A Britisher in Philadelphia: Prime Minister Theresa May speaks to the Republicans


January 27, 2017

A Britisher in Philadelphia: Prime Minister Theresa May speaks to the Republicans

The first foreign leader to visit Donald Trump, Prime Minister Theresa May spoke to Republicans on her country’s special relationship with the United States, bringing back memories of Ronald Reagan and Dame Margaret Thatcher.  Listen to this eloquent leader who is a “conservative”, not a populist. We are not sure about political leanings of President Donald Trump except to note that the 45th President of the United States is all about America First and Making America Great Again.–Din Merican

Trump’s Victory is a Wake-up Call


January 27, 2017

Trump’s Victory is a Wake-up Call: America First

By Michael S. H. Heng*

*Michael S. H. Heng is a retired professor who has held academic appointments in Australia, the Netherlands, and at 6 universities in Asia. He has published 5 books.

http://ippreview.com/index.php/Home/Blog/single/id/337.html

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The Controversial, Contentious, and Perplexing 45th President of the United States–Donald J Trump

Even without the benefit of hindsight, Donald Trump’s victory in the November 2016 US presidential election was not surprising. Although the majority of mainstream newspapers and opinion polls had predicted a victory for the Democrat candidate, a few sharp observers and analysts had been saying that the opposite would happen.

In 1989, Michael Moore made a movie “Roger and Me” about the devastation that descended on the city of Flint, Michigan after General Motors closed the car plant there. Since then we have seen 8 years of Bill Clinton and another 8 years of Barack Obama. What have the Democrats done to address the social and economic ills of Flint? Now the city is saddled with a water crisis, where the tainted tap water cannot be used for drinking, cooking or bathing. In the recent presidential election, the state of Michigan went to Donald Trump. This should have been predictable to any clear headed political observer.

The Bill Clinton presidency of 8 years was not as Hillary Clinton had put it: a great time of economic progress. That is what they like to think and persuade others to believe. Those were years that continued to favor the neo-liberal seeds planted earlier with the blessings of Ronald Reagan and the senior George Bush, with catastrophic blowback in the form of the 2008 financial crisis. The following 8 years of the junior George Bush were an unmitigated disaster with the invasions of Iraq and Afghanistan. But then came along Barack Obama with the promise of Hope and Change. The Great Recession ushered in by the financial crisis of 2008 was not used as an occasion to galvanize the nation to roll back the hanky-panky activities of the financial sector and to reinvent the economy. For 8 long years, his green shoots of recovery proved to be a disappointment. Millions of people just ceased to register as job seekers, because the jobs they were looking for had vanished. It was not unusual for a hotel doorman in New York City to juggle 3 jobs and his wife 2 jobs in order to make ends meet.1 Wages were so low and work so hard to come by.

The victory of Trump constitutes part of a global trend. It is a trend where the failure of ruling parties in the West and elsewhere to address the real and deeply felt grievances of their citizens have thrust political power or influence onto demagogues and xenophobes.  The populist backlash in the US was attributed in an analysis by Niall Ferguson to five factors: (a) surge in immigration, (b) rise in inequality, (c) increase in perception of political corruption, (d) the ongoing Great Recession, (e) the emergence of demagogues. When people are extremely fed up, they would prefer to listen to wild allegations and promises than to the “rational arguments” which have cheated them for too long.

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Rather than being consumed by rage, hate, and despair, it is better to treat Trump’s triumph as the serious symptom of a disease that has plagued social, cultural-intellectual, economic, and political life in the last few decades. Politically, it should be taken as a wake-up call for the political, media, bureaucratic, business, and academic elites who have benefited enormously from globalization and immigration.

Unless and until the problems faced by the working class are solved, it is safe to predict that phenomena more horrible than Trump’s victory are going to happen. In the worst-case scenario, they may pave the way for the demise of the peaceful and prosperous world order as we know it.

Without trying to be funny and cynical, it may be argued that Trump’s victory as a wake-up call is politically more valuable than a victory by Hillary Clinton. Her victory would have lent weight to the belief that the US has been doing pretty well. Sure, there are problems, but here comes another Clinton to solve them and make America even better.

History has provided many examples of how resistance by vested interests has resulted in the country experiencing economic difficulties and even demise, with vested interests buried with it.

Thinking along this line, it is wrong to disparage those angry and long-suffering citizens who turned anti-establishment and voted the thug-like and mendacious Trump into power. To blame those who voted for Trump is tantamount to blaming the victims of the past few decades for complