1930s have become commonplace. How far does this analogy take us?

To be sure, this is a profound systemic crisis of capitalism, as was the Great Depression. But historical analogies are generally more misleading than illuminating – and that is true in this case. To begin with, the overall weight of public expenditures in the major capitalist economies is much higher than in the 1930s. Secondly, operating without a gold standard (in any form) gives central banks today much greater monetary flexibility in responding to the crisis: they can dramatically increase the money supply without violating legislation involving ratios between currencies and gold. Thirdly, governments have responded with a much greater infusion of economic stimulus earlier on. As a result, the odds are that this slump will not be as deep as that of the 1930s; in particular, government spending should create a floor below which employment levels won’t drop (though Spain could come close to 20 per cent unemployment this year). Having said that, this slump could be as protracted as the Great Depression, resembling in that regard the “lost decade” of the 1990s in Japan. And a long, drawn-out crisis gives the left a longer period in which to rebuild from its current weakened state.

The current economic crisis seems to be finally bearing out the analysis of many on the left that global capitalism and US hegemony never really recovered from their conjoined crises in the 1970s. From this perspective, disaster has been avoided thus far through the unsustainable expansion of massive pyramids of personal, corporate, and US government debt, increasingly funded by capital inflows from foreign sources. What does the current crisis tell us about US power and the international hierarchy of states?

To begin with, I don’t believe global capitalism has been in crisis since the early 1970s. The evidence demonstrates, in my view, that there was a sustained neoliberal expansion from 1982 to 1997, centered particularly in East Asia. Wage repression, lean production, spatial reorganization, and industrial and financial restructuring raised the rate of exploitation of workers and underpinned a period of substantial growth. Over the past decade, that boom was increasingly reliant on massive debt creation, especially, but by no means exclusively, in the US. But credit expansion does not – and in my view could not – explain a quarter-century of capitalist growth. Only a genuine restructuring and recovery of profit rates could have done that. But the neoliberal expansion has now hit a wall. And recovery will not be easy.

As for US hegemony, the story is quite complex. On the one hand, there is no other state with the economic, military and political capacities to direct the global system. On the other hand, the US was not the key center of capitalist accumulation during the neoliberal era. East Asia was far and away the more dynamic economic space, and the huge stockpiles of foreign exchange assets in China, Japan, and South Korea reflect this. Furthermore, during the same era, European capital made considerable headway – though the crisis is creating counter-pressures – in terms of market integration and the creation of a common currency, the euro. As a result, I believe the US National Intelligence Council was right to suggest late last year that the world system is evolving in a more “multi-polar” direction. Yes, the US remains dominant. But its dominance is less sweeping than it was a decade ago – and will probably be less so again in another decade. Other regional powers will be able to exercise an influence that would not have been available to them in, say, the 1990s.

One key indicator of this is the growing pressure to diminish the role of the dollar as world money. The creation of the euro has already curtailed the dollar’s global role. And China’s call to dramatically increase the role of Special Drawing Rights through the IMF is an attempt to further constrain the dollar as world money. Both Russia and a UN panel support China on this, though making it happen in the short-term will be quite difficult. In the meantime, China is negotiating direct currency swaps with a number of countries – most recently with Argentina – which facilitates world trade without the use of the dollar. I believe that all of this points to a protracted process in which the US empire will confront increasing efforts to curtail its global dominance. There is no new center of global capitalist power that could simply replace the US. But there are also growing indications that the US will have less room for unilateral dominance.

A distinctive feature of the current financial crisis, in comparison with the recurrent episodes of financial turmoil over the last quarter century, appears to be that it has not been contained to countries in the periphery. What are the North-South dynamics emerging in this crisis and what do they tell us about the organization of the global economy today?

