Newsnotes 2012 04

Notes On The News

by Gwydion M Williams

Milking Globalisation

Galloway Wins Bradford West

What Next? [the Myth of Crony Capitalism]


Milking Globalisation

“This budget carries a message not just about Britain’s relationship to the world, but also about the nature of its economy. When the government came to power in 2010, the wounds from the financial crisis were still raw. Politicians argued that Britain should try to wean itself off financial services and rediscover honest manufacturing and small- and medium-sized enterprise. Just a year ago, Mr Osborne was talking about a “march of the makers”. It was hoped that Britain would become rather like Germany, but with better restaurants. The rhetoric continues: there was lots of talk this week about helping small business. The budget sends a different signal…

“Britain is not Germany. Although its manufacturing sector is far from puny, it lacks a Mittelstand churning out high-value machine tools. Nor is it likely soon to develop one. What the country is good at is financial services and luring foreign investment: in short, milking globalisation. While insisting he is doing other things, Mr Osborne has quietly acknowledged Britain’s strengths and doubled down on them.

“It is a shame he could not say this. In his budget speech Mr Osborne mentioned financial services only to say that Britain needed other strings to its bow. And it is a shame, too, that other parts of the government’s programme undermine the country’s advantages. It is pursuing an immigration policy that makes it harder for bright people to come to Britain, and plans to withhold settlement and citizenship from many of those it does let in: an awful message. Its policy on Europe is a shambles that has strengthened the forces arrayed against free trade.”[1]

Thus spoke The Economist in an editorial after the recent budget. Its function is to give realistic descriptions of how the world works to the people currently running it. So you find the real beliefs of the ruling “1%”, without all the propaganda and flim-flam needed to get suitable governments elected by ordinary conservatives.

But this ruling 1% are only smart at milking the system to their own advantage. When they had a chance to turn Russia into a permanent ally, they bungled it by foolish policies that made Russia poorer than it had been in Soviet times, and then declared that the Russians should blame themselves. Even if it had been true the Russians should have blamed themselves for incorrectly applying ‘brilliant’ Western advice, it should also have been bloody obvious that they would not in fact blame themselves. Obvious that they would rally under some sort of anti-Western nationalism. All of the bitching about Putin’s recent re-election ignores the insignificance and unpopularity of Russia’s pro-Western liberals. The core of the anti-Putin protest was Russia’s Communist Party, though it also included some right-wing nationalists.

Britain is told to go on “milking globalisation”: we need not bother with making things that are actually useful to anyone.. But supposing the rest of the world objects to being treated as a ‘cash cow’?

Britain made a fatal false turn in the Victorian era, when the ruling class decided that it was easier to be imperial and dominant than to seriously modernise and learn science. They actually went backwards: the 18th century ruling class was interested in science and supported innovation and improvements in agriculture and communications. In the Victorian era they turned against that and took bits and pieces of the Roman Empire as their ideal. But they left out one element that might have saved the Empire: they shut out the non-white elites of the Indian sub-continent and of the other territories they ruled. In the 18th century, there was a lot of intermarriage between the overwhelmingly male community British in India and the old elite. This was very much in line with practice in the Roman Empire, which also let local elites be promoted to the Senatorial ruling class. But ordinary Britons never lost their racist attitude – didn’t lose it till maybe the 1970s. And when white women began arriving in the colonies in large numbers, an immensely dull, narrow and racist culture was imposed. Once this took hold, the eventual collapse of the Empire was almost certain.

John Stuart Mill is the most respected of the 19th century liberals. John Stuart Mill spent most of his working life as a well-paid employee the East India Company, though remaining in their London offices. This was a job he inherited from his father – he was gifted, but family connections counted for more. Mill could be very liberal and enlightened about matters that cost him nothing, such as slavery in North America. I don’t think he ever said anything significant about the domination of India’s ancient civilisation by a rigidly racist elite that supposed it could rule for ever.

The British Empire was doomed when it decided to exclude the non-white elite. The modern 1% is different: multi-racial and willing to incorporate anyone, though with a disproportionate number of white male Anglos. But it also operates in a very different world. The victories of socialism in the first three quarters of the 20th century still count for rather more than defeats of the final quarter. Besides, the rule of the 1% or Overclass has been very far from conservative. Most of what they’ve done had undermined the way of life of the people who vote for parties captured by the New Right. So far the dominant reaction has been the sort of attitude you get in the Daily Mail, “the country is going to the dogs”, but only further right-wing policies could fix it. The current set-up suits the people who own the Daily Mail, or who write for it or support it through advertising. The readership are a docile herd who are guided towards fairly harmless hatreds and resentments.

