Obama's New New Deal and the Irreversible Crisis

Gregory Meyerson and Michael Joseph

The fortunes of the American economy have grown so alarming and the pace of the decline so swift that economists are now straining to describe where events are headed, dusting off a word that has not been indulged since the 1940s: depression. -- New York Times, February 28, 2009

It took only a month into his presidency for Barack Obama to demonstrate how he planned to deliver the nation from financial and economic crisis on the basis of a new New Deal. The audacious Obama managed a $787 billion stimulus package from Congress, issued the second installment of a bank bailout worth $350 billion, and promised that billions more would flow to US corporations. Then came the plea for hope in his first speech to Congress, a veritable call for national salvation, vowing that “we will rebuild, we will recover, and the United States of America will emerge stronger than before.” Two days later, the president served up his $3.6 trillion budget for fiscal year 2010, one that carries the largest deficits since World War II when measured as a share of gross domestic product.1

But the two paramount questions are: who will pay and will it work? Apart from measures to tax the wealthy and end several subsidies, both of which will bring inevitable floor fights and partisan compromises, there is little indication that anyone has determined who will pay for Obama’s “New Deal.” Here, we note the increasing anxiety about China’s willingness to continue funding America’s ballooning deficit by purchasing US Treasury bills. And the deficit is large: $1.75 trillion alone during the current fiscal year (ending September 30), which is four times the largest previous federal deficit. Even more astounding are the administration’s own figures, which put the combined deficit for 2009-2012 at $4.42 trillion; moreover, the government’s net debt over the same period – what it owes to individuals, businesses and foreign countries – will double from $5.3 trillion to $11 trillion.2

Meanwhile, there is no clear explanation of how all this deficit spending will actually trigger economic growth – especially worrisome given the quickening pace of decline.3 As David Harvey has pointed out, a stimulus program will not succeed unless it is accompanied by “sophisticated state planning plus an existing productive base that can take advantage of the new infrastructural configurations” – an option rendered more remote than ever by the neoliberal attack of the 1980s, which has made “the pursuit of a full-fledged Keynesian solution all but impossible in the United States.”4

For Harvey, the difference in material conditions between the 1930s and the present moment is enormous. Despite an orchestrated deflationary spiral and massive unemployment during the Great Depression, the productive base of the US economy remained intact.5 The economic and political conditions at all levels of US society are much less favorable for stimulus-induced recovery today than they were in the 1930s. This is a result of three interconnected components of the current crisis: (1) the financialization of the US economy, (2) US/China geopolitics as it affects funding of US debt, and (3) contradictions of Obama’s proposed “green new deal.”

The Limits of Keynesianism Then and Now and the Impact of Financialization

Let us begin by noting the standard Marxist point, recently admitted even by liberals like Paul Krugman, that the New Deal of the 1930s did not take the US out of the Great Depression – the war did. As Baran and Sweezy noted: “By 1939, it was becoming increasingly clear that liberal reform had sadly failed to rescue United States monopoly capitalism from its own self-destructive tendencies…. Then came the war and with it salvation. Government spending soared and unemployment plummeted.”6 This time around, by contrast, government spending has already soared, but in the context of multi-trillion dollar indebtedness, ongoing war, and unprecedented energy and ecological crises.

Shortly after Obama was elected, Paul Krugman warned him that the real danger with any new New Deal was to not spend enough. “My advice to the Obama people,” he wrote, “is to figure out how much they think the economy needs, then add 50 percent.”7 At the time, he showed no interest in considering the limits of spending in the context of skyrocketing national and international debt. A month after Obama was inaugurated, Krugman concluded that Obama’s stimulus plan would not work and suggested that we should be reconciled to a long drawn out recession/depression.8 A week later, he reaffirmed that the stimulus package was likely “too weak and too focused on tax cuts” but then praised Obama’s budget for setting America on “a fundamentally new course.”9