Unlike any crisis of the neoliberal era, this one began in the capitalist core – first the US, then Europe. All previous crises of the neoliberal period – Mexico (1994), East Asia (1997), Russia (1998), Argentina (2000-1) were regionally contained. But this is a globalizing crisis that originated in the core. Of course, capital in the North will try to use tactics of “spatial displacement” to make people in the South bear the brunt. And this will increase human suffering in the most objectionable ways. Yet, so deep is the crisis in the banking sector that such tactics are not enough to stabilize the system. Most decisive, however, is the huge ideological defeat Washington has suffered with this crisis; its institutions and policies are seen as responsible for having dragged down the whole world economy. In this context, it will be much harder to impose austerity and structural adjustment in the South – by means of cutbacks to social spending, privatization and liberalization of banking – when the dominant nations are doing exactly the opposite.

I believe this is the most significant development in terms of North-South relations. Washington’s crisis is likely to embolden popular movements and left reformist governments, like those in Venezuela, Ecuador, and Bolivia, to break with aspects of neoliberalism. Perhaps most significant in this regard, Ecuador has repudiated some of its foreign debts, claiming that they were fraudulently contracted. This is a most important move, and could open the door to further debt refusals – and perhaps popular movements to repudiate debt – at a time when Washington’s moral authority has been battered.

More or less stagnant real wages for the vast majority in the rich countries have had as their counterpart (in addition to increased hours of work) steadily rising mortgage and consumer debt as households struggle to maintain relative levels of consumption and hope to share in the gains of asset price appreciation. To what extent does the current crisis signal the limits to this pattern of incorporation and social reproduction of subordinate classes? What does it suggest about the modes of resistance and struggle that are likely to have increased traction in this context?

It is certainly true that working class incorporation via debt has hit a wall, as people pay off debt (“de-leverage”) rather than take on more. As a result, working class people in the North must now deal with living standards determined by their actual wages, not wages plus credit. This has big macroeconomic effects, since it means large drops in overall levels of spending and consumption. And for working class households it means real struggles to sustain living standards. In that sense, neoliberal illusions about prosperity through asset inflation (mainly via rising values for houses) are effectively dead. And that will have huge implications for politics. But, as I suggest below, how growing anger and resentment are translated into social and political action will depend enormously on the capacities of the left to respond in bold and creative ways.

Episodes of crisis would seem to offer important political openings to both the left and the right. The gathering struggle over how the crisis will be addressed promises both opportunities and dangers for the left. What are these opportunities and dangers, and how should we navigate them? What are the distinctive tasks of the radical left under these new conditions? What are the implications of the new terrain for left strategy, campaigns, organization, and alliance-formation?

A complex dialectic of danger and opportunity characterizes this moment. Obviously, the anger and fear generated by recession, job loss, and declining incomes can be channeled in quite different directions. Desperate, fearful people can often be pulled behind union concessions and national protectionism. And within protectionism lies the kernel of racism – the idea that “our” jobs are more important than those of others, and that “Canadians” need to protect themselves and “their” economy. Labour leaders who push campaigns like “Buy Canadian” or “Buy American” bear much of the responsibility for this. It is an especially easy – and dangerous – response by union leaders who are agreeing to plant closings and cutbacks to wages and benefits to “wrap themselves in the flag” as a way of diverting attention from real failures of strategic leadership. In so doing, they open the door to the scapegoating of immigrants and undocumented workers. Already, we have seen major moves against migrant workers in Canada, Australia, Britain, Spain, Thailand, and South Korea. So, if any left worth speaking of is going to be built in this period, it will have to be an intransigently anti-racist one that champions the rights of migrant workers and resists all forms of nationalism and protectionism. That is what makes the campaigns by groups like No One is Illegal so important.

At the same time, this crisis can create real traction for arguments from the left that creatively challenge capitalist bailouts while making the case for popular anti-poverty and anti-capitalist responses. Imagine, for instance, what might be achieved by radical forces significant enough to reframe the “bailout debate” by insisting that no public funds be given to auto companies without guaranteeing every job, preserving union contracts, and converting “excess” factories to green products (solar panels, or fuel-efficient diesel buses). Of course, such arguments would need to be linked to radical demands on behalf of the unorganized and the non-working poor – demands for free public transit, full rights for migrant workers, radically improved access to Employment Insurance, and so on. All of this means building a left capable of clearly, intelligibly, and radically posing alternatives that cut against the grain of the logic of capitalism. And it means developing these alternatives in a framework of anti-racism, internationalism, participatory democracy, and genuine non-sectarianism.

