Back to the future.

When Franklin D. Roosevelt ran for president in 1932, he complained that the profligate spending of his Republican opponent, Herbert Hoover, had deepened the Depression. Even as late as 1937, this great liberal still argued for budget cuts on the assumption that free markets would eventually guarantee full employment. If people can't get jobs, the ruling-class wisdom of the day went, perhaps they aren't trying hard enough.

It took a decade of depression, followed by the massive military spending of World War II, to vitiate this logic. But old ghosts die hard. The slow economic growth of the last two decades has led to the resurrection of a traditional economic conservatism that hasn't been seen since the 1920s.

Twenties conservatism began its official comeback when Ronald Reagan busted the air-traffic-controllers' union and continued as the use of permanent replacement workers became almost the norm. Now, conservatives are talking about the need to repeal the minimum wage, claiming that, like rigid union wages and rules, the minimum wage costs jobs - especially to foreign competition. Thus, eliminating the minimum wage would create new jobs.

Labor markets, however, differ in major ways from other markets. If millions of blue-collar workers suddenly agree to work for three dollars an hour, they may in fact get jobs - in part by displacing those workers earning ten dollars or more. But those higher wages are also the largest part of the consumer demand which creates the need for workers in the first place. Cutting wages may help profits go up in the short term, but in the long term the displaced or impoverished workers will not be able to afford the goods that are being produced, thus destroying consumer demand and (eventually) corporate profitability. This was how the Depression started.

No unregulated market economy has ever produced full employment for any extended period of time. Since the thirties, every major capitalist democracy has had to intervene in markets through government deficits, which directly and indirectly create jobs and keep wages high, and through taxes, labor protection, and income-support policies, which prevent extreme economic inequalities. Far from drowning the private sector, these policies have created demand for unused human and capital resources and led to increased private saving and investment. National debts and stronger economies have grown together. Good wages also assure a modicum of labor peace.

Economic and political structures are undergoing a sea change today - one with potentially ominous consequences. Modern technologies have made it easier not only to trade goods and services but to move whole productive processes, including management systems, anywhere in the world. Even before "free trade," nations with economic inequalities and repressive labor practices were being brought into the trading systems, often as part of a corporate strategy to contain costs.

Justifiably, many of today's workers want more than good wages; they want some say in how their businesses are run, and a life that includes some time away from their jobs. These are rights that some Western European laborers have gained during the last 30 years. Productivity in the United States, however, has slackened considerably in the last 25 years, and wage growth has been constrained by competition from low, wage havens and more innovative foreign workplaces.

These changes have created the political context for a wide-ranging assault on labor. Minimum wages, unions, and government spending are all to be rolled back. Unleashing the "free" market, we are told, will make us prosperous once again and more competitive in the international economy.

Free trade, of course, encourages competition from unregulated low-wage havens. And while business protests any government interference with the market, it also insists that "free trade" include iron-clad (and government-backed) guarantees of intellectual and other forms of property rights.

These trends are eerily reminiscent of the 1920s. The ability of businesses to reap large profits grows, while labor law, trade treaties, tax and minimum-wage "reform" all undermine the ability of workers to keep much of what their labor produces. The new nations we bring into the trade equation have enormous pools of unemployed workers, assuring that wages worldwide will go down. In such a climate, government spending by a large and still powerful economy like the United States could do some good (even though, as things stand now, ever more of our spending actually creates jobs in these low-wage havens).

As if this picture weren't already grim enough, American conservatives propose to add one more element to the mix. They wish to write this classical conservatism into the very fabric of the Constitution, assuring that, if the concentration of wealth does lead to diminished purchasing power and growing unemployment (as it inevitably will), government must sit idly by. If a major recession starts to trigger increasing layoffs, decreasing government revenues, and further slashes in government spending, a real downward spiral could start. While some balanced-budget amendment proposals do, in fact, allow deficit-spending if national emergencies are voted by super majorities, how long would it take to get those majorities in a political climate increasingly dominated by 1920s-style conservatism?

Progressives must push to retain the deficit tool, imperfect as it is. Government spending is often the only way not only to avoid economic collapse but to hire minorities and provide those social goods which markets will never finance - such as education, basic research, and public-health programs. Even in a prosperous economy, it is not reasonable to pay for such long-term benefits out of current income, and in a sagging economy, the needs of the poor and of future generations will be completely put aside.

Just as importantly, these tools need to be extended to our international economy. Labor protection and minimum-wage standards pegged to the productivity of each nation are just as vital a part of trade treaties as intellectual property rights. An international development bank, financed by all major industrial nations, should have some responsibility for helping developing nations improve their technologies (and thus the productivity and wages of their workers). These reforms would build wages worldwide and assure that the United States no longer had sole responsibility to float the world economy in times of stress.

And just as corporate profits in the long term require well-paid labor, long-term productivity now depends on making the best use of workers' skills. This entails protection for and encouragement of a union movement which can provide workers with an opportunity to share profits and participate in product planning and broader financial decisions. Outlawing forced overtime would also create jobs and improve the quality of both work and family life. Sharing power and improving the quality of workers' lives will turn out to be as good for the society as a whole as sharing the economic fruits of technology was in the 1950s and 1960s.

Progressives must advocate preservation and extension of economic democracy even in the present conservative climate. Without an alternative perspective, hard times and a government reluctant to create new jobs will surely leave a climate in which more xenophobic and repressive responses to economic decline will become popular. California's Proposition 187 is only the beginning. If left unresolved, our economic difficulties may once again be resolved only through the ultimate experiment in deficit financing - war.

John Buell is a freelance writer living in Southwest Harbor, Maine. He is author of Democracy by Other Means: The Politics of Work, Leisure, and Environment, which will be published by the University of Illinois Press this fall.