To Krugman’s left, Dean Baker, critiquing Obama’s pragmatism, has argued that legislation primarily substituting tax cuts for government spending will result in a weaker package that generates less economic growth and fewer jobs. Moreover, African Americans and Hispanics, he notes, will feel the effect disproportionately, experiencing “considerably higher rates of unemployment.”10 He does not address, however, the potential adverse ecological consequences of a revival of growth. He appears to want to return to the 1947-73 period in the US, the golden age of productive capitalism and strong unions, when we had a "virtuous circle," with "productivity gains passed on to workers in the form of wage growth" which "led to more consumption" which in turn encouraged more investment in plant and equipment, leading to increased productivity and further wage growth.11 Baker’s goal is to demonstrate how capitalism can pass beyond the booms and bubbles to that “broad prosperity” that doesn’t need bubbles in order to grow. In doing so, he ignores Marxist political economy: for example, Robert Brenner, who shows the crisis at the heart of the “broad prosperity” that motivated the neoliberal turn in the first place. There is no sense that the golden years contained the seeds of their own undoing in the form of profitability crises.12

Following the writers at Monthly Review, we think that the disastrous financialization that has led to the current deflationary spiral emerges from a deep stagnationist tendency in capitalism, not just from exogenous sources like bad money.13 As John Bellamy Foster and Fred Magdoff suggest, a Keynesian solution to our current problems is dubious because of massive US over-indebtedness: as the gap between the financial economy and real economy explodes, the increased debt has “less of a stimulating effect on the economy.” In the 1970s, every dollar of increased debt produced 60 cents of GDP growth whereas in the early years of this century, this ratio decreased to 20 cents on the dollar.14 They argue ultimately that financialization has gone so far and is so essential to monopoly capitalism that a return to so-called productive capitalism, via Keynes’ hoped for “euthanasia of the rentier,” can no longer occur.15 One might add to this David Harvey’s observation that a Keynesian turn has become “politically impossible,” as the working class is in no position to enforce a central pillar of Keynesianism – greater empowerment of labor.

The above-mentioned deflationary spiral can moreover easily whipsaw into a devastating hyperinflation and stagflation. Hyperinflation could occur for two reasons: flight from the dollar, and an increase in energy prices due to peak oil. Of course, we cannot say when these things will happen. As we will discuss below, China figures prominently in the first scenario. The emergence of the oil peak as a concrete force is also hard to assess, especially with the economic slowdown which lowers fossil fuel demand. Still, as James Kunstler has noted, our oil supply has depended more and more on “supplementals” – synthetics, heavy oil, etc., as the light sweet crude has gone flat at around 73 mbd, with such amounts almost sure to decline as depletion of major wells is proceeding more rapidly than discovery. Producing these supplementals requires a higher price of oil – ca. $70-80/barrel. With oil at around $40/barrel, the likely decline in oil production relative to 2008 could snuff out any emerging recovery. And should flight from the dollar converge with peak oil, energy prices would continue their ascent.16

China’s New Deal and its Implications for Sino-US Relations

China is positioning itself to engage in a round of Keynesiansim that more closely mimics America’s New Deal of the 1930s than does Obama’s new New Deal. Like FDR’s New Dealers, Chinese leadership has the resources to pay for it, relying on nearly $2 trillion in foreign reserves of which $660 billion is in dollars. Equally significant, China plans to commit its entire stimulus package of $580 billion for infrastructure, a move which for all practical purposes compels the development of its internal market. As Harvey now argues, China’s economic and political conditions make a full-fledged Keynesian solution possible, since it has both the means to engage in massive deficit-spending and a “centralized state-financial architecture” to implement and administer the process.” Thus, he notes, there exists

a strong predilection to undertake the massive infrastructural investments that are still lagging in China (whereas tax reductions have almost no political appeal). While some of these may turn into "white elephants," the likelihood is far less since there is still an immense amount of work to be done to integrate the Chinese national space and so to confront the problem of uneven geographical development between the coastal regions of high development and the impoverished interior provinces. The existence of an extensive though troubled industrial and manufacturing base in need of spatial rationalization, makes it more likely that the Chinese effort will fall into the category of productive state expenditures.17

This is terrible news for the Obama administration. The inward turn of Chinese development in the face of global economic crisis may enable China to replace the United States as the new engine of the world capitalist economy, the fulcrum of Harvey’s “tectonic shift.” But even if it lacks the power and resources to replace the United States as global hegemon, it could be a driving force toward a re-regionalization of the global economy – a serious threat to what remains of US global power as well as the global capitalist project itself.18