We can see elements of what is possible in this regard by looking at the mass social mobilizations that have swept Greece and France in recent months. In these cases we witness millions taking to the streets – in general strikes and mass demonstrations – against neoliberal responses to the crisis. In both countries, major new coalitions of the radical left have played important public roles. Without a doubt, the most important of these is the New Anti-capitalist Party (NPA) in France, launched earlier this year with 10,000 members. And, of course, all of this intersects with important discussions coming out of Latin America about developing a “socialism for the 21st century.” So, while right-wing forces will undoubtedly try to intervene around this crisis, we should not underestimate the possibilities for building a new socialist left.

It would be naïve to pretend that we can artificially reproduce what has been achieved in France, where waves of mass anti-neoliberal protest since 1995 have had a material impact on the political culture. But it is clear that this is a moment in which non-sectarian forces of the radical left need to build new networks, new forms of collaboration, new common fronts for education and action in response to the crisis. Out of such initiatives, by creating new spaces of radical convergence, a new left might emerge – one capable of mobilizing much more substantial anti-capitalist forces in the face of this crisis.

Sam Gindin and Leo Panitch

The standard account of the current financial crisis attributes it to excessively risky lending by financial institutions. When combined with “securitization,” which allows for the packaging and re-selling of income streams (e.g. mortgages) as financial assets, this reckless lending made it possible for the sub-prime mortgage market in the United States to act as trigger for a global credit crisis. Is this just a financial crisis or is it the product of other dynamics in the “real” economy?

Sam: This is clearly a crisis that started in finance, but you can’t separate finance from the real economy. You can’t understand it as simply a diversion from real accumulation or as a source of credit propping up the system. It has been fundamental to the making of global capitalism in the 1980s and 1990s. In this crisis we have seen how finance developed to the point where its dynamics and contradictions had a certain autonomy. It’s a global crisis because of the way that finance has become global. But this crisis emerged in housing and mortgages, which are fundamental to the real economy, and this has given it a certain depth. You can’t understand the depth of the crisis apart from the inequality that grew up over this period, and the way in which workers came to relate to the system in part as investors. However, the sub-prime mortgage market can’t be understood simply in terms of workers wanting loans: it was the dynamics within finance, like leveraging and innovation, that made these loans possible. And the state encouraged it.

Leo: I would be willing to grant to those who see this as a stagnation or overaccumulation crisis that what they describe is basically true for a number of important industries. The auto sector is a good example. But we need to recognize that the last twenty-five years have been a very dynamic period of capitalist development in terms of technological change and the restructuring of industry, both regionally and in the labour process. So while it may be the case that certain industries were especially vulnerable to a crisis triggered in finance – and that’s important to be aware of – this needs to be put in perspective. This isn’t the same crisis that people were identifying in the 1970s. That crisis – which developed out of the strength of the working class and the contradictions of the welfare state, in conjunction with international competition – was resolved in no small part through the rise of finance, and this gave rise to new contradictions.

Sam: The role of finance in disciplining labour and promoting the restructuring of production has been fundamental. Even if you argue that finance creates no surplus, finance contributed to a larger surplus being generated through its role in disciplining and ?allocating capital across sectors and regions, so finance was ?functional to capital accumulation in that sense. In addition, when you think about the things that you need for an incredibly complicated and globalized capitalism to work, there’s an expanded role for finance in providing different forms of insurance and services. Finance is speculative, but it is also functional, for instance in the areas of futures and options which provide credit for trade, or in the pressures created by the buying and selling of General Motors stock that have helped defeat the auto workers’ union. Finance has also been central to American empire by fostering the penetration of American capital throughout the world and by fostering the flow of funds back into the United States which has been central to the US capacity to wage wars and fund foreign investment.

As states flirt with nationalizing large swathes of their banking sectors and intervene heavily in the market, even mainstream commentators are announcing the “death of an ideological god,” in the words of Martin Wolf of the Financial Times. Are we witnessing the end of neoliberalism? Is the state back? Did it ever leave? What are the prospects for a post-neoliberal world emerging from this crisis?

