FRSO Sixth Congress
Introduction: The Current Crisis
In December of 2007, the United States entered a recession. Nine months later, the failure of investment bank Lehman Brothers triggered a financial crisis that spread across the Atlantic to Europe. As the recession in the United States and Europe deepened, the world economic crisis spread to Asia as their export-oriented economies slowed. The greatest economic crisis of capitalism since the Great Depression of the 1930s has engulfed almost every major economy of the world, with the exception of China. 
As the crisis developed, mainstream economists, the Federal Reserve, and Federal government officials tried to explain away the problem. When the problems in the mortgage market began in 2006, they said that it would be “contained” to so-called sub-prime mortgages made to borrowers considered to poor credit risks. Then the housing market as a whole began to sink, and they said that it wouldn’t cause a recession. As the economy began to lose jobs and the recession started, they said that Europe and Asia would be fine and that our exports to the rest of the world would help the United States. Finally, when the financial crisis exploded on Wall Street and shook the world economy, the Federal Reserve and Federal government jumped into action and the finger pointing began.
With interest rates already near zero in a failed attempt to combat the recession, the Federal Reserve went on a lending spree, pumping about a trillion and a half dollars into banks, financial institutions, and bond markets. The Federal Government has cut taxes, loaned hundreds of billions of dollars to bailout banks and other financial institutions, and increased spending on social programs and infrastructure, leading to a trillion and a half dollar federal budget deficit for the 2009 Fiscal Year.
The dominant free market school of economics reeled in shock as the capitalist system teetered on the edge of calamity. They saw the economic crisis as unthinkable and impossible and tried to blame it on the government, overlooking the fact that the government had pursued their policies of deregulation, free trade, and cuts in social programs for the last thirty years.
Keynesian advocates of government borrowing and spending to fight recessions had been on the defensive for thirty years. The worldwide economic crisis gave them a new lease on life, as they came back with ideas to increase regulation and the role of the government in banking and health care in addition to their spending stimulus. 
But while the economic debate between the free-marketers and Keynesians heated up, both sides have ignored the only school of economics that actually explained why recessions and economic crisis are a regular feature of capitalism instead of explaining it away or trying to figure out how to save the system. This school is Marxism, based on the economic analysis of Karl Marx, V.I. Lenin, and others.
A Marxist Analysis of Capitalist Economic Crisis
Marxism lacks both the mathematical fantasies of the free-market economists, and the determination to save capitalism found in Keynesian economists. Instead Marxism begins with the reality that the means of production of goods and services, that is the land, buildings, and machinery that labor needs to produce, are owned by a small group of wealthy capitalists. In the United States, the wealthiest 1% of the population owns almost half of financial assets such as stocks that represent ownership of productive forces. This means that the vast majority of people (in the United States about 90%) must work for others to make a living. 
Under capitalism workers’ wages are not determined by the value of the product of their labor, but instead by the value of their labor power, or goods and services needed to sustain themselves and their families. The value of labor power is reflected in the wages and benefits of workers as well as social benefits provided by the government. The value of labor power is not set, but is historically determined, and can vary from country to country and time to time depending on a number of factors. These factors include what workers are able to win in the class struggle, the condition of the reserve army of labor, and the extent of national and colonial oppression, and the necessary level of training and education of the average worker. 
The difference between the value of the goods and services created by labor, and the value of labor power, or wages that the workers are paid, is surplus value, which goes to the capitalists who own the means of production. Surplus value is the source of capitalist profits. Thus the more that the capitalists can force down wages, the greater their profits. This is what Marx called exploitation. This can be clearly seen in the second three months (April to June) of 2009, where corporate sales fell due to the recession, while their profits soared as layoffs, wage cuts, and harder work by the remaining workers boosted their bottom line. Indeed, over the course of the entire 2001-2007 expansion of the economy, typical household incomes (adjusted for inflation) actually fell despite economic growth. At the same time profits grew to record levels. 
But unlike the kings and emperors of ancient and medieval times, the capitalists today do not spend their all their wealth on luxuries, temples, and armies. While they do live lives of luxury, most of their wealth is reinvested into expanding their businesses. This accumulation of capital also contributes to the rapid technological advances under capitalism, as the capitalists use their wealth to develop new innovations that they hope will help them compete with other capitalists.