With China already holding $652.9 billion in US Treasury bills (as of October 2008), Obama has banked a US bailout on continued Chinese financing of America’s nearly $2 trillion deficit.19 Days before Obama’s inauguration, incoming Treasury Secretary Timothy Geithner told the Senate Finance Committee that Obama believed China was keeping its currency artificially low against the dollar.20 A month later, US Secretary of State Hillary Clinton concluded her Asian tour by issuing what amounted to a threat: keep up its purchases of US treasury notes or risk an even deeper economic crisis. Only a day earlier, however, China's foreign minister, Yang Jiechi, would not say whether Beijing would continue buying US notes. This may reflect increasing criticism of the government’s continued financing of US debt by Chinese economists, who warn that the deepening American crisis could result in a dollar depreciation and lower US bond value.21 Economist Michel Chossudovsky sums up the US situation, now warning of fiscal collapse given the shaky combination of “the largest budget deficit in US history coupled with the lowest interest rates in US history,” a situation not likely to ease China’s worries.22

In fact, in announcing its own fiscal stimulus plan, China has signaled less willingness to finance US debt.23 Since 2003, China has spent as much as one-seventh of its entire economic output buying foreign debt, mostly American, thus surpassing Japan as the largest overseas holder of Treasuries. But change is now afoot. Although the People’s Bank of China, the country’s central bank, says it will continue buying dollars, worsening economic conditions inside China will make that more difficult.24 Pieter Bottelier, in a long article on China’s unemployment problem, notes that China’s short-term economic health will depend on the success of its stimulus program in creating millions of new, non-agricultural jobs. If not, Bottelier estimates, non-agricultural unemployment could be as high as 33-42 million, or 7-8% of the non-agricultural labor force at the end of 2009.25 Along with the stimulus plan, Bottelier says, the Chinese government is preparing other measures to counter the sharp downturn, including easier access to finance for state-managed enterprises, increased expenditure on a wide range of social programs, encouraging state-owned enterprises to limit layoffs by accepting lower profits, and – despite US pressure – stopping further nominal yuan appreciation.

In an editorial in Peoples Daily (Feb. 5) Zuo Xiaolei, chief economist at Galaxy Securities, stated that China would take the global lead in achieving economic recovery. China’s “real economy” has remained strong, Zuo said; thus economic restoration will occur there rather than in developing a "virtual economy." Rapid economic expansion has led to growth in China’s fiscal revenue, resulting in continuous strengthening of the nation’s economic power. A savings rate of consistently over 40% has created abundant private resources.

China’s emergence as the hegemonic power in East Asia constitutes a significant threat to Pax Americana. The dangers for the US Empire are many, among them a potential trade war that portends a run on the dollar. This sort of hegemonic confrontation may also produce resource and proxy wars in Central Asia and, possibly, in Africa and parts of Latin America. Unlike the Cold War, where the Soviets were constantly playing catch-up, the United States finds itself at an increasing disadvantage in a zero sum game which will further drive its militaristic foreign policy – leading perhaps to greater militarization of the US domestic economy.

Energy, Ecology and the Limits of Capital

If war was the way out for the first Depression, war is here part of the problem – and more war would exacerbate the debt and push energy and ecological crises past their tipping points. In a recent powerful article, George Monbiot, noting that the climate crisis is a lot farther along than even the Inter-Governmental Panel on Climate Change has predicted, asserts that we have “one shot left,” an all-out global green technological mobilization that itself risks reaching climate tipping points due to its sheer magnitude.26

But this is where the centrality of the green vision associated with Obamism asserts itself with such seeming good fit. A utopian reading of the Obama policies would go something like this: Obama’s various stimulus packages and tax cuts lead to an explosion of green-collar jobs to build a new green infrastructure to power green growth both here and abroad. This green jobs program will be at the same time a powerful anti-racist, anti-poverty program – one that “includes every class under the sun and every color under the rainbow,” one that “lifts all boats.” It will solve the problem of deflation/stagnation and possible stagflation plaguing the economy. And it will solve the problem of global warming. To do this will require something akin to a “wartime mobilization”27 – which would eliminate the need for resource wars.

