The British election campaign has reached its dramatic climax, with the third debate between the "major" party representatives, but the furor created by Gordon Brown’s confrontation with that "bigoted woman" who dared ask a question about immigration may have pulled the rug out from under the Labor party before the clash of the partisans was aired. In British politics, as in America, immigration is an issue that separates the elites from the hoi polloi: the former don’t want to talk about it, except to give reasons why it ought to be increased, and the latter deeply resent it, as the economy tanks and immigrants line up for welfare benefits. In hard times, when ordinary people are being squeezed, immigrants as scapegoats are a popular target, but Brown’s run-in with Gillian Duffy, the "bigoted" grandmother, underscored the arrogance not only of the British Prime Minister but of the elites he speaks for, who feel nothing but disdain for ordinary people as they struggle to survive in an era of diminished expectations. How dare Grandma Duffy ask such a politically incorrect question! Doesn’t she know the rules?
One candidate who is trying to appear as if he’s breaking those rules is Nick Clegg, the Liberal Democrat leader, who is supposed to represent "change." Yet he, Brown, and David Cameron, the Conservative, are all pretty much constrained by the straitened circumstances of the British state, which is drowning – like our own government – in an ocean of debt. All three are desperately seeking to cut corners and trim the British welfare state down to a manageable size, while facing the biggest economic crisis since the global depression of the 1930s. The best any of them can do is trim a little bit here, a bit more there, and hope for the best – as the economic contagion spreads throughout southern Europe, hitting Greece, Spain, and Portugal, and zeroing in on Italy.
It is the banking disease that’s hit the Euro-zone, and the scope of the bailouts being prepared is enormous, as governments try to prop up basically bankrupt institutions and get their economies moving again. The problem is that these "too big to fail" institutions are inherently insolvent, a condition that has eluded the Keynesians who control the policy levers: all they can think of doing, as shown during the debate, is to keep priming the pump, printing more government paper and calling it "money" in the hopes that no one will notice there’s nothing to back it up.
Yet the markets are indeed noticing, and the banking dominoes are all lined up, shivering and shuddering just as they’re about to fall. The Great Fall is coming, and the implosion of the Western banking system seems imminent, as the contagion threatens to spread and leap across the Atlantic to infect our own sick system of similarly "too big to fail" banking institutions.
Indeed, the banks were the focus of much of the debate, with only Clegg deviating in the slightest from the corporatist policies that created the crisis in the first place: the LibDems want to break up the big banks, and limit the financial compensation for the managers of these bailed-out "business" executives who are, for all intents and purposes, an arm of the government: no longer capitalists, in the classical sense, but managers of wealth they neither created nor increased.
In two essays published in the 1940s, George Orwell said of James Burnham that, like most intellectuals, he saw history as a grand schematic plan, and, because of this, projected the present onto the future, implicitly siding with whomever holds the reins at any particular moment and extrapolating their triumph as a matter of course. Yet Burnham, it seems, was dead right on the money, literally: projecting the growing power of governments over the economy and society, Burnham predicted the advent of what he called the "managerial society," [.pdf] in which the old capitalist class has been displaced by the avatars of modernity: the all-powerful managers. They aren’t creators, they’re accountants, the sort of people who manage other people’s money – and the sort of government officials who spend it.
These are often the same people, as we’ve seen most dramatically in the Obama administration, which is owned lock, stock and barrel by Goldman Sachs, the single biggest contributor to the Obama campaign and a major backer of the Democratic party. During the Bush years, perhaps a slightly different clique of CEOs were sitting at the control panel, alongside the "regulators" and the politicians, while sitting in the Big Chair is the main player at the table [.pdf]: the Federal Reserve. These folks preside over the economy like mad scientists sitting at a control panel, pushing a button that says "inflation," next to the one that says "war," alongside another marked "repression."
It’s all very "scientific," you see: they have the charts, and the PowerPoint presentations with unbelievably good graphics, to "prove" recovery is right around the corner, and the course set by our rulers is unalterable and inevitable. However, the corporatist model of this marvelous machinery doesn’t include a control marked "deflation" – in, say, Gordon Brown’s world, we can simply inflate our way out of the depression, and spend our way out of the economic quagmire he and his party have got the Brits stuck in.
The managers of Europe’s welfare states — and the super-state they’ve created in the EU – are facing an existential crisis, and, in Britain, at least, they have found their man of the moment in Clegg. His program of Liberal austerity is the American equivalent of a very moderate Republican of the sort that no longer seems to exist in the US. He doesn’t challenge the social democratic paradigm in any serious way, but merely seeks to create a more efficient welfare state with more modest imperialist aspirations. In short, he’s a manager for an imperial power slowly fading into the sunset, hoping – praying – for a soft landing.
