A review of the latest book by economist and commentator Paul Krugman, ‘Conscience of a Liberal’

With working-class families reeling under the impact of the housing bubble bursting, rising prices, and layoffs, workers and the labor movement need a clear program that defends our interests. Here is a workers' program to fight the bosses' attacks.

Almost every day, some bad news on the economy hits the headlines: market volatility, hedge funds near collapse, rising oil and food prices, investors losing confidence and moving to less risky forms of investment such as gold. The question is now no longer “Will the sub-prime crisis trigger a broader downturn?,” but rather “How deep and long will the downturn be?” as it becomes clear this will be a serious recession.

As millions of workers begin to feel the effects of the devastating economic crisis now unfolding, let’s pause a moment in concern for the effects of this crisis on the Chief Executives of the financial institutions involved. “My life has been flushed down the drain,” one senior executive told the New York Times. Some reacted immediately, by putting their weekend homes on the market!

As the subprime mortgage crisis has spread into a housing crisis and slowing economy, serious economic spokespersons are now predicting the U.S. is slipping into an economic recession. Politicians from the Democratic and Republican parties have come together to offer a $150 billion stimulus package to ‘prevent’ or ’shorten’ the coming recession.

The collapse of the U.S. housing bubble has triggered an economic slowdown and the subprime finance crisis. These forces threaten a global financial crisis and a serious downturn in the world economy. "This is not a normal crisis", financier George Soros told the gloomy delegates attending this year's Davos forum of big business leaders. "We are at the end of an era of credit expansion…"

The contradictions in the U.S. economy and the world financial markets run deep, meaning that this downturn could be very sharp. For activists and socialists, this doesn’t just mean we need to get scared, it means we need to get organized.

The subprime mortgage crisis has detonated the recent convulsions in the financial sector internationally. But it is also leaving a trail of collateral damage in working-class communities across the U.S.

Serious commentators are now increasingly concerned about a recession in the U.S. and around the world. The U.S. ruling class will undoubtedly attempt to offload the crisis onto the working class.

The global capitalist economy has been hit by a major credit crunch. The collapse of the sub-prime mortgage business in the US, brought home by the collapse of two hedge funds managed by Bear Stearns investment bank, provoked panic on money markets. The effects have already spread much wider than the housing finance sector. As a result, there is a paralysis of inter-bank lending and a seizing up of big sections of the wholesale money market.

The global financial markets have been ridden with anxiety and turbulence for the past few months. The capitalists have watched horror-struck, fearing that their financial system could face a drastic fall like a house of cards collapsing.

Market mayhem has shattered the irrational confidence of the capitalist class and their belief the world was entering a new "super-cycle" of prolonged global expansion. As the Telegraph (London, August 19) warned, the world is still facing "the most serious financial crisis since global share prices collapsed back in 1987."

Mortgage loan companies and banks have made hundred of billions of dollars in profit by preying on people who would otherwise be shut out of the market. Lenders use these tricks with full knowledge that they are entrapping people into an endless cycle of debt.

Making promises of affordable, quick credit, payday lenders often prey on the most vulnerable of the working class, the poor, while thriving on their borrowers’ inability to repay the loan on time, thus creating a cycle of recurrent fees and debt. Socialist Alternative has started a campaign against these lenders in Tacoma.

The world capitalist economy has been buoyed up by a tide of liquidity, a flood of cheap credit. This has fuelled the frenzied financial speculation of the last few years, a profits bonanza for the super-rich. Underlying this, however, are unsustainable imbalances and deepening contradictions in world economic relations.