A “green” New Deal, however, can only be sustained if the economy is genuinely sustainable ecologically. Liberal optimists are banking on a green economy powered by non-nuclear renewable energy, which would in effect dematerialize the economy, allowing it to grow even while energy throughput diminishes. There is good reason to doubt that such a dematerialization is possible. To demonstrate this, we will examine the central contradictions disabling any US-led worldwide turn to green capitalism, and then explore the problems plaguing renewable technologies, especially under the capitalist-expansionist imperative. Finally, we consider whether a possible technological magic bullet, generation 4 nuclear power, could indeed square the circle.

We can understand the general problem with a green New Deal under debt-ridden US capitalism by looking at the problems with what is called the Kuznets curve. The theory is that early in their growth-curve, capitalist economies deplete the resource base and pollute the earth in ways disproportionate to their growth, but that at some point on the growth curve, due to modernization, dematerialization sets in. It then becomes possible to grow the economy while reducing energy throughput – a popular idea among green progressives. Thus, Arjun Makhijani, argues that with renewable energy plus energy efficiency measures, the economy can grow at a “healthy” 2-3% clip while reducing total energy throughput (and thus environmental impact) by 1% per year from now until 2050.28 His evidence for being able to do this is extremely thin – coming from individual company success stories. Yet despite widespread unit efficiencies, energy throughput has grown 30% in the US since the 1980s.

The reason may have to do with the Khazzoum-Brookes postulate that energy efficiency can increase energy use: you drive a lot more in your energy-efficient car; energy efficiency improves in the home while homes get larger and more are built. A new technology saves energy, but its introduction leads to a multiplication of uses so that the savings at unit level are neutralized, or utterly countered at the level of total use.29 In fact, with some exceptions (local air pollutants), the dematerialization curve simply never materializes.30

With respect to the central problem of decarbonization, Minqi Li has shown that the objective of climate stabilization is incompatible with “the endless expansion of the global capitalist economy.”31 He offers three growth scenarios for keeping emissions of carbon dioxide equivalent to 445-490 parts per million (notably higher than the 350 ppm of CO2 advocated by James Hansen, but in accord with IPCC recommendations for keeping global temperature-increases in the 2-2.4 degree range). To achieve the lower target, we would need to reduce global emissions 89% by 2050. For this scenario, Li builds in incredibly optimistic assumptions, including 100% decarbonization of the electrical grid. Even then, the world economy would have to contract by 0.7 percent annually. Given how capitalism operates in times of chronic contraction, this would likely result in war and social breakdown, which, as Monbiot suggests, would in turn negate any chance to roll back climate tipping points.

If the decarbonization scenario seems overly abstract, the problems become evident when we consider the liberal icons of renewable energy, wind and solar power. Solar and wind power are both diffuse and intermittent – forbidding technical problems in any society but especially under capitalist imperatives. Because of the diffuse aspect, the only way to get lots of such power is to use lots of space. In a capitalist economy growing exponentially, this means endlessly growing space on a finite planet!32

Wind farms will have to be properly integrated into the electrical grid. This will require money for DC cables for long distance transmission – thus lowering capacity further. Another forbidding problem is controlling electricity flow since wind power fluctuates and the grid can only handle relatively small variations in voltage without damage, leading to blackouts, which often take a day to restore. For example, with computers (all our power would presumably be digitized, smart power), “current flows” must be maintained “99.9999 percent of the time in order to avoid losing data” – according to the industry standard, “Blips as brief as one-sixtieth of a second can zap computers and other electronic gear and blackouts can be catastrophic.”33

How will we produce these millions of turbines? Wind turbines need large amounts of concrete and high alloy steel. In fact, contra anti-nuclear mythology, wind power uses seven to ten times the concrete and steel needed for generation 1 nuclear plants producing the same amount of power – and generation 4 plants should use less concrete and steel than generation 1.34 There are further problems since high alloy steel for the turbines requires high energy plasma arc technology that would be hard to power at scale, perhaps impossible, with low energy intensity technology. While wind power is often thought to be cheap, it is not cheap at the level of upfront construction costs per gigawatt. In fact, T. Boone Pickens’ plan to build the largest Texas windfarm has been placed on hold due to costs which Tom Blees calculates, when connection to grid is factored in along with real production figures (as opposed to nameplate capacity), at an astounding $15 billion per gigawatt, far higher than estimates based on rosy and totally unrealistic assumptions.35

