[Editor's note: Radically-minded types might dismiss this article because its author is an employee of the pro-imperialist Council on Foreign Relations or because it appeared in the pro-capitalist UAW magazine. SeeingRed thinks, rather, that it's compelling for exactly those reasons.]

The global economic crisis of 1997-98 is indeed a historic event. If there were an Economics Channel as there is a Weather Channel, frenetic newscasters would be interrupting regular programming right now to give us hourly updates on something they would be calling the storm of the century, an economic cataclysm as big as or bigger than the Great Depression of the thirtiies. The behavior of economic storms is as hard to predict as the course of a hurricane. Still, this storm already has a track record, and it's pretty damned chilling.

If it Reaches the U.S., Watch Out If, God forbid, it reaches the United States, watch out. In a blow like this, stock prices could easily fall by two thirds-- that's 6,000 points on the Dow -- and it could take stocks a decade or more to recover.

In a real meltdown, the damage wouldn't be limited to the financial markets. Housing prices would plummet, leaving millions of highly leveraged home and apartment owners sitting on mortgages that are worth far more than their homes. Millions of people would lose their jobs, and tens of millions more would watch their wages drop as employers frantically tried to cut back their payrolls. Many cities would face bankruptcy as their tax revenues collapsed. All these things and more have already happened in many countries around the world. Thailand, Indonesia, Malaysia,South Korea, Japan, Vietnam, Russia, South Africa -- stock markets in these countries have fallen by as much as 90 percent, unemployment rates are exploding, and countless people face the loss of their businesses, jobs, and homes. Even starvation.

We put our confidence in two basic ideas that turned out tobe wrong. The first is that rapid deregulation of the international financial system would promote growth without creating dangerous financial crises. The second idea is that the export-oriented development model pioneered by Japan, Taiwan, and South Korea would keep working forever. In fact, that economic strategy hit a wall ten years ago.

After World War II, it was necessary to rebuild the international financial system from scratch, and the architects of the system believed that the price of regulation -- slower growth, economic inefficiency -- was worth paying. Anything to prevent another depression and to reduce the risk of new wars. But as the memory of the Depression gradually faded, a shift in economic opinion occurred.

A largely unregulated international financial market was reborn in the late sixties, and gradually the entire system of capital controls, fixed currency rates, and other international regulations faded away.

Amazingly, as the regulations came off, we began once again to experience the kind of turmoil in capital markets that had been common before the thirties. The long period of American expansion is probably over. The Asian crisis could give the old bull one more run as Japanese capital flees that country's troubled banks and stock marketst o seek refuge in the United States. When that happens, watch out. Mass Japanese movement toward the U.S. market could be the trigger that first pushes theDow up to genuinely insane levels, and then causes a long-overdue -- and long-term -- crash.

If our currency collapses in the midst of the crisis, look for a global depression on the scale of the one in the 1930s.And a major war is more than likely to follow.

The Real Worries Are Elsewhere

But enough about us. The real worries are elsewhere -- in, for example, China and Russia, two nuclear powers that hadtheir doubts about the world system even before the globa leconomic crisis threatened to crush them both.

Few Americans understand just how explosive the situation in China is. State- owned rust-bucket industries from Maoist times are slowly collapsing, putting heavy demands on the national treasury. If these industries lay off workers faster than the private economy can find them jobs, China faces mass unrest in the big cities.

The current round of global economic trouble couldn't have come at a worse time for Russia. Since the end of the cold war, Western policy toward Russia has been a textbook case in how to drive a people to fascism.

At mid-century, Americans were sobered and seasoned by the terrible threats they had grown up with: the Depression, followed by the Second World War, followed by Stalin's quest to extend his totalitarian control throughout Europe. They looked back on the 1920s with bitterness -- as a time when a careless and superficial generation neglected its responsibilities and squandered the opportunity to build a real peace.

This will likely be the way that future Americans look back at the nineties. We ignored the lessons of history, danced on the boneyard of the twentieth century, and acted as if we were invulnerable, as if history could never touch us.

History isn't over, we are going to discover.

History is back.

And it's hungry.

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Walter Russell Mead, author and political economist, is the Senior Fellow for Foreign Policy at the Council on Foreign Relations.His first book was Mortal Splendor: The American Empire in Transition.

[The monthly magazine Solidarity can be found at /www.UAW.com]

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