Such a crisis of overproduction can be seen around us: stores are closed and factories are idle. Homes stand empty and goods pile up unsold. At the same time workers are laid off, getting evicted from their homes, and suffering from cuts in government services and public schools.
These crises of capitalism also pave the way to recovery. As businesses close down, means of production are destroyed, reducing the excess capacity to produce that helped to lead to the crisis. At the same time new markets can be found, restoring the ability of the capitalists to sell their products. This restores economic growth, which in turn recreates the conditions for another crisis of overproduction. Thus there is a pattern of economic expansions followed by recession, or what is known as the business cycle. Here in the United States there is a recession every five years on average. The U.S. economy is in the 33rd official recession since 1857 .
The Development of Capitalism into Imperialism
Another characteristic of capitalism pointed out by Marx is the tendency for businesses to grow in size. This comes from the process of accumulation itself, or the concentration of capital and from the tendency of bigger businesses to crush and absorb their smaller rivals, or the centralization of capital. This process of concentration and centralization of capital can be seen today in the beer industry, where three large firms control almost 90% of the market. 
By the end of the 19th Century, this process had led to a new stage of capitalism, monopoly capitalism. This change is described by Lenin who in 1917 listed five features of monopoly capital: first the centralization of capital into a few large firms in each industry, who have monopoly power. This can be seen in the United States where more and more industries are dominated by a handful of giant firms. This centralization began in manufacturing, and has spread to transportation, communication, retail, banking, and restaurants. 
Lenin also pointed out the rise of what he called “finance capital” and of a financial oligarchy that profits from speculation in stocks, land, and other financial securities. Here in the United States in the 21st century, the fact that the so-called “FIRE” industries (Finance, Insurance, and Real Estate) made 40% of the profits of large corporations, shows the importance of finance capital. 
In the 16th, 17th, 18th, and early 19th centuries merchants and capitalists expanded trade around the world. European powers sought colonies where they could dominate trade according to the prevailing “mercantilist” economic theory. But by the late 19th century up to today, flows of capital have greatly exceeded the amount of trade. This can be seen in the growth of multinational corporations and the huge amount of foreign currency speculation today. This growth of multinational corporations is what is referred to as imperialist globalization, and has been going on for over a hundred years. 
Last, but not least, Lenin criticized the idea that the growing international ties among capitalist nations would lead to more harmonious relations. Instead he pointed out the growing competition and conflict among the imperial powers for control of raw materials, markets, and opportunities to invest. These conflicts exploded into World Wars I and II. Today there are also mistaken theories that capital is now transnational and that national governments don’t matter as much. But the reality is that economic contradictions are growing among countries, especially the rising economies of the so-called “BRIC” (Brazil, Russia, India, and China) and the established economic powers of the United States, Western Europe, and Japan. There are also growing protectionist barriers to trade and investment in the wake of the economic crisis in the United States and other countries.
Lenin said that imperialism was the monopoly stage of capitalism. Our view of the world economy today is that these basic features that Lenin identified almost one hundred years ago: the centralization of capital in gigantic corporations, the growth of finance capital, the export of capital and formation of international corporations, and the growing competition between economic powers, still hold true. The models of competitive markets that mainstream economics is based are by and large myths designed to explain and defend the status quo. 
The Working Class and National Oppression in the Monopoly Stage of Capitalism
This can be seen in the monopoly capitalist countries (the United States, Western Europe, and Japan) where the vast majority of immigrants come from the developing nations of Africa, Asia, Latin America, and the Caribbean. These immigrants and their children have become oppressed nationalities in the imperial nations. Here in the United States, African Americans in the south, Chicanos in the southwest, and peoples of Hawai’i have been forged into oppressed nations. 
National oppression contributes to economic inequality in the United States. Many of the poorest communities in the United States are on Native American reservations, Texan towns where the Chicano Nation borders Mexico, etc. The long-standing relative poverty in the South is rooted in the national oppression of African Americans and the African American Nation.
Marx had noted the tendency for capitalism to proletarianize workers, in other words, to change work done by skilled artisans such as weaving cloth into manual labor in factories. This tendency towards deskilling workers continues under monopoly capitalism, as former professionals such as clerks, nurses, and teachers are transformed into workers who have to sell their labor power. They have joined skilled trades workers in an upper stratum of the working class. 
At the same time immigration for the Third World and continuing national oppression have contributed to the continuation of a lower stratum of the working class. African Americans and immigrants from Asia, the Caribbean, and Latin America also make up the bulk of what Marx referred to as “the reserve army of labor,” the unemployed and underemployed workers that capitalists can draw upon when needed without having to raise wages, and to be released at will -- in other words the “last hired and first fired.” This can be seen today in the rates of unemployment that are almost twice as high for oppressed nationalities as for whites. 
Economic Crisis and the Role of the State under Monopoly Capitalism
Under monopoly capitalism crisis of overproduction is centered in the production of capital goods (or what mainstream economics refers to as “investment spending”). This can be seen in the current recession, which began with a downturn in the housing market, and the previous recession in 2001, which began with a downturn in computers, routers, service, fiber optic cable, etc. that formed the backbone of the internet. 
This goes hand in hand with the general tendency towards overcapacity, or the ability to produce more than what can be sold. Even before the current recession broke out, there was overcapacity in many industries, including auto, steel, airlines, retail, etc. This overcapacity means that there is a lack of profitable investment outlets in the production and distribution of goods and services, leading to a tendency towards stagnation, or prolonged periods of crisis. These long periods of crisis under monopoly capitalism can be seen in the Great Depression of the 1930s. 
The Great Depression was only overcome by the gigantic destruction of capital during World War II and stimulus to the economy of the reconstruction efforts. Continuous military spending on the Cold War with the socialist countries and wars to suppress national liberation struggles in Korea and Vietnam also stimulated the economy. There was also the relatively cheap and abundant land and energy that drove a wave of suburbanization, stimulating construction, auto manufacturing, and other industries. These combined to create an economic boom in the United States.
The role of the Federal government also changed with the Great Depression and World War II. Earlier, it played little direct economic role. But beginning in the 1930s the Federal government, began to play a much larger role in regulating industries, especially banking, in social welfare programs such as social security, and in the allocation of credit through the Federal Reserve bank and mortgage lender Fannie Mae. This was in addition to the economic stimulus of vast military spending.
The government also developed policies to try to stabilize the economy. The Federal Reserve Bank began to raise and lower interest rates to try to even out the flow of credit by the private banking system. The Federal government also began to raise and lower taxes and spending to offset the changes in investment spending on capital goods. While these policies did have an impact on the timing, duration, and depth of crisis of overproduction, they in no way were able to eliminate this fundamental feature of capitalism, as the business cycle continued in the post-World War II period. 
But by the 1970s, many of the factors leading to the post-war boom had played out. The reconstruction of western Europe and Japan was completed and these countries played an increasingly competitive role. The era of cheap energy came to an end with the decline in U.S. oil production and the maturation of OPEC into an effective bloc against US and other imperialist oil corporations. This led to renewed economic crisis and a decade of Stagflation (combination of rising inflation and rising unemployment) during the 1970s.
In the 1980s, monopoly capitalism found a new way to increase exploitation and profits and at the same time expand its markets through the ever greater extension of credit. Reaganomics meant a new anti-union line by the government and the trimming of social welfare programs that aided workers. At the same time there was a huge expansion of credit to maintain and expand consumer spending in the face of declining wages. In the last ten years the boom in the housing markets was another source of credit for consumer spending. In 2005 alone some $600 billion in spending came from refinancing home mortgages. 
The most striking change in this period has been the massive buildup in debt across the economy. Household, businesses, and the government have all seen their debts grow much faster than the overall economy. The United States is borrowing more from other countries to pay for a growing trade deficit. The biggest explosion in debt was in the financial sector, where a combination of deregulation of banking, new information technology, and capital unable to find profitable investment elsewhere fed into a boom. More capital began to flow into the financial sector, and the growth of lending and speculation in financial assets. 
Uneven Development and the Rise and Decline of U.S. Economic Power
Imperialism also leads to the uneven development among countries. The growing gap between rich and poor countries was first and foremost due to the growing wealth of the imperial countries in Western Europe, the United States, and later Japan, and the impoverishment of the colonial and semi-colonial countries of the Third World. This gap has continued after the end of European and American colonial rule through neo-colonial relationships that keep Third World countries as sources of cheap labor and natural resources. 