Solar has similar problems with intermittency and land use. The solar grand plan featured in Scientific American would claim to provide 69% of our electricity (current amount) by 2050, but it would require covering three states to do this – 30,000 sq. miles of solar panels. Blees notes that covering 10,000 square miles with panels (the area of Vermont) would cost about $2 trillion, not including upgrades to the grid or maintenance costs. Of the Scientific American plan, he notes that a system like this would require “completely covering 2 square miles per day every day for over forty years.”36 And there are additional problems. Solar arrays are usually and sensibly sited in deserts. There’s more sun in deserts. But there’s also corrosive sand, and the arrays need to be kept very clean or they will lose efficiency. They thus require constant pressure washing and this means lots of water, which would have to be transported to and across the deserts. Many commentators have noted that the coming resource wars would be fought over not just fossil fuels but water, especially fresh water. If desalination is factored in, the costs soar as this is a very expensive and high-energy process all the more difficult to accomplish with diffuse power. The point is that material production and reproduction problems are forbidding under a growth economy. And we have not even addressed global transport. Those who blithely assert that we “could” power our cars with hydrogen produced from solar powered electrolysis have not thought through the numbers.37

What then can be the power-basis for green capitalism if wind and solar power are insufficient? What about a nuclear renaissance, a green nuclear deal? We believe that a program to build generation 4 nuclear reactors – should the US somehow be able to solve the debt problem – is the most plausible form a green New Deal could take. But, we argue, that won’t work either.

The most detailed plan along these lines is that of Tom Blees in his book Prescription for the Planet. Blees’ plan, built around generation 4 nuclear technology, boron fuel, and plasma converters, could, if combined with some sci fi sounding carbon reduction programs like terraforming, meet James Hansen’s goal to reduce emissions to 350 ppm, and Hansen himself has responded by calling for the immediate building of integral fast reactors (IFR).38 These reactors are much different from the light water reactors that dominate the scene today, and their feasibility was close to fully demonstrated when the IFR program was shut down in the mid 1990s. Nearly all of the technical and safety related problems associated with earlier nuclear power are solved by IFRs. Their passive safety features include metal fuel (the molecular composition prevents overheating), sodium pool and sodium coolant at atmospheric pressure (rendering any explosive high-pressure meltdown impossible), and an argon blanket as well as a stainless steel core (nonreactive with sodium) to prevent any air/sodium mix leading to fires. The system was tested for both Chernobyl and Three Mile Island type scenarios and the reactors passively shut down in both cases. In addition, IFRs could play a central role in anti-proliferation efforts since they eat weaponized waste, fuel from water reactors, and depleted uranium, and they utilize an on site a pyroprocessing method that renders the nuclear fuel impossible to weaponize. The efficiency in their use of materials is so great, according to Hansen, that there would be no need for uranium mining and milling for a couple hundred years.

Blees, using very conservative assumptions, costs the IFR at $2 billion per gigawatt. Modular design and Euro or Japan style regulations could bring the cost of the Prism reactor (the IFR designed by GE and ready to build) to $1.3 billion/GW. Needless to say, this evaluation of nuclear could not be more at odds with critics like Helen Caldicott. One should read both Caldicott and Blees to make up one’s own mind. In our view, Caldicott’s claims about fast reactors amount to propaganda.39

Blees insists that this program could only be undertaken by global, public, and democratic institutions. In other words, profit would be taken out of energy policy and a global energy democracy would have to be promoted through a type of organization Blees refers to as GREAT (Global Rescue Energy Alliance Trust) – a task that is compatible with capitalism, he argues, however highly regulated. And this is of course where we as Marxists disagree most with Blees’ ideas. Just as Li argues that the various decarbonization scenarios would require capitalists to act in ways unlike anything suggested in their history, so our great leaders would have to develop and share technologies fast, with full public accountability – something capitalism has never done and we would argue cannot do and still remain capitalist.

