Notes On The News
by Gwydion M Williams
The most deregulated financial markets since the 1930s have led to the biggest economic crisis since the 1930s. Coincidental?
The specifics of the crash were unexpected. The basics were obvious. ‘Financial Services’ cannot create new wealth, unless it channels venture capital to useful industries . Or unless it lowers the transaction costs for buying or selling stuff that people actually use: but transactions based on need have been completely overshadowed by the incestuous breeding of money with money. They’ve done for banking, what Al Capone did for Valentine’s Day
‘Smart money’ can only profit when it finds ‘silly money’ to take the losing end of the deal. As the Madoff scandal showed, the ‘silly money’ can be people you’d have thought would know better.
(Though there are oddities in the official story. Supposedly Madoff Senior tries to ship out the last of the cash and his sons turn him in. His sons have never once suspected that the gigantic fund was a dummy, so they walk free. I don’t believe any fraud could run without a team of insiders, and I could believe a man whose own position was hopeless sacrificing himself to save his offspring. I’ve also heard it claimed that maybe Madoff pretended fraud rather than admitting his fund was bankrupt, supposedly to get more compensation for his clients. I’ve not yet heard it from any trustworthy source so I keep an open mind.)
Even without fraud, some sort of smash-up was bound to happen. It’s much as if you let a drunken teenager drive a fast car – some sort of accident would be expected. To borrow an analogy from E. H. Carr, if the teenage drunk ran over and killed a women who was on her way to buy cigarettes, someone might try to divert attention from the original folly by saying it was fresh evidence of the perils of smoking.
There were people in the financial world who predicted that something pretty bad was coming. Soros was one of them: he was briefly hailed as a guru but has been now downgraded to ‘speculator’ in a recent Guardian summary of the meltdown. [B] But it was one thing to say in general terms that the market was imperfect. It would have been another matter if he had taken a hard line and said that his compatriot Alan Greenspan was making a complete hash of the Western economy. (Both Soros and Greenspan are of Hungarian-Jewish origin, though Greenspan was born in New York.)
Of course Soros, Greenspan and all the others flourish because far too many of the 1960s generation opted for selfishness and irresponsibility, made that choice in their hundreds of millions. Hippy-to-Yuppie was an easy move – and when Yuppies dropped out of fashion, a range of new games were started. In as far as it was possible to have a powerful high-paid job and still act like a teenage drop-out, they managed it.
Another hippy idea was ‘smash the system’!
In economic terms, the last 30 years have been a big mistake. But if the left in Britain is to revive, it must accept that other changes were carried through quite nicely. Ordinary people know that there have been gains as well as losses. Talk of ’empowerment’ is sometimes nonsense, but a lot of the time it has happened. Unskilled workers get bullied, but those with marketable skills benefit from workplaces that are much less hierarchical than they were 30 years ago. Selfish empowerment, yet still empowerment.
Yet the pursuit of selfish happiness has maybe hit its limits. People complain ‘it’s a jungle out there’, and increasingly it is. But why is it a jungle rather than a garden? Unlike past civilisations, we have an enormous abundance of food and basic goods, even though they are witheld from many of those who need them. Even the affluent are unhappy, because there are any number of billion-dollar industries that feed off making them discontent and helping the affluent consume more than is good for them.
We need some sort of new morality – but first we need to admit that the old morality has been trashed and is not coming back.
The New Right have covertly implemented a Libertarian program, removing all effective controls over people’s private lives, especially on sexual matters. The ‘line of patter’ was to suggest that both markets and ‘family life’ would happily regulate themselves if freed from state controls. I first came across this mix in the works of Robert E. Heinlein, who was often entertaining but never well informed, the sort of person who ‘approaches every problem with an open mouth’. But he had cult status for a time as the author of Stranger In A Strange Land, a book which I thought rubbish at the time and still do.
What was offered was an atomised social life, in which people were supposed to know the right thing to do. This can often work: we are social animals and our instincts are often sound. But not as often as the New Right supposed. Keeping the show on the road depended on the appearance of economic success. Much more an appearance that a reality: Anglos did no better under the New Right than under Keynesianism. Western Europe was messed up by the social changes of the 1970s, but East Asia rose at the same time and the world has changed beyond recognition.