There are also differences among the imperial countries. During the 19th century Britain was the leading imperialist country with a leading economy, the largest empire, and greatest ability to project military power through its navy. However World Wars I and II weakened Britain, and the United States became the leading imperial country after World War II. The U.S. economy was dominant with the other major capitalist countries (Britain, France, Germany, Japan, and Italy) heavily damaged by the war. The U.S. had the largest military, which was armed with nuclear weapons. As the struggles of colonial people forced the European powers to shed their colonies, the United States moved in with neocolonial relationships that it had long practiced in Latin America.
The 1970s was a turning point for U.S. economic hegemony. At that time China pointed out that “Countries want independence, Nations want Liberation, and the People want Revolution.” The U.S. empire was battered as national liberation struggles, in particular the heroic struggle of the Vietnamese people showed the limits of U.S. military power. The rise of OPEC (Organization of Petroleum Exporting Countries) meant an end to cheap oil that had helped to fuel the post-World War II economy through construction of suburbs, a growing auto industry, and related travel industries such as tourism. The struggle of African Americans for equality and power inspired other oppressed nationalities and the working class to greater struggle. In addition, the recovery of Japan and western Europe from World War II meant more competition for the U.S. economy.
The relative decline of the United States was reflected in the high rates of inflation and the decline of the U.S. dollar. After World War II the U.S. dollar became the international reserve currency, meaning that it was as “good as gold” in backing other countries’ moneys. But in 1973 this so-called Bretton Woods arrangement came to an end, the U.S. dollar sank in terms of the Japanese Yen, German Mark, among other currencies. 
The United States was able to slow its relative economic decline in two ways. One was through “Reaganomics” in the 1980s, which included union busting, deregulation of banking and industry, breaking down protective tariffs. The end result was to lower the value of labor power and increase the profits of the monopoly capitalists. The other was the demise of the Soviet Union and eastern European socialism in the early 1990s. This opened up new markets for the monopoly capitalists, removed a major obstacle to U.S. military intervention in the world, and dealt a blow to socialism and the workers’ movements.
The Current Crisis of Monopoly Capitalism
One of the features of capitalism noted by Marx was that each resolution of a crisis laid the groundwork for an even greater crisis. After the dot-com bust following the internet boom, speculative capital flowed into the mortgage market, fed by historically low interest rates set by the Federal Reserve. The boom and then bust in the housing market led to both a recession, and then a financial crisis not seen since the Great Depression of the 1930s.
The main features of the current economic crisis are first, the increased exploitation of the working class, cuts in government services, and schools, and generally lower standards of living as the capitalist try to shift the burden of the crisis on to the working class and oppressed nationalities. Unemployment and home foreclosures continue to rise. A vicious cycle develops where jobless workers fall behind on their debt payments, and then are denied jobs because of their bad credit! More and more people are losing health insurance as businesses cut benefits and individual plans become too expensive. Homelessness is growing and mothers and children are being thrown off of TANF and into the streets due to 5-year limits.
Secondly, the crisis is destroying means of production. Plants are closing down, never to reopen. Stores and even entire shopping malls are boarded up. Some banks have even gone as far as tearing down foreclosed homes to try to prop up prices for remaining houses. Thus the Obama administration’s “rescue” of U.S. auto makers actually led to more and faster closings of plants and dealers than GM and Chrysler had been doing on their own. This is worsening the crisis of unemployment for the working class, with the official unemployment rate rising to more than 25% in the hardest hit city of Detroit. 
Third, the concentration and centralization of capital has accelerated as the smaller and weaker firms fold and the bigger and strong ones snap them up or even prey on each other. This can be seen in the U.S. banking industry, where four giant banks (Bank of America, Citigroup, J.P. Morgan Chase, and Wells Fargo) have emerged with over half the bank assets in the United States. 
The current crisis has also sped up the relative economic decline of the United States. The U.S. economy has been hit harder than most other large economies due to the financial boom and bust. The free-market economics pushed by the United States to further its own economic interests has been discredited. For the first time, other countries are questioning the large debt of the United States to the rest of the world, and the role of the U.S. dollar as the international reserve currency. 