Sam: Neoliberal ideology fostered the illusion that states were the problem for capitalism. But neoliberals have actually been very statist, even authoritarian, in all sorts of ways. We can see that neoliberalism was really about what the state could do to promote accumulation while ensuring that class strength was not built up from below in the process. The ruling class is incredibly pragmatic and they have been prepared all along to be interventionist if necessary. For example, there was very little criticism of the Bush deficits in elite circles, because a deficit based on military expenditures and tax cuts is not a problem from capital’s perspective.

Leo: It was always astonishing how many serious people took neoliberal ideology at face value and thought the state’s role was diminishing in a fundamental way. This ideology is now in tatters. Ironically, it suffers more on its own terms by saying that regulation was the problem. It becomes easy enough to argue that this disaster has been caused by the embrace of neoliberal deregulation, even if the truth is more complex. So at least at a superficial level, we are now free of the ideological stranglehold of neoliberalism. Even if you define neoliberalism more broadly as a form of social rule – a set of practices that rests less on ideology and more on how capitalism itself has evolved over the last thirty years – this form of social rule is in trouble. If the way that finance has been operating is in profound crisis, then it follows that a new set of practices and linkages will have to emerge if global capitalism is going to continue the way it did before.

Sam: It is difficult to imagine how the ruling class can say that what they are doing now is only temporary and that we’re going to go back to the ways things worked before. At the same time, capitalism can keep chugging along without a lot of legitimacy because of people’s continued dependence on the system and their fear of losing what little they have as subordinate class participants in it. For example, it is quite amazing to look at the auto industry and see that despite all the delegitimation that’s gone on, the ruling class can still kick the shit out of auto workers, give money to Wall Street, and get away with it. US autoworkers are going to end up with their wages cut in half and will lose their health care at exactly the moment when you’d expect capital to have to be paying up. But there is a real opening and it could be very interesting.

Leo: The fascinating thing about the crisis of the 1970s is that it didn’t interrupt globalization but accelerated it. It’s an open question at the moment whether or not this crisis will interrupt global capitalism in a serious way, not necessarily in a socialist or even progressive direction, mind you. It’s not clear that things can be put back together. Many of the states that are crucial to sustaining the project of global capitalism are fragile, and political fissures could emerge to prevent this crisis from being contained. There are real problems coming in Eastern Europe, and there are extremely reactionary forces in Western Europe as well. What Obama and company are most worried about is economic nationalism, which since 1945 has been seen as just as much of a danger by the American empire as the Communist threat.

The current economic crisis seems to be finally bearing out the analysis of many on the left that US hegemony is finally in serious trouble. From this perspective, disaster has been avoided thus far through the unsustainable expansion of massive pyramids of personal, corporate, and US government debt, increasingly funded by capital inflows from foreign sources. The apparent capacity of the US to sustain its position within these global imbalances as “consumer of last resort” has been viewed paradoxically as a symptom of both its weakness and enduring strength. What does this crisis suggest about the prospects of US power in the international hierarchy of states?

Sam: It is difficult to make any sense of recent events without emphasizing the imperial dimension of America’s relationship to the rest of the world. The crisis began in the US, rapidly spread to other parts of the world and continues to be shaped by American political and economic developments. Defying the hopes and expectations of a great many commentators, the crisis has not produced any meaningful delinking from the US-centred global order. And in this respect the situation is dramatically different from the 1930s, when the world economy quickly fragmented. In the age of American empire, such autonomy is much harder to achieve. To be sure, the longer-term strength of American financial institutions remains to be seen, but the current crisis cannot be explained in terms of the external challenges to the financial power of the American state.