Though we think Li is unconvincing in his assertions about technical obstacles to decarbonization (he understandably does not know about the IFR) and even about transport fuel (he does not know about boron), he does understand capitalism and its imperatives very well. He notes that even if many energy-efficient technologies (along with boron fuel, IFRs and plasma converters, we would add) “become available right away, their application will be delayed by the inherent obstacles to technological diffusion under the capitalist system.”40 Any energy democracy would have to overcome this intrinsic property of capitalism, which is part of the general problem of coordination under the anarchy of capitalist production. Blees’ plan is less akin to energy democracy than to superimperialism. It is hard for us to see this as embodying the shift in class power that would be needed in order to serve the interest of humanity as a whole.

The Crisis and Limits of State Capitalism

We have approached the economic crisis from several vantage points in order to demonstrate the interconnectedness between capitalist contradictions, the inadequacy of Obama’s stimulus package, the deepening problems in US-China relations, and the improbability of green capitalism. The long dance between China and the United States seems to be at an end: their double-digit economic growth financed by our increasing indebtedness, and their financing of our debt by buying US T-bills. Everything now points to increasing friction. On the energy and ecology front, without something like the integral fast reactor (at once highly energy-intensive and renewable), global capitalism seems unlikely to surmount current energy constraints (especially around transportation). Resource wars and trade wars of an increasingly zero sum character seem more likely, with US debt explosion/peak oil and ecological tipping points leading to an implosion of systemic contradictions. On the other hand, if the fast reactor technology were to pan out, there would likely be a race to develop it first. It would not be shared, but hoarded, and the massive state discipline needed to whip the respective populations into shape – especially in the US – might itself be a form of fascism, not a new green deal.

These speculations lead us to reevaluate the meaning of state capitalism. If the crisis of US capitalism is irreversible, then so also is the crisis of US state power, i.e., of so-called bourgeois democracy. Monopoly capitalism/imperialism put an end to the ideal bourgeois state in which the political and the economic reside in separate spheres. State power is now gradually taking control of all spheres of private production. This brings closure to a process that began with the rise of Pax Americana at the start of the 20th century. Now the crisis of Pax Americana has changed the way in which bourgeois state power is exercised. This brings to mind Ernest Mandel’s comment that in the era of late capitalism, “the greater the intervention of the state in the capitalist economic system, the clearer does it become that this system is afflicted with an incurable malady.”41 Mandel saw the hypertrophy of state power as inevitable and necessary for capital while at the same time creating “new contradictions for it.” From the standpoint of capital’s needs, nationalization only makes sense for the bourgeoisie if it leads “to a stabilization, and if possible to an increase, in the profits of private capital.” At the same time, efforts to increase state expenditures must not be allowed to create “a long-term reduction in the rate of surplus value or to threaten the valorization of capital,” since the “ideal budget is one that generates surplus value and profit.”42

Here is where new contradictions emerge. Even in periods of apparent normality, state expenditures must always ensure that capitalist profits are maximized, which means that the horizontal redistribution of surplus value must be minimized. However, when objective conditions change, so does the range of functions that make up state power. For Mandel, the “end of the long wave of rapid growth” marked the changing conditions that resulted in “the endemic financial crisis of the late capitalist State.”43 With this endemic financial crisis now hard upon us, the aforementioned geopolitical battle over an accumulation-shaping energy technology could lead to more militarism and war, with the winner able then to take the advantage afforded by hegemony over the new technologies. Fascism might both emerge and intensify in this cauldron,44 especially in a context where the attempt to solve the climate crisis was for all practical purposes halted for the sake of a new energy hegemony.

While liberals hope to avoid resource wars by going green, the nuclear power option under present-day capitalism – whether US or Chinese – might open up new regimes of accumulation, but only on a cooking planet. This prospect heightens the stakes of class struggle, making a socialist moment all the more vital.


1. New York Times, February 27, 2009.

2. Patrick Manning, “Obama budget projects record deficits and borrowing,” Feb. 27, 2009 www.wsws.org. Manning adds: “The ten-year budget projection, covering the years 2010 to 2019, shows the annual deficit declining to $533 billion in fiscal 2013 – still larger than any previous year before the crash of 2008 – and then beginning to rise again. By 2019, the US national debt is estimated at $13.8 trillion, a sum equivalent to the entire US Gross Domestic Product last year.”