This, at least, is what he’s promising, but in the case of Britain – and the rest of the West – that may no longer be possible. Clegg’s appeal is that he seems unafraid of the scale of the economic crisis, and tells people honestly that they’re going to be facing some painful times.
Brown, on the other hand, is an unapologetic dinosaur, and indeed has the look of one: he says the Brits must not "take money out of the economy" at such a crucial moment as this, but must wait for the economic malaise to somehow pass, as if it were an actual physical contagion. Yet the bankers disease that is decimating the world’s financial institutions is not as easily cured, or endured, as a case of the flu. What ails the managerial order that rose out of the ashes of World War II – an emerging corporatist system of giant cartels – is the economic equivalent of AIDS.
Brought on by a veritable orgy of promiscuous spending, conspicuous consumption, and obsessive-compulsive borrowing, the affliction spreading northward from the Mediterranean is more of a threat than the Spanish Armada ever was, and the British ruling class knows it. How to face this crisis is the central issue of the British election.
While Cameron seems to have a better understanding of economics, and the dynamics of actual wealth creation, his efforts to sell the "new" Tory party as a populist phenomenon is unlikely to give him a majority. I predict a LibDem-Conservative coalition, with Clegg at the helm, but with the Tories safely in control of foreign policy – the one area where Clegg breaks away from the pack.
It’s a good thing for the three main parties that the election is taking place at this particular moment, because if you’ll go here, you’ll see why, by this summer, the economic crisis may heat up considerably – perhaps to the point of international meltdown. As one financial analyst puts it:
"If we somehow make it past the money needs of Greece in April and May and that is a big if, the next significant money raise will need to be done by Italy… In addition to a sizable money raise in March, Italy needs to raise significant amounts of money in June. Don’t bet your house on this, even if it is underwater, but maybe the Italians can pull it off. Remember the head of Italy’s central bank, Mario Draghi, is a former Goldman man.
"Following the heavy Italian money needs comes Spain. Let’s put it this way about Spain, Spain does not have a ‘robust domestic banking system,’ where the money will come from."
Although the managers are hoping "the global economy will be out of recession by the time Spain needs to raise its money," our analyst, Robert Wenzel, of the Economic Policy Journal, avers "It won’t. The month of the Spanish money demands? July." And the contagion is spreading:
"Back on the domestic front, Los Angeles faces a budget shortfall of nearly a billion dollars. The first hurdle is a $200 million deficit that some how has to be funded. The month of this deficit? July.
"I repeat, the entire global government connected financial sector is teetering and could collapse at any time. But July seems to have more intense problems."
There is no button marked "deflation" on the managerial control board, but it is being pushed anyway – by the invisible hand of the market. There will come a time when not even such a master of evasion as Gordon Brown will be able to avoid acknowledging the futility of postponing the pain – not when the back of the world economy is broken.
I tend to view catastrophism with deep suspicion: after all, look what happened to the Seventh Day Adventists, and other religious cults that await The End. When it didn’t come they rationalized it away, and withered away into irrelevance. The problem is that the doomsayers are always too specific in their predictions of doom: the End, they claim, will come on such-and-such a day, in such-and-such a way, and of course no one can predict precisely when the crisis will culminate in an "event." What we do know is that the implosion of the West – detonated by governments in default and the collapse of the fractional reserve banking system – is only a matter of time.
You’ll recall that the old Soviet Union – once pictured as a mighty colossus threatening our freedom and our very lives – passed from the scene in a matter of months. First the satellites began to wobble, and fall to the ground, one by one, and then the contagion spread to the USSR itself, penetrating the heretofore impenetrable walls of the Kremlin and felling Lenin’s heirs. It was all over in a matter of little more than two years: the first cracks in the edifice appeared in 1989, and by August, 1991, the once mighty Soviet Empire was no more.
The ultimate irony is that the West, which claimed credit for the fall of the Soviet system, seems to be traveling down the same road, and at an equally rapid clip. How long after the Big Meltdown will the NATO-crats be forced to end their Afghan campaign? And what about the long-planned confrontation with Iran – is this to be put on the shelf?
The button marked "war" is one option for the managers: in wartime, privation is looked upon as a patriotic duty. In addition, war directs anger outward, rather than at those actually responsible for the pitiful condition in which the people find themselves. It acts as a social anesthetic, silencing the complaints of critics, and numbing our moral sensibilities. As the crisis deepens, militarism is the last resort of the Keynesians, who see war and preparations for war as just another jobs-making program, another way to keep the bubble from popping and the system intact.
So that’s what’s on the horizon: imminent economic calamity, rising social protest, and increasing prospects of a major war. Now, please, don’t let me ruin your day. Go about your business just as you would on any other day – walk the dog, feed the cat, tend to your garden — but just remember: you read it here first.