It began in September with the battle on the bailout plan in the House of Representatives. Right-wing Republicans like Jeb Hensarling from Texas declared the bailout to be the “slippery slope to socialism.” Not to be outdone, Senator Jim Bunning declared: “It is financial socialism and it’s un-American.”

According to Michael Moore, “The richest 400 Americans … own MORE than the bottom 150 million Americans combined…. Their combined net worth is $1.6 trillion. During the eight years of the Bush Administration, their wealth has increased by nearly $700 billion. Why don’t they just spend the money they made under Bush to bail themselves out? They’d still have nearly a trillion dollars left over to spread amongst themselves!” (michaelmoore.com, 10/1/08)

When discussing this economic crisis, we’re not just talking about GDP figures, housing bubbles, credit markets, and the Dow. We’re talking about people’s lives, about families and whole communities being devastated by home foreclosures, layoffs, cuts to wages and benefits, and budget cuts. We’re talking about a decline of living standards on a scale most of us have never seen.

In less than a year, the U.S. government has thrown over one trillion dollars at the big investment banks and insurance companies. Imagine that: one trillion dollars. It is hard to fathom. Twelve zeros after that one. $1,000,000,000,000. Count those zeros: twelve. That’s a lot of money.

After September 15, with the bankruptcy of the big investment bank, Lehman Brothers, the deepening crisis in the global financial system entered a new, more acute stage.

Every time working people, unions or community groups demand better wages, benefits or social services, these corporate politicians have told us: “We can’t afford it.” Now the government is authorizing $700 billion (possibly much more) to buy up the bad debts of Wall Street “banksters.” This money should instead be used to guarantee healthcare, housing, childcare, education, and a living wage for everyone.

As the US financial system has teetered on the brink of collapse, many people are focusing the blame on the Bush administration, and saying the crisis is a result of 8 years of Republican rule. However, the truth is that both Democrats and Republicans are responsible for this crisis.

After a week of economic and political turmoil, on Friday, October 3rd, Congress bowed down to Wall Street and passed the largest corporate welfare package in U.S. history. On top of the $700 billion package, Democrats agreed to add another $150 billion in tax cuts for the rich to secure more Republican support. Many lawmakers conceded this bill may only be the first installment in further attempts to make taxpayers and working people pay for Wall Street’s enormous gambling debts.

The world economy, already in turmoil from the credit crunch, was swept further into an abyss by the thunderbolt news that the US congress had rejected` a ‘blank cheque’ $700 billion bailout of failing banks. US government leaders and treasury chiefs had dramatically warned of dire consequences if the package was not passed, so the congress vote was followed by US stocks going into freefall, with shock reverberations worldwide.

The recent phase of accelerated globalization and unfettered neo-liberal policies is drawing to a close and an entirely new period of developments is opening. Massive state intervention in the finance sector has wider implications for trade, international currency flows, and industrial policy. There will be even deeper tensions between the major capitalist powers. Prolonged stagnation, punctuated by weak recoveries and renewed recession, will provoke social crises and mighty political struggles.

After a week of unprecedented economic and political turmoil, leaders of both political parties were stunned as their bi-partisan plan to bail out Wall Street at taxpayers expense went down in defeat on Monday. The vote is a huge defeat for the Wall Street elite and it deepens the political crisis in Washington.

“If Wall Street gets away with this, it will represent an historic swindle of the American public - all sugar for the villains, lasting pain and damage for the victims.” This is how William Greider described the Wall Street bailout.

The ultra-free market model of the Bush administration and governments around the world has revealed itself not just to be a disaster for the poor, which was always evident, but also a deadly threat to their own profit-crazy system. The significance of events in September 2008, when the global banking crisis entered a new critical phase, should not be underestimated.

The economic witch-doctors and soothsayers of capitalism were wrong and the socialists and Marxists were right. This is what the collapse of Lehman Brothers – the fourth largest investment bank in the world – means.