Leo: A crisis was predicted by a great many pundits on the premise that China and Japan, Middle East oil exporters, and ‘emerging markets’ with trade surpluses more generally were bound to stop their capital flows to the United States given the size of its trade deficit. But that crisis did not occur! Instead, it has really been instructive to see capitalists and governments everywhere that are responding to the crisis by searching for a safe haven turning to dollar debt, above all Treasury obligations. The Chinese call for the US to take measures to guarantee its “good credit” to ensure the “safety” of their holdings of US debt and even for a new IMF-sponsored international reserve currency independent of the dollar, need to be understood in light of what the head of the China Banking Regulatory Commission said in New York in February this year: “US Treasuries are the safe haven. For everyone, including China, it is the only option… we know the dollar is going to depreciate, so we hate you guys but there is nothing much we can do.”

Even those European leaders like the German Finance Minister Peer Steinbrück, who opportunistically pronounced the end of American “financial superpower status” when the crisis erupted, soon started crediting the US Treasury for “acting not just in the US interests but also in the interests of other nations.” The US was not being altruistic in doing this: not to do it would have risked a run on the dollar. But this is precisely the point. The American state cannot act in the interests of American capitalism without also reflecting the logic of American capital’s integration with global capitalism both economically and politically. This is why it is always misleading to portray the American state as merely representing its “national interest” while ignoring the structural role it plays in the making and reproduction of global capitalism.

Sam: In this context, not too much should be made of such differences in approach as exist between European governments that favour more multilateral regulation and a US administration which stresses greater coordination of fiscal stimulus. Much more serious than the difficulties of keeping the Americans and Europeans on the same page is the question of how the crisis may aggravate the difficulties of fully integrating China within global capitalism. As we have suggested here, the danger posed to the US imperial role in global capitalism by Chinese investment in the US is not really the central problem. Rather, China’s integration will depend on the US being able to penetrate further into the dynamics of East Asian economic development, to implant institutional forms that will ensure its compatibility with continued American imperial power. A new liberal multilateralism could afford the US, very likely backed by Europe, more influence over the parameters of Asian economic development.

If and when, during the next decades, the foundations of American empire were really to crumble, class struggles within the imperial heartland itself would likely play a major role in bringing this on – precisely because of the way in which the external and internal dimensions of American empire are intertwined. At the same time, the ability to pacify the citizens of the empire is critically dependent on the ability to maintain wider structures of global exploitation and integration. Making apparent the linkages between these different sources of oppression is therefore more pressing than ever. But just as the re-regulation agenda may tend to take the wind out of the sails of domestic opposition, so proposals for the return to a more cooperative, multilateral international order may tend to prematurely harmonize the contradictions generated by global power structures. The progressive transformation of the economic world order requires the kind of international solidarity that advances struggles within each state, not multilateralism among states as they are presently constituted.

As the economic crisis deepens, references to the Great Depression of the 1930s have become commonplace. What are the similarities and differences between the crisis and responses to it in the 1930s and today?

Sam: We’ve been thinking about this by looking at when people began to rebel in the 1930s. You don’t really see much resistance until about 1932. So it was a good three years before the big marches of the unemployed in Detroit, for example. And it’s not until 1933 or 1934 that the sustained efforts at organizing got going. People were really shocked and numbed. What’s interesting is that around 1934 there was a real economic upturn. Unemployment only drops to 17 percent from 25 percent, but you have economic growth rates of 20-25 percent for two or three years before the second recession. It was only really when the economy started to improve that people had the confidence to begin to fight back. After the second collapse in 1937, the United Auto Workers union was almost completely destroyed at General Motors. In Canada, the union survived by setting up bowling leagues and rod and gun clubs. They had almost no base in the plants then, and that didn’t really change until the war.

Leo: Most people on the left think that state intervention and re-regulation is where we ought to go. This is limited and naïve. If you look at the 1930s, what happened is that the state stepped in and saved financial capital as a fraction of the capitalist class, and then nurtured it back to health for thirty years. It would be a tragedy if the outcome of this crisis were a re-regulation that merely saved capitalism again. It’s misleading to think that the state as it is presently constructed is going to intervene in ways that serve left objectives. What are needed are the kinds of reforms that could be built on as part of a process of more fundamental change. Socialists didn’t think enough about this is the 1930s and 1940s. Many of those reforms were good and necessary, but they involved a bureaucratic capitalist state, distant from the working class, introducing reforms of a kind that didn’t lay any basis for moving forward in a more radical way. Now, you’re not going to get anywhere as a socialist without offering and fighting for immediate reforms (you can’t say “wait for the revolution”), but the danger is that in the process you promote, as in some ways was done in the wake of the Great Depression, reforms that will meet certain needs but won’t help lay the basis for moving beyond the system.