The New Right also depended on the incredibly stupidity of traditionally-minded voters, willing to accept economic suffering for a false promise of protecting their social values. The West in the Keynesian era sold itself as the upholder of ‘freedom’ – in those days, the Soviet economy was catching up and the West insisted it had a ‘mixed economy’, not capitalism. Making freedom your watchword meant it was hard to defend traditional limits on liberty. Homosexuality was decriminalised, though not exactly acceptable in public. Divorce became easier, abortion became legal. Traditionalists were offended, but didn’t quite know how to oppose it. The New Right lured them with the notion that it was all the fault of Keynesianism and welfarism undermining the old order, at least they got that message across. I think most of the New Right knew perfectly well that their policies would weaken what still survived of traditional family life. But if a lot of voters were stupid, why not exploit them? It all fitted very nicely with the New Right outlook: exploit the stupid and assume that the human race is better off when they eventually vanish.
Stupidity has not run out. The appearance of economic success is another matter, there is widespread rebellion against the official line of ‘solve this crisis and then business as normal’.
Barack Obama is the 44th President of the USA, but he is the 43rd individual to take the oath at least once. He said in his address “forty-four Americans have now taken the presidential oath” [A], overlooking that Grover Cleveland had two single terms separated by Benjamin Harrison’s presidency. Cleveland counts as both the 25th and 27th president, by the same count that makes Obama 44th. I wonder how such a goof got through.
Beyond that, it is too early to say. He has had to take the oath twice, having the first time been given a slightly garbled version of the text the constitution lays down. What this might mean has never been tested and they preferred not to take a risk. It is looking a shade accident-prone, what with Teddy Kennedy collapsing at the celebrations and then John F. Kennedy’s little-known daughter deciding she didn’t after all want to be Senator for New York.
It’s an utterly ridiculous system, of course. Most countries allow ministers to be members of the legislature. The USA is out of line in forbidding this, and also in letting the governor of the state pick whoever they like to succeed. All due to the fear by the Founding Fathers that the responsibility of government might corrupt the legislature, and a failure to anticipate that their new Republic would normally operate as two rival teams of politicians competing for the top jobs.
The US Constitution was based on a French mis-reading of Britain’s 18th century system, which was an oligarchy managed by the monarch in which only a minority of adult males had the vote, and most of those votes were piled up in a few constituencies with a big electorate. Before the 1832 reform, a few hundred rich families could secure a House of Commons majority, in as far as they could agree. They mostly operated as two teams, Whigs and Tories, because it was a convenient way to bundle up a diversity of opinions and have coherent politics. Also the Tories could control the reactionaries while the Whigs controlled the radicals, so there was never any large body of people who wanted to change the system of government.
The British system was not democratic till 1885, the first election in which a majority of adult males voted. No women voted till 1918, when the vote was also extended to women over 30. The British parliament also governed a gigantic empire, most members of which had no vote.
The USA democratised early: it was solidly democratic when it elected Andrew Jackson as President in 1828. His vice-president was a man called John C. Calhoun, an enthusiast for freedom for white men and slavery for blacks. Calhoun did more than any other single man to convince the US South that slavery was a positive good and that any threat to it was tyranny. In a very real sense the Southern USA has remained stuck in an 1830s time-warp, convinced that the values it had then are the best possible.
Do I believe that Obama can fix this mess-up? No.
Charter 77 was a media event launched in West Germany by a few Czechs who levered themselves into leadership 12 years later when the system collapsed. They established a rather foolish and selfish Republic that sits securely in the heart of the European Community and doesn’t need to know what its doing. The immediate impetus for Charter 77 was the imprisonment of members of a Czech psychedelic band called The Plastic People of the Universe. It’s moot if Charter 77 made the slightest different to the lifetime of the Soviet system, which was maybe doomed when it crushed the vastly more interesting ‘Prague Spring’ back in 1968. ‘Solidarity’ in Poland did much more to weaken Moscow’s grip – and the heroic shipyard workers saw their jobs largely vanish in the new world of privatisation. If it wasn’t the Poles it was the Russians themselves, with Gorbachev taking over a stagnant system and wrecking it with ignorant enthusiasm for market forces.
Czechoslovakia got its freedom when the Russians lost interest in occupying them. The main development after that was a peaceful split from their Slovak neighbours. Vaclav Havel, who became President on account of his Charter 77 role, failed to lead the country in a manner that would have encourage the Slovaks to stay. Havel would have preferred to avoid the split, but politics is about achievements rather than wishes. Charter 77 has spawned a rather useless sort of politics.