Future Prospects for the U.S. Economy
At this time (April, 2010), it is clear that most sectors of the economy have bottomed out, with state and local governments and schools the major exception. At the same time the economy is still in a deep hole. Jobs are coming back, but it will take years to make up the 8.4 million jobs lost in the recession. Housing sales and prices are no longer trending down, but there are millions of vacant homes.
But these “green shoots” of recovery heralded by economists and politicians are all too dependent on the government. Forty percent of new mortgages are being made by the Federal Housing Authority and the Veterans Administration, and sixty percent of mortgages are being bought, turned into bonds, and resold to investors by Fannie Mae and Freddie Mac, both of whom have been taken over by the Federal Government. The Federal Reserve is buying a half a trillion dollars of Federal and mortgage bonds to try to keep capital flowing. Unemployment insurance benefits have been extended from the standard six months to more than a year and a half, etc.
The chances of a strong economic recovery, last seen following the 1981-1982 recession, are slim. That recovery followed more than a decade of stagflation.
Interest rates were lowered, and a new, pro-business Reagan administration was in power. Most of all, the massive build-up of debt had just began, and with it the ability to juice the economy. None of these conditions exist today: the crisis is less than two years old with massive overcapacity. Interest rates are already at zero. Debt is now so large that it is a major drag, not a stimulus for the economy.
Another possible scenario is a long period of weak economic growth such as Japan in the 1990s, following its boom and bust in both housing and stock market in the 1980s. But Japan was able to stimulate their economy with massive government spending that raised their public debt from 20% of GDP in the 1980s to 120% by 2000. With the U.S. public debt already at above 50% of GDP and rising because of the Bush era tax cuts for the wealthy and wars in Afghanistan and Iraq, the large budget deficits are now being opposed by Republicans and conservative Democrats. The Japanese government was able to borrow at home with Japan’s high savings rate, but the U.S. government has had to borrow from other countries, which are increasingly worried about lending more. 
This leaves the possibility of a “double-dip” where the economy takes another sharp drop. There are a number of factors that could lead to this. One is that further cuts in consumer spending due to rising unemployment and tighter credit could cause another wave of cuts by businesses. Another possibility is that the Congress, driven by fear of deficits, cuts back on government spending, and/or the Federal Reserve gets spooked by inflation and raises interest rates. This is what happened in 1937-1938, where after four years of recovery, the economy took another step down during the Great Depression. There is also the possibility of another financial crisis, this time driven by bad loans in business real estate. Cuts in state and local government services and public schools, not seen the Great Depression, could also push unemployment even higher.
Last but not least, there is also the possibility that the U.S. economy will experience another crisis which begins outside the United States. The most recent bout of financial instability because the Greek government debt crisis that (for now) has been contained by a one-trillion dollar fund by the Euro-zone governments is a case in point. In the 1990s the United States was able to prevent crisis in Mexico, Southeast Asia, Russia, and Latin America from spreading to the United States. But today the relative decline of the U.S. economy relative to others and the recent recession and financial crisis have left the economy weaker and the ability of the U.S. government to respond to another crisis is less. International capital markets are also more integrated, as seen in the spread of the U.S. financial crisis to Britain and the Euro-zone. 
The Peoples’ Struggle and Socialism
The economic crisis has brought about an increase in struggle among workers and oppressed nationalities. Some other biggest are against plant closings and business takeaways of health benefits, home foreclosures, and cuts in education. So far (again, as of October 2009) these struggles remain generally localized and defensive, but there remains great potential for expanding and linking these struggles. [Note: more analysis of the peoples’ economic struggles are in the domestic section of the this MPR]
At the same time, the monopoly capitalists are also regrouping and laying the groundwork for new assaults on the working class and oppressed nationalities to shift the burden of the economic crisis on to their backs. There is growing clamor about the weakness of the U.S. dollar and growing Federal government budget deficit from bankers and the Right-wing. They want to start raising interest rates and cut government spending and institute a new period of austerity by further assaults on reforms won in the 1930s and 1960s (social security, Medicare, and home ownership).
