If the next two weeks fail to produce yet another astonishing change, we are on the verge of an Obama landslide that will also produce a Democratic landslide in the congressional elections. This will be not merely an electoral event but a watershed election, one of the infrequent but profoundly altering basic changes in American political history.

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Be patient, please. I am a history professor and this is an historical analysis, a useful terrain few journalists explore.

The resemblance of 2008 to the 1932 election is almost eerie. President Herbert Hoover, a true believer in laissez faire capitalism, had presided with almost complete passivity over the ever-deepening depression triggered by the 1929 stock market crash (when the Dow lost 87 per cent of its worth), and the ensuing industrial and banking catastrophe. Hoover had been preceded by 70 years of Republican hegemony, decades of wildfire capitalist development coursing along boom and bust cycles. Government had stayed clear of regulation while also handing out land and other resources to the private sector. The occasional Democratic president had played variations on Republican themes.

1932 changed everything. Franklin Roosevelt, a good-looking, pragmatic and centrist political figure swept to victory on the most vague of platforms. However, when he took power, he initiated the New Deal, massive government intervention in the financial sector of the economy, with macro-economic projects for the unemployed. Actually, the New Deal never ended the depression, but it gave people hope.

Previous age of liberalism

Also during the 1930s, John Maynard Keynes, an internationally influential British economist, developed a full theory of government intervention in the economy, including deficit financing during economic bad times and tight regulation of banking and finance. Whether this should be considered socialism or state capitalism is a matter of argument. The usual term applied was a "mixed economy." The ideology was "liberalism."

This political period lasted until either 1968 or 1980, depending on how you look at it.

When the Republicans returned to power in 1952, after 20 years in the wilderness, the Eisenhower administration endorsed rather than reversed Democratic governance using an economically engaged state. And then the Kennedy/Johnson years saw a revitalization of the activist state, with a serious War on Poverty producing a plethora of new federal institutions. Unfortunately, Lyndon Johnson sank his popularity with a shooting war in Asia, and anger with him and the Democrats produced Richard Nixon in 1968. While Nixon did not reverse every element of the Johnson policies, he ran against Washington and set the political ground for a reversal of the state interventionist policies that had been dominant since 1932.

Reagan and his Democrats

It was the election of Ronald Reagan in 1980, however, that proved to be the political and economic watershed. The state was the problem not the solution, Reagan urged with his actor's reassuring shuck and smile. The Republicans reversed the whole New Deal mentality, the belief in state action that had characterized American political life for nearly 50 years. Liberalism became a curse word; deregulation was going to free the marketplace to perform wonders of wealth-creation never seen before. Taxes were slashed for the very rich and for corporations. Wealth was redistributed upwards, reaching back to the salad days of the 1890s and the 1920s.

Bill Clinton signed on to this program, killing many more financial regulations and creating the housing program that has led to the current catastrophe. He was a Reagan Democrat, proving the hegemony of the Republican New Order.

Until the financial crisis that is now about a month old -- although it feels like a decade -- it had been unclear what the meaning would be of an Obama election. Clearly people are sick and tired of W, clearly McCain is a weak candidate, but Obama seems to be an instinctive centrist politician planning to reach across the aisle to introduce moderate reforms.

The coming veer to the left

It is the economic crisis that will make 2008 another watershed election. Circumstances will drive Obama and the Democratic congress to the left. An interventionist state is returning with a rush; Reaganite, anti-state, deregulated capitalism, it is now clear, is a catastrophe and a dead letter. A new era has begun.

This time the Republicans have adapted to the economic and political sea change even before they have left office. In dire straits, somewhat reluctantly following the British lead, the Goldman Sachs element of finance capitalism that runs the W. treasury has signed on to massive state intervention, and a bewildered Congress agreed. Henry Paulson et al are of course saving themselves through state intervention -- Keyensianism in the foxhole -- but such rapid reformulation of their self-interest proves my point.

Therefore when the Obama administration deepens this new departure, many influential elements of the Republican Party will not be able to rail against the state as the enemy and the Democrats as high spending state activists.

Conservatives for Obama

When Republican warhorses like George Will, Christopher Buckley, Colin Powell and the Chicago Tribune (for the first time in its 157 year history) endorse Obama, you can measure the depths of this adaptation to the emerging new political economy.

Moreover, unlike during the Great Depression, the world's major economies have all responded in coordinated fashion to the crisis in financial capitalism. Under European leadership, during the next year or two, we will see the development of an international system of financial regulation to respond to the ever-increasing internationalization of capitalism.

None of this was even vaguely plausible a month ago. Gordon Brown, who had presided over reckless British deregulation for a decade as Finance minister, suddenly rediscovered and enacted Keynesian interventionism. Along with Nicholas Sarkozy, the conservative French leader, Europeans are leading the charge for what the French president calls a New Capitalism. Bush, however reluctantly, is following along and will soon convene the first conference in the international reorganization of capitalism that will take months or years to institutionalize.

The meaning of 'change'

Barack Obama will preside over this change, and he will raise the taxes of the rich, punish a whole raft of corporate thieves, and begin a true national health care system. This will not be another Clintonian endorsement of Reaganism but a reversal of its premises and policies.

As for the Republicans, they will either follow the lead of the current shift in thinking and action initiated by the dying W. regime or they will regroup rightwards in reaction against the new internationalism that they will define as treason to American sovereignty and American world domination. With a charismatic leader -- NOT Sarah Palin -- they could become an even more dangerous assault army attacking the new political order that has just begun to emerge.

The alternative and more likely scenario, if history is any guide, is that Republicans will continue to seek the new centre, which has just jolted to the left.

We certainly live in amazing times. I am awe-struck by the suddenness of this fundamental economic and political re-orientation. And I am reassured by memories of what my father told me, that the depression he lived through was a very creative and exciting as well as dislocating and disheartening human experience. The next few years are likely to produce a deep recession, but the mechanisms for combating it are already being mobilized. In that sense the world's leaders have indeed learned from history that we are all in this together and that the people who play with our money need to be watched like hawks.

Barack Obama never has articulated exactly what he means by Change. History is doing it for him.

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