Now we have something in China called Charter 08, which seems to have learned nothing from the 20th century. It begins “A hundred years have passed since the writing of China’s first constitution”. A joke constitution that was a product of the extreme weakness of the Manchu Dynasty, which was overthrown three years later.
“With the revolution of 1911, which inaugurated Asia’s first republic, the authoritarian imperial system that had lasted for centuries was finally supposed to have been laid to rest. But social conflict inside our country and external pressures were to prevent it; China fell into a patchwork of warlord fiefdoms and the new republic became a fleeting dream.” (China‘s Charter 08 [C])
A mixed bag of rebels overthrew the Manchu Dynasty. The dynasty were ratted on by General Yuan Shikai, their chief military commander. The genuine reformers were foolish enough to make Yuan Shikai the president of the new republic, and of course he was soon a dictator. China had elections of a sort in 1913, though I think it was a very narrow franchise, an election for the rich. When this delivered victory to the Kuomintang, its talented deputy leader Song Jiaoren was assassinated, almost certainly on the orders of General Yuan Shikai, who then took over the fledgling republic without much difficulty. A country where a politician can murder a rival and carry on without loss of reputation is hardly a country ready for multi-party rule. Yuan then tried to become Emperor, as Charter 08 fail to mention. This failed and China collapsed into chaos and warlordism.
A partial reunification was achieved in the mid-1920s, after the Kuomintang was reorganised by Soviet advisors, trained its own army and formed an alliance with the Chinese Communists. The radical impulse allowed the ‘Northern Expedition’ to get as far as Shanghai, a city built around a British-dominated Foreign Concession that brutally exploited ordinary Chinese. Chiang Kaishek chose to team up with the exploiters and to massacre the Chinese Communists. Charter 08 fail to mention any of this, the core history of their own society.
“Victory over Japan in 1945 offered one more chance for China to move toward modern government, but the Communist defeat of the Nationalists in the civil war thrust the nation into the abyss of totalitarianism. The ‘new China’ that emerged in 1949 proclaimed that ‘the people are sovereign’ but in fact set up a system in which ‘the Party is all-powerful.’ The Communist Party of China seized control of all organs of the state and all political, economic, and social resources, and, using these, has produced a long trail of human rights disasters.” (Ibid.)
The victory over Japan was largely the work of the USA, with a lot of guerrilla work by the Chinese Communists and a late but decisive entry by the Soviet Union, which overran Japan’s last efficient army in Manchuria. The Kuomintang did very little and generally disgusted their US allies, those who were close enough to see what was really happening. The US also chose to rely totally on foreigners when they organised the famous ‘Flying Tigers’. The Kuomintang regime was supposed to have an air-force but the US preferred to ignore it completely, it was so bad.
Mao’s Communists had been technically in alliance with the Kuomintang during the war, though in fact they were blockaded and sometimes attacked by their ‘allies’. Despite which, they tried to negotiate a coalition government after Japan was defeated, with the USA trying to sponsor it. Chiang Kaishek refused: he had been functionally a dictator since the mid-1920s, despite some show of elections, and he had no intention of sharing power. But his post-war government was appallingly incompetent: it had the Taiwanese rebelling on the grounds the Kuomintang were even worse than the Japanese. China’s weak middle class was ruined by massive inflation. Even the most dedicated anti-Communists historians have to admit that the Kuomintang in the 1940s were useless and that it was very understandable that Chiang’s own troops surrendered in droves to the efficient Communist forces.
It’s possible that Mao would have taken the same deal that Tito took, if the USA had been willing to swallow its pride and accept that it had backed a bunch of losers. Instead the USA had the McCartheyite witch-hunt, throwing out all the government experts who knew anything about China and locking the USA into a policy of denying that the Chinese Revolution had ever happened. This lasted till the early 1970s, when Nixon sensibly ended it, noticing that China was growing increasingly strong despite US hostility.
“During the last two decades of the twentieth century the government policy of “Reform and Opening” gave the Chinese people relief from the pervasive poverty and totalitarianism of the Mao Zedong era, and brought substantial increases in the wealth and living standards of many Chinese as well as a partial restoration of economic freedom and economic rights.” (Ibid.)