3. The latest Commerce Department figures show that the economy contracted at an annualized rate of 6.2% in the last quarter of 2008, the sharpest quarterly decline since 1982.

4. David Harvey, “Why the US Stimulus Package Is Bound To Fail,” www.marxmail.org.

5. Students of the current crisis would be well served by revisiting Lewis Corey’s highly informative Depression-era work, The Decline of American Capitalism (New York: Covici-Friede, 1934). Among other salient points, Corey demonstrates how the restriction of production, which is always relative under capitalism, becomes absolute in the epoch of capitalist decline. Unlike the crisis of overproduction that defined the deepening of the Great Depression, the current crisis stems from the long-term impact of financialization and deindustrialization, which has systematically decimated the real, productive economy.

6. Paul A. Baran and Paul M. Sweezy, Monopoly Capital (New York: Monthly Review Press, 1966), 175.

7. New York Times, November 10, 2008.

8. New York Times, February 20, 2009.

9. New York Times, February 27, 2009.

10. Dean Baker, “Spending Versus Tax Cuts: Who Pays the Cost of Political Compromise?” Center for Economic and Policy Research January 2009, www.cepr.net/documents/publications/2009-01-Spending-Vs-Tax-Cuts.pdf.

11. Dean Baker, Plunder and Blunder: The Rise and Fall of the Bubble Economy (Sausalito, CA: PoliPoint Press, 2009), 6f.

12. See Robert Brenner, The Economics of Global Turbulence: The Advanced Capitalist Economies from Long Boom to Long Downturn, 1945-2005 (London & New York: Verso, 2006), 97-143.

13. John Bellamy Foster and Fred Magdoff, The Great Financial Crisis: Causes and Consequences (New York: Monthly Review Press, 2009), 116.

14. Ibid., 48f.

15. Ibid., 139.

16. See Kunstler’s blog, Clusterfuck Nation, at http://jameshowardkunstler.typepad.com/

17. Harvey, “Why the US Stimulus Package Is Bound to Fail” (note 4).

18. For a more detailed elaboration of this position, see Giovanni Arrighi, Adam Smith in Beijing: Lineages of the Twenty-First Century (New York: Verso, 2008). Arrighi, it should be noted, differs from Harvey and Foster in that he sees the China developmental model as a rival but a non-imperialist rival. Leo Panitch disagrees with this basic position, arguing that US hegemony is relatively secure and that, even with all its debt, it is still the safest place for global capital (Panitch interview: www.creative-i.info/?p=4735). For an argument that the US is declining but China lacks the wherewithal to become a new hegemon, thus leaving the globe without hegemon, see Minqi Li, The Rise of China and the Demise of the World Capitalist Economy (New York: Monthly Review Press, 2009).

19. Obama failed to heed the warning of a top Chinese official who had advised the United States in December: "Be nice to the countries that lend you money." Gregory Chin and Eric Helleiner, “Calling China’s Bluff,” January 2009, www.ForeignPolicy.org

20. New York Times, January 23, 2009.

21. Bill Van Auken, “Hillary Clinton presses China to keep buying US debt,” February 24, 2009, www.wsws.org

22. Michel Chossudovsky, “America’s Fiscal Collapse,” www.globalresearch.ca/index.php?context=va&aid=12517

23. New York Times, January 8, 2009.

24. Finance Minister Xie Xuren warned that a 3% decline in revenue would make 2009 “a difficult fiscal year,” likely further slowing overall accumulation of foreign Treasury notes. For details on the precipitous drop in direct foreign investment, housing bust, the drastic decline in value of Chinese stocks, and the cutback in US demand for Chinese imports – all of which necessitate a Chinese stimulus plan, see New York Times, January 1 and 23, 2009.

25. Pieter Bottelier, “China’s Economic Downturn: Employment is The Critical Issue,” China Brief, Volume 9, Issue 3, February 4, 2009.

26. See George Monbiot, “One Shot Left,” The Guardian, November 25, 2008.

27. Van Jones, The Green Collar Economy: How One Solution Can Fix Our Two Biggest Problems (New York: HarperCollins, 2008), 6.