But no matter what the monopoly capitalist do and say, the current economic crisis has shaken confidence in the capitalist system. Opportunities for educating people about the true nature of monopoly capitalism are growing. At the same time this also is a good time to point to the need for socialism, a system based not on the profit of privately owned corporations, but one based on serving the needs of the working people through government and collective enterprises.
 China’s economy, with large government owned enterprises and banks, government control of foreign capital flows, and a large domestic market, was able to continue growing, However, China does have a very large export sector linked to the world capitalist economy, which took a big hit and caused economic growth to slow substantially. Cuba’s economy has been hit much harder by a dramatic fall in trade combined with massive damage from three major hurricanes last year. The world economic crisis had a bigger impact on Cuba as compared to China due to Cuba’s relatively larger export and foreign direct investment sectors.
[Note: Cuba’s Foreign Direct Investment or FDI is twice that of China when compared to either the size of the economy or population. Despite this important link to the world capitalist economy, the U.S. press generally portrays Cuba as “socialist” and China as “capitalist.” What this is based on is the fact that China has more trade and investment ties with the United States, while Cuba has more trade and investment ties with Europe and Latin American countries. However this is because of the U.S. embargo on Cuba, and one should not decide on how “socialist” a country is based on U.S. foreign policy.]
 Named after economist John Maynard Keynes, whose 1936 book The General Theory of Employment, Money, and Interest, pointed out the possibility of economic crisis and the need for government spending to get capitalism going again.
 For example, the wages of workers in the United States has historically been higher than other capitalist countries. The origins of the United States as a European settler state has meant that the relatively large amount of land taken from indigenous people has provided a (relatively) high standard of living for white farmers, and the reserve army of labor has had to come largely from immigrants and African Americans. The victories of mass struggle during the Great Depression increased workers wages, benefits, and government benefits. The high level of education required for more and more jobs increases the value of labor power to support a longer period in school.
 In 2000, right before the 2001 recession, the median household income in the United States was $52,500. In 2007 the median household income was $52,163 (adjusted for inflation). Income, Poverty, and Health Insurance Coverage in the United States: 2008, table A-1, page 29. From 2000 to the peak in 2006, corporate net operating surplus (the broadest measure of corporate profits, before interest expenses and taxes) rose from 9.2% to 11.4% of GDP, a 25% increase. When other forms of income from property (proprietors income and rent) are included, it came to almost 21% of GDP in 2006. Note that the total share of income from property and exploitation is even higher, since this figure does not include high salaries and benefits going to top managers and administrators whose pay comes from the surplus extracted from exploitation.
 The dates for recessions are set by the Business Cycle Dating Committee of the National Bureau for Economic Research (NBER). The historical dates can be found at <www.nber.org/cycles/cyclesmain.html>. Note that “The NBER does not define a recession in terms of two consecutive quarters of decline in real GDP. Rather, a recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. For more information, see the latest announcement from the NBER's Business Cycle Dating Committee, dated 12/01/08.” (quoted from the web site cited above).
 In 2002 the four largest breweries in the United States held 90.8% of the market (2002 Economic Census. Sector 31: Manufacturing: Subject Series - Concentration Ratios: Share of Value of Shipments Accounted for by the 4, 8, 20, and 50 Largest Companies for Industries: 2002. Row 427. Since 2002 concentration has increased as the single largest U.S. beer company, Anheiser-Busch, was recently bought by the Belgium-Brazilian giant Inbev. In addition the next two largest firms, Miller and Coors, have agreed to joint distribution of their beers.
 See “Imperialist Globalization and the United States” By Steff Yorek and Mick Kellyfor the National Executive Committee, Freedom Road Socialist Organization, 2001. <http://www.frso.org/about/docs/glob2001.html>
 Note that mainstream economics defines monopoly as a single large firm dominating and industry, and an oligopoly as a few large firms. The Marxist term monopoly capital would include both, as in both cases the capitalists make extra profits from reducing output and raising prices due to their control of the market.
 See FRSO: National Oppression, National Liberation, and Socialist Revolution, 2004.