People this year are celebrating 30 years of Deng’s reformist socialism, which has indeed made the country much richer. Most commentators talk as if China achieved nothing under Mao: in fact the economy tripped in a little over a quarter century, having been flat-lining up until then.
Estimated in terms of 1990-value US dollars, the Chinese economy was 228,600 million in 1820, 241,344 million in 1913, 303,324 million in 1936 – the Kuomintang’s best year. Mao took over an economy devastated by the Japanese invasion, and produced astonishing growth. From 239,903 million in 1950 to 384,842 million in 1956, 553,676 million in 1966 and 793,092 million in 1976. [D]
Growth certainly speeded up under Deng – 1,703,671 million by 1986 and 3,433,255 million by 1996. But Deng had the advantage of the USA allowing foreign technology into China and accepting cheap manufactured goods which helped China at the expense of equivalent manufacturers in the West. Because China had been strong under Mao, the USA was very accommodating to Deng’s move away from Mao’s radicalism, just as they had earlier let non-Communist East Asia wipe out a lot of their consumer electronics just to give those countries an incentive to stay pro-Western.
Charter 08 is maybe the best Chinese joke since the 1920s, when Coca Cola was unofficially advertised by Chinese grocers with Chinese characters that literally said ‘Bite The Wax Tadpole’. A lot of Chinese attempts to Westernise have involved similar silly imitation without understanding or originality.
Meantime the Czech Republic, still operating in the tradition of Charter 88, opened its Presidency of the European Union with an artwork that is a series of feeble jokes.
“The Czech EU presidency has apologised for an art installation it commissioned that lampoons national stereotypes.
“Czech Deputy Prime Minister Alexandr Vondra apologised directly to Bulgaria, which has formally complained over its depiction as a toilet in the art work.
“David Cerny, the Czech artist behind the work, admits misleading officials over his intentions with the project.
“He said he had ‘wanted to find out if Europe is able to laugh at itself’.
“The Czech Republic thought it had commissioned work from 27 European artists for the Entropa display, which was installed at the weekend to mark the start of its six-month presidency.
“But it turned out the work – an eight-tonne mosaic resembling a snap-out plastic modelling kit – was entirely completed by Mr Cerny and two associates.” [E]
‘Europe laughing at itself’ is one thing: affluent Czechs laughing at impoverished Bulgarians is something else. Meantime no one at all is laughing at China, and they have Mao to thank for that. An intelligent opposition would accept past achievements and move on. Charter 08 are clearly a bunch of fools, and with the West’s current weakness and need to keep China sweet, they are unlikely to amount to anything.
If you listed to most Western experts, the Russian people’s rejection of Western values is an incomprehensible outbreak of irrationality after the West did its best. That Western ‘help’ made the Russians poorer and sicker gets evaded. Still, a detailed report on the process by the British medical journal The Lancet was too respectable to ignore:
“Following the break up of the old Soviet regime in the early 1990s at least a quarter of large state-owned enterprises were transferred to the private sector in just two years.
“This programme of mass privatisation was associated with a 12.8% increase in deaths.
“The latest analysis links this surge in deaths to a 56% increase in unemployment over the same period.
“However, it found some countries with good social support networks withstood the turmoil better than others.” [G]
This last refers to Middle-Europe, the countries that had been freed from more than four decades of Russian occupation, and who therefore had a lot to celebrate despite the damage done to them by foolish Western advice. Russia was different and Western bungling was so bad that in 1996 Yeltsin only just beat the Communist candidate, getting 54% against 40%. This was also the start of the ‘dirty tricks’ that the Western media mostly blame on Putin. Why Yeltsin chose Putin they fail to understand, but there are any number of things they fail to understand.
Russia also shows a continuing fondness for Lenin and Stalin. The Western media were amazed that Stalin could come third in a recent ‘Greatest Russian’ poll, after legendary hero Alexander Nevsky and after Stolypin. [H] No amazement was expressed Lenin coming sixth, though it was Lenin who decided to overthrow multi-party democracy and criminalise political opposition. I suppose that shows the influence of former Trotskyists and Khrushchevites in the media.
Without Stalin’s 1930s industrialisation, the Soviet Union would not have lasted long and Hitler would almost certainly have won the Second World War. Has the BBC ever thought about that? They and other commentators also seem to know nothing about Stolypin, a Tsarist-era whose authoritarian methods were the most plausible alternative to Bolshevism. And Stalin’s status is hardly new. It was the popular view all along, suppressed by the official leadership from 1956 through to the final collapse.