Sam: If we look at the Great Depression in a broader historical perspective, a few other things stand out. From World War I on, the working class emerged as a democratic force. This created problems in an international monetary system based on the Gold Standard, which was supposed to lead to automatic adjustments. But you now had workers who would not accept that kind of devastating discipline and adjustment. So a conflict emerged between workers and finance, and the question was how to resolve it. With World War I, the Bretton Woods system, and the growth of welfare states, you get one kind of resolution, which worked for a time but gave rise to contradictions and was ultimately unsustainable. Out of its crisis in the 1970s, we ended up with liberal finance once again smashing workers, and this is now in crisis. So there is a question about where things can go from here.

More or less stagnant real wages for the vast majority in the rich countries have had as their counterpart (in addition to increased hours of work) steadily rising debt levels as households struggle to maintain relative levels of consumption and hope to share in the gains from asset inflation. To what extent does the current crisis signal the limits to this pattern of incorporation and social reproduction of subordinate classes?

Sam: This question has to be understood against the backdrop of the discipline that finance was able to exert on industries to promote restructuring in such a way that workers were more disciplined, were working at a higher rate of exploitation, while at the same time limiting wage increases. Workers were not able to sustain (especially in the last decade) their relative standards of living without getting in over their heads in terms of mortgage debt and other forms of consumer credit. The way whole working class families had increased their hours of work to sustain their standard of living reached a limit by the end of the 1990s. While the structure of consumer credit dependence was in place by the 1950s, and especially the 1970s, it really accelerated in the last decade, especially around mortgage debt.

Leo: The new industries that emerged in this period of restructuring didn’t produce as many stable well-paying working class jobs with benefits as the old sectors had. They might have done so for a number of computer programmers and technicians, but not for large numbers of workers. That’s not to say that these industries weren’t profitable and accumulating in a very dynamic way, but the relative dearth of decent jobs did produce realization problems, and credit played a role in bridging this gap for a time. But this pattern of integration is now in crisis.

What are these opportunities and dangers that are emerging over responses to the crisis, and how should we navigate them? What are the distinctive tasks of the radical left under these new conditions?

Leo: Because of the role of finance, this crisis may lead people on the left to look for an alliance pitting workers and industrial capital against rentiers. Since Henry George in the 19th century this has been the most common form of working class politics. The default politics has not been revolutionary, but has rather been about looking towards an alliance with a rooted national or regional capitalist class. Of course it has been some time since national capital has been interested in this kind of alliance. They may be more inclined towards this in some form today, and if that’s true, then progressives are likely to head in that direction, to the detriment of working for more fundamental change.

Sam: In terms of resistance and struggle, there is no reason to have confidence in spontaneous developments. There will be acts of resistance, to be sure, but we shouldn’t expect this to become generalized. People are reacting in completely confused ways, for example by attacking the rich, but also attacking Chinese workers or domestic auto workers. However, there is a real opening because so many people have exhausted their capacity to survive in what had become the normal ways – more hours worked, debt, etc. Larger questions have to be raised immediately. More radical responses, like nationalizations, have to be talked about now. That’s the only way these things ever get on the agenda. And they have to be linked to the immediate struggles and demands that will emerge as people try to defend themselves.

In the auto industry, for example, as long as the union is content to say “we are not the problem,” it goes nowhere. The discussion then becomes about how much you’re going to give up. The only way the union could have survived this would have been to act in a much bolder way by refusing to even discuss further concessions and by trying to provoke a larger discussion. In the United States, auto workers should have put healthcare on the agenda a long time ago, even if it meant a strike where they would be attacked at first. This would have given them the chance to defend themselves by standing up for everyone else. This is now going to happen with pensions in Canada.