28. Arjun Makhijani, Carbon-Free and Nuclear-Free: A Roadmap for US Energy Policy (Takoma Park, MD: IEER Press, 2007).

29. See Monbiot, Heat: How to Stop the Planet from Burning (Cambridge, MA: South End Press, 2009), 61, and Peter W. Huber & Mark P. Mills, The Bottomless Well (New York: Basic Books, 2006), ch. 7.

30. James Gustave Speth, The Bridge at the Edge of the World: Capitalism, the Environment, and Crossing from Crisis to Sustainability (New Haven: Yale University Press, 2009), 56f. We would note that the mere fact that China and India are presumably still progressing up the curve could mean, given time constraints, that the world could not avert the climate crisis even were the curve correct.

31. Minqi Li, “Climate Change, Limits to Growth, and the Imperative for Socialism” Monthly Review, July/August 2008, 59.

32. To give the reader a sense of these requirements: In 2004, the US used on average 3.35 TW of power. How many large windfarms would it take to produce this kind of power, and how much space would it require? The largest US windfarm, Horse Hollow Wind Energy Center in Texas, has a 730 MW nameplate capacity. But this number is misleading since wind (unlike nuclear) does not produce at anything resembling full capacity (and of course the wind does not blow all the time); 20% capacity is a reasonable number. To power the US economy on wind would require (putting aside other logistical problems) about 4 million sq km, more than all US farmland. David Mackay, in Sustainable Energy: Without the Hot Air (Cambridge: UIT, 2009), has noted that wind power uses 500 times as much space as nuclear per unit of energy (167). Defenders of wind will note that this large amount of space does not preclude other activities, like farming around the turbines, but an expanding economy will nonetheless eventually set space-limits. The problem of intermittency is equally intractable; mere geographical distribution cannot assure that missing wind power will be offset by an equivalent amount elsewhere.

33. William Tucker, Terrestrial Energy (Savage, MD: Bartleby Press, 2008), 158f.

34. Mackay, Sustainable Energy, 62.

35. Tom Blees, Prescription for the Planet (Amazon: Surge Press, 2008), 75.

36.Ibid., 68f.

37. On a recent Booknotes, Van Jones responded to an audience member worried about a nuclear renaissance by saying that nuclear power took up too much space, and that in a given space, you could get the same amount of solar power. His facts are off, however, by about a factor of 20! Solar One, the solar farm in Nevada, produces, on about the land for a modern nuclear power plant, 64 MW of power compared to 1 GW nuclear. In his book, Jones also refers to the mythical “tons” of CO2 emitted in the nuclear production process without mentioning the far greater number of “tons” emitted in construction of wind. Fred Krupp and Miriam Horn suggest, in Earth: the Sequel (New York: Norton, 2008), 149, citing the National Renewables Energy Laboratory, that geothermal could provide up to 20% of US power by 2025. But Mackay shows that with geothermal, “the speed at which heat travels through solid rock limits the rate at which heat can sustainably be sucked out of the earth’s red-hot interior.” What this means is that with pumps sunk at the ideal levels all around the globe, geothermal could sustainably produce about 2 KWH/Person/day, about .08% of current US energy requirements (Sustainable Energy, 96). For problems running a hydrogen economy using solar power, see David Strahan, The Last Energy Shock (London: John Murray, 2007), 95f.

38. Hansen notes that “it is essential that dogmatic ‘environmentalists,’ opposed to all nuclear power, not be allowed to delay the R&D on 4th generation nuclear power.” See James Hansen’s letter to Obama, “Tell Barack Obama the Truth – the Whole Truth,” www.columbia.edu/~jeh1/mailings/20081121_Obama.pdf

39. See Helen Caldicott, Nuclear Power Is Not the Answer (New York: Norton, 2006), 121-30. According to Blees, we could even run our cars safely – on boron, and utilize syngas produced from the plasma conversion of our waste as fuel for high energy industrial processes. Even without the boron, the production of electric cars, which Li figured would take decades, would be much sped up with a crash program to build the IFR.

40. Li, “Climate Change…” (note 31), 61.

41. Ernest Mandel, Late Capitalism (London: NLB, 1975), 486.

42. Ibid.

43. Ibid., 489.

44. Gregory Meyerson and Michael Joseph Roberto, “It Could Happen Here,” October 2006, www.monthlyreview.org/1006meyerson.htm