 Lenin referred skilled trades workers as an “aristocracy of labor.” But the upper stratum now includes semi-professional workers, as well as some unionized industrial workers such as longshoreman. These newer sectors have a history of militancy to the point where it is no longer accurate to refer to the upper stratum of the working class as “labor aristocrats” that the social basis for opportunism in the labor movement. See FRSO: Class in the U.S. and Our Strategy for Revolution
 See National Income and Product Table 1.1.6. Real Gross Domestic Product, Chained Dollars (Billions of chained (2005) dollars] Seasonally adjusted at annual rates. Bureau of Economic Analysis, Department of Commerce.
 The 1970s were another period of economic stagnation, with four recession between 1969 and 1982, and high rates of inflation. The United States could well be entering another decade of stagnation.
 The Federal Reserve Bank or Fed is the U.S. central bank. Its main function is to stabilize the economy by raising short-term interest rates to slow the economy and limit inflation, and lower them during recessions to try to limit rising unemployment. During this last crisis, the Fed also played the role of “Lender of Last Resort” in bailing out large financial institutions such as the AIG insurance company. However, almost all of the Fed’s interest rate hikes to fight inflation have contributed to a recession, while recently the low interest rates to fight recession have resulted in asset price bubbles, such as the late 1990s Internet Stock Market boom and bust, and then the 2003-2006 Housing Market boom and bust.
 The Bursting of the Housing Bubble and the Coming Recession, By Dean Baker. Truthout, 17 August 2006.
 Foster and Magdoff, The Great Financial Explosion
 The term “Third World” began in the 1950s to describe the colonial and semi-colonial countries of Africa, Asia, and Latin America as opposed to the “First World” of the imperial countries and the “Second World” of the European socialist countries. In the 1960s and 1970s the term was also used to describe oppressed nationalities in the United States.
 The Bretton Woods conference in 1944 planned out the post-World War II international monetary as a more flexible version of the 19th century gold standard where currency values were measured in gold. This was one of the last contributions of the economist Keynes to the capitalist system.
 The official unemployment rate for Detroit in January 2010 was 25.3%, more than twice times the national unemployment rate of 10.6% (both rates are NOT seasonally adjusted). The official unemployment rate understates the economic pain to workers by not counting people without jobs who want to work but didn’t look in the previous month (discouraged and marginally attached workers), and those who are working part-time but can’t find full-time work due to the economy. In January 2010 the alternative unemployment rate including these other workers was 18% (not seasonally adjusted). Bureau of Labor Statistics.
 “Breaking up the Financial Industrial Complex,” by David Weidner, Wall Street Jouirnal, April 1, 2010.
 The United States is net debtor nation, that is, foreign-owned U.S. assets is are greater than U.S.-owned foreign asset to the tune of $7.9 billion. One advantage that the U.S. has in borrowing from abroad is that the U.S. dollar is the reserve currency used to do international trade in, so that other countries need to hold dollars to finance trade. Federal Reserve Flow of Funds Accounts of the United States, Flows and Outstandings, Fourth Quarter, 2009, Table L.107, page 69.
 The U.S. Federal government debt held by the public was about $8.4 trillion, or 53% of GDP (Gross Domestic Product, which is the total output of final goods and services in the economy, the standard measure of national production). With the annual Federal budget deficit running at about $1.5 trillion, or 10% of GDP, this figure will rise significantly. Economists generally use the debt held by public, net of bonds owned by Federal agencies such as Social Security, as the standard measure of government debt. The total or gross U.S. government debt is $12.9 trillion, or more than 80% of GDP. US debt from the U.S. Treasury at http://www.treasurydirect.gov/NP/BPDLogin?application=np and GDP is from http://www.economicindicators.gov.
 The Greek/Euro crisis of early 2010 also shows the limits of the Keynesian response to the latest economic crisis where trillions of dollars of government stimulus (much larger relative to the size of the economy than the 1930’s New Deal) were used to stop the downward spiral of capitalist economies. Countries throughout the Euro-zone and in Britain are now trying to cut their budget deficits, which will slow the recovery and possibly push it back into a deeper recession. The bailout of banks and capitalists who own Greek and other Euro-zone government bonds has meant severe austerity for Greek working people, especially government workers who are having their pay cut, taxes raised, etc. even as unemployment continues to rise. The growing movement in the U.S. government to “cut the deficit” is a call for more austerity for U.S. workers and poor people.