Something like 500 auto parts plants will be closing in the United States over the next couple of years. For many workers and communities that’s all they have. If people would take plants over, that would be a way to get the debate going. We need to start a discussion about the plants that have closed, even before the crisis, and how they could be re-opened and converted for new kinds of green production. Of course, to do this requires a plan, so it immediately raises the question of democratic planning at the community level. Windsor, in Ontario, already had a crisis before the crisis, so public debate needs to be sparked about how to prevent Windsor from becoming another Detroit, for example. You have to try to change the agenda in a way that allows you to fight and mobilize. This would also get the union talking to its unemployed members, which they’re not doing apart from some job-training programs. These people are not being mobilized at all.

Leo: To even imagine this, unions have to be non-corporatist and they have to be willing to attack the companies. You have to talk about communities and their productive capacities, not just the companies. To do this requires confidence, vision, and internal democracy. The lack of democracy is a big part of why the union is incapable of taking this kind of thing on. What the union has become very good at doing is controlling internal dissent.

The problem is partly the very nature of unions. Marx himself seemed to be of two minds about this. Sometimes he described unions as “schools for socialism,” and sometime he had very critical things to say about the role they played. You can take a union so far but it organizes people for reasons other than radical social change; it is a bit like an insurance company. Now, one wishes that you had the kind of union leaderships that in the old days were prepared to join, and encourage as many of their members as possible to join, labour parties, the Industrial Workers of the World, Communist parties, etc., but these kinds of leaders are few and far between today.

Sam: There’s a limit to what you can expect from unions, and I think the situation they’re in now makes it very difficult to imagine them playing a leading role. But there is an opportunity for the radical left, because a significant number of union members and those who have lost their jobs will be frustrated by the broken promises, or the limits of winning of a few extra weeks of unemployment insurance. Of course this demand is important, but this crisis is of such a kind that this is a band-aid measure. That’s the main reform that’s being advanced by unions.

There are two ways to go for the radical left in the short term. One is to get street mobilization going and to take more radical action within the unemployment insurance demand, for example by occupying unemployment offices. Another is to fight to expand the demands: why should it just be about unemployment insurance, why not dental care and pharmacare, why not public housing, and so on? Instead of just talking about the stimulus plan and its size, we should talk about democratizing the process: what are we stimulating? New forms of working-class organization need to emerge in this crisis, and a good place to start is at the community, or city-wide, level. Thinking a bit longer term, a great many non-traditional workers are going to be facing intense pressures and can be mobilized and turned to radical politics. They can play a role in building the kinds of socialist formations that unions can’t be. It seems clear that this is what we have to be working towards. Clearly, you need to have parties that are both inside and outside unions.

The radical left needs to be in the public eye and, for lack of a better term, “sound crazy.” We need to raise big questions and demands even if we’re not sure of whether or not they will work. We need to shift the terms of debate from “bailouts” to saving the infrastructure and skills of communities and converting them to new socially useful forms of green production. If we take the environmental question seriously, then every factory that produces anything is going to have to make some major transitions. It’s not just about energy-saving, it’s about making the things that are going to be necessary for a broader shift in what we produce and consume: wind turbines, materials needed for retrofitting, etc. The list is incredibly long once you start thinking about it. Communities are going to need to overhaul a lot of infrastructure in coming years. Without a broader democratic plan that makes this about something other than bringing new products to the market, this risks amounting to providing subsidies to a new environmental-industrial complex. We have to raise the bigger questions about democratic planning.

Leo: We need to raise the question of nationalizations, but in a different way from the old Communist Party approach: we need to insist that nationalization involve democratizing the state, because people are rightfully fearful of the state. When you talk about nationalizing the banks, for example, people are often skeptical, and for some good reasons. Broadening the discussion in this way also provides for some common ground with the people that came up in the anti-globalization movement who, rightfully but also in some limiting ways, have been very anti-statist and very concerned with the question of democracy. So things have to be approached in terms of democratization.

Ultimately, this is still going to involve trying to get people into a broad socialist formation with an agenda that is not limited to producing literature and protesting, but is oriented to getting people involved in and excited about developing a radical plan for Canada, in solidarity with similar projects internationally.