But the British ruling class has never been that smart, and nor are the current elite. This elite no longer claim a right to rule: they have declined into a mere Overclass that has to plead and persuade because it would no longer be trusted or obeyed. Clever on their home ground, they are also self-confidently ignorant when dealing with the wider world.

These are the people who decided in 1915 to carry on with the World War when Germany was quite willing to call it a stalemate and go back to the status quo of 1914. The same people who after winning the war decided on a peace that was severe enough to leave Germany resentful but not severe enough to make Germany helpless. They had the option of restoring the fragmented Germany that had existed up until 1870, but an unreasonable fear of French dominance persuaded them against this. And these same people were very tolerant of Hitler while he was weak and could have been easily stopped: the Daily Mail was among the appeasers. They then unexpectedly drew a line over Hitler’s attempts to make a final settlement with Poland, even though Hitler was willing to leave Poland in possession of territories that had an ethic-German majority. They started a war and then found it could only be won with the help of the Soviet Union, which they had viewed as a worse foe than Nazi Germany. The war left them discredited and dependent on the USA, which had a more substantial view of the world in those days, based on shared Christian values that were never openly questioned. It took until the 1970s for them to recover their confidence and operate as the British section of a global Overclass that pandered to everyone’s vanity and greed.

The relevance of all this history is that you’d not expect the current elite to react sensibly if their strategy of “milking globalisation” were doomed, and it does seem doomed. It’s unlikely that global trade connections as such will be rejected, but you now have the rising nations of BRIC and BASIC asserting their own right to protect their economies. The example of Japan must have been noticed: Japan accepted the Anglo version of globalisation in the 1980s and its spectacular economic rise turned to stagnation.

Britain is still a manufacturing power, inferior to Germany but not hopeless by world standards. A greater seriousness about manufacturing might recover some of the lost ground. We are also the home of the language of globalisation – Spanish and Mandarin Chinese might have more native speakers, but speakers of Spanish or Mandarin are almost certain to use English when talking to someone outside of their own linguistic group. The same applies to Hindus, Arabs, Germans etc. So Britain has global potential for a knowledge-based economy: most Britons are rather ignorant of foreign customs and preferences, but we are considerably less ignorant and self-confident than the USA. We have a grand potential there.

What has a doubtful future is the parasitic finance that has had an extraordinary growth since the rise of the New Right in the late 1970s. It’s really just gambling on a grand scale, no winners without losers and with a great deal of fraud and instability. If Britain were confined to genuinely useful financial services, there would never be enough of this to support the current enormous ‘finance industry. It is also in many cases outside British control: several long-standing British Building Societies transformed into banks, bankrupted themselves by foolish finance and are now owned by the Spanish-based Santander. You’ll see their name all over the main streets of a typical British town or city, often with multiple branches on top of each other from the different entities they swallowed. (Abbey National in 2004, Alliance & Leicester and Bradford & Bingley during the crisis of 2008.) A thinning-out of branches is likely to happen soon, and even those banks or building societies still owned by Britons have been regularly shedding staff and will continue to do so.


Galloway Wins Bradford West

Bradford West’s electorate is 42% Asian, not all of them Muslim.[2] So George Galloway’s unexpected election cannot be seen as just a protest by Asians at what Britain has done in the name of anti-terrorism. It must be part of the wider discontent.

Note that it has not just been a move by Labour voters to Respect and Galloway. The Tory result was even worse than Labour, if you look at number of votes each party got, compared to the General Election of 2010. The share of the electorate voting was down from 65% to 50%, so an average result would have been 80%. Labour hung on to only 45% of their voters from 2010, a pretty bad result. But the Liberal Democrats kept only 32%. The Tories kept only 22%, they were the biggest losers.

To be more exact, the result was:

2012 2010 Percent
Labour 8,201 18,401 44.57
Tories 2,746 12,638 21.73
Liberal Democrats 1,505 4,732 31.80

Respect leapt from an insignificant 1,245 in 2010 to 18,341, more than 50% of the votes cast.

Has it just been an isolated event? It’s possible, but also it could be that ordinary Britons are getting sick of the New Right vision that took over Toryism and now dominates the thinking of Labour

If the overseas Cash Cows start rebelling more against the current version of Globalisation, things might change very fast.

[Sadly, Galloway was not equal to the task. He quarrelled with members of his own party and failed to focus on the key issue of anti-Austerity.]


What Next? [the Myth of Crony Capitalism]

Now Galloway is back in Parliament, he should start hammering away at a demand to restore the Mixed Economy as the official economic wisdom. In real terms it has never gone away, but Thatcher and Reagan were successful with a demand to restore Primitive Capitalism, with a hope beyond that of running the economy on the basis of the Imaginary Capitalism of right-wing economic textbooks.