20 million Jews currently count for more in world affairs than more than a billion Muslims – but for how much longer? I’ve said before than Israel can only hope to survive if they make a peace with the Palestinians that other Muslims find acceptable. Yet the very opposite keeps happening.
To say that the carnage could have been avoided by Hamas accepting Israel’s terms is to miss the point. Any war could be avoided by unconditional surrender by one side. Peace is generally secured when one side is annihilated or else both sides are satisfied. Arafat in his last days was ready to settle for very little, a micro-state on a majority of the land that Israel took in 1967. He was then repeatedly attacked because he could not control the Islamists – one might as sensibly bomb Washington because the USA has not secured peace in Iraq or Afghanistan. Arafat’s heirs had no credibility and that was why Hamas won the most recent Palestinian election. Israel’s terms for peace are basically that Hamas accept the same sort of ‘Bantustan’ arrangement that discredited Arafat and the PLO. It’s about as likely as the Poles voting to restore Communism.
Since Israel knew that Hamas was not going to quit and that innocents would be killed in front of world media, what were they thinking of? If Europe and the USA stop supporting Israel, Israel is doomed. I heard people taking the attitude that both sides were as bad as each other. The relevant point is not whether this is the correct view, but the likelihood of it becoming the majority view in the West.
Twelve Israelis had died in 3 years of rockets from Gaza. A lot more Israelis have died since, along with large numbers of Arab children, many of them seen pathetically mutilated or dead on Western television. The only logic to such actions is if the aim is to expel all of the Palestinian Arabs: a North American pattern, clearing hostile natives. But that was the 19th century, and the Native Americans no wider connection. Palestinians are connected to the larger Arab world and to more than a billion Muslims, that fight cannot be won.
It will also end messily. Israel has nuclear weapons – though it pretends not – and Pakistan is also a nuclear power. Something pretty dreadful is almost bound to happen in the long run. The USA and the European Union should take a tough line with Israel and force it to compromise. But all along it has been easier to pretend there was some other solution.
For a long time the Native Americans of Latin America were strangely docile. I thought it odd at the time and I’ve no idea why it has changed now, but change it has. It maybe started with Fujimora in Peru: his origins are Japanese but he maybe broke the racial barrier. East Asians and Native Americans are anyway similar in origin and appearance, if not culture.
Bolivia is a country where Native Americans are a majority but have always been poor and powerless. President Evo Morales is the first of the Native Americans to rule and has followed a set of radical policies aiming at evening out a very unequal society. He has also taken the sensible line that chewing coca leaves is a long-standing and not particularly damaging local tradition. If US citizens are stupid enough to wreck themselves by snorting processed coca as cocaine, that is a US problem that the US should solve on its own territory. The ‘war on drugs’ has totally failed to stop supplies getting though: it has been the ‘miracle of the market’ in action.
Now we have a referendum which Morales seems to have won with 60% of the vote, Bolivia’s poorer West prevailing over its richer and more-European East. [F] The Western media do not like it. The Western approach tends to be “is it really democratic if the wrong people happen to get the most votes?” It was on this basis that the USA repeatedly organised coups against unwanted democracies. But these days, they no longer have the power and their reputation is fading.
A vigorous minority in Thailand has successfully thwarted the majority, in a society that isn’t really democratic. Thailand has had multi-party elections and some right of dissent. But an elite grouped around the monarchy has kept power and does not think the people are allowed to choose anyone else. That was the basis of the protest by the ‘People’s Alliance for Democracy’, which is nothing of the sort. And in itself, it was not enough to overthrow the government.
What happened in the end was that the judiciary disqualified a lot of the government MPs, allowing the opposition to take over. And they then won enough of the by-elections for the seats of the disqualified MPs to stay in power for now. But for how long?
The biggest shift has been an open admission that the Thai monarch has been identified with the ‘People’s Alliance for Democracy’ and anti-monarchical feeling has started to grow.
Maybe the Thai royal family should have a chat with the exiled Greek royals, discredited after being shown to be partisan and not trustworthy. Or those of Italy, discredited by their cooperation with Mussolini. It is a very dangerous path to take.
[C] [http://www.nybooks.com/articles/22210] – China‘s Charter 08
[D] Maddison, Angus. The World Economy: Historical Statistics, Table 5b. This is the standard work on the subject.