The Mixed Economy is a system whereby the state aims to dominate and regulate the economy, owning large chunks of it, while accepting that private businesses should flourish within this framework. Primitive Capitalism was the 19th century system whereby the state stuck to a narrow range of functions and let business do what it pleased within a loose framework of law, except where business people positively asked for regulation. Imaginary Capitalism is the system dreamed up by Adam Smith, whereby the state should do as little as possible and the world is supposed to consist of independent individuals who would each attend to their own selfish concerns, except when they chose to support private charities. The Primitive Capitalism of the 19th century tried to remould the flourishing Gentry-Capitalism of the original Industrial Revolution to this ideal, but never really succeeded.

The crisis of the 1930s convinced most people that Primitive Capitalism had outlived its usefulness. Parasitic finance and speculation was correctly blamed for the Great Slump, and for a long time it was curbed, with the Bretton Woods system of fixed exchange-rates tying all Western currencies to the US Dollar, which in turn was tied to gold. This was officially ended by Richard Nixon in 1971, when the dollar and many other currencies became free-floating. This had short-term benefits, but long-term costs that we are only now paying. There was also a general move to liberate finance, resulting in a gigantic growth of speculation and a shift in benefits to the rich.

The Mixed Economy never in fact ended, but in the West it became a kind of ‘Secret Vice’, the squalid reality behind the rhetoric of Imaginary Capitalism. This was never the case in the economies of the Asian Tigers, nor in People’s China when it opened up after Mao. All of them follow the rules of Mixed Economy, with China as the most regulated of all. But rather than being noted as proof of the merits of a Mixed Economy, it gets sneered at as Crony Capitalism.

So what is Crony Capitalism?

Having studied the matter, I’ve concluded that Crony Capitalism is ordinary routine capitalism when practiced by people you dislike or can’t get on with. The notion that personal contacts are less important in business in Britain or the USA than in the Republic of India or People’s China is simply nonsense. The big difference is that an Anglo business person will find it relatively easy to join such networks in another Anglo society, and may well have been born into them in their own society. In an unfamiliar society it will be hard to access such networks and probably impossibly to become fully a member. Naturally they complain to anyone who’ll listen, including authors and journalists who will repeat this viewpoint without noticing how subjective it is.

The 20th century’s most successful system was Mixed Economy, yet it has very few friends among economists or other intellectuals. Possibly this is because it tends to be pragmatic and offers few opportunities for grand theorising without reference to the specific realities of any particular industry. Yet it is the system that works in the long run.

Full state control of the economy can also work well, at least for a decade or three. Both Stalin’s Russia and China under Mao were highly successful in producing basic industrialisation in a largely agricultural economy, but there was trouble building on this and in fact a complete failure to move on in the Soviet Union. If one accepts the viewpoint of German economist Friedrich List, who wrote before Marx, then both Mao and Deng Xiaoping were right for their own era, while the post-Stalin leadership bungled their own transition in the 1960s and 1970s.

The Republic of India managed to industrialise an agricultural economy with its own version of a Mixed Economy, but actually at a much higher human cost. You hear much less about it because life was very much more congenial for middle-class intellectuals able to speak articulately in English and get through to a global audience. I’ve detailed before how at the end of Mao’s rule, China had a much stronger economy than India, and also a much higher life expectancy. Had China in 1949 somehow acquired a multi-party system and a successful economy – itself a pretty unlikely outcome – then there would have been considerably more premature deaths, even supposing that there would not have been the same sort of mistakes that happened in the Great Leap Forward.

Mao never put forward ‘Move Fast and Break Things’ as one of his slogans: that’s actually the philosophy behind the remarkable rise of Facebook.   But the general rule is the same: moving fast and accepting some failures is likely to work better overall than doing everything cautiously.

China would never have liberated itself without taking chances. The rise of the East Asian Tigers and India’s success might not have been allowed had the West not seen them as lesser threats than Global Communism. Cold War victory led to an attempt to win back North Atlantic dominance, one that is likely to end with ignominious defeat in Iraq and Afghanistan. But it seems unlikely to end without at least one more spasm of violence, perhaps a war against Iran.

North Atlantic dominance has been of benefit just to a small elite, not to the working mainstream. People should remember what Brooker T. Washington said: ‘you can’t hold a man down without staying down with him’. The US South, sadly, was sufficiently vain and narrow to choose to stay down rather than accept equality. Only during the Cold War were the pressures great enough for formal racism to be ended. Informal racism was then rescued by the US Republicans and their ‘Southern Strategy’ of picking up white racist voters for what became the New Right in the USA.

Hopefully Britain and the rest of Europe will be wiser.



[1] Economist, March 24th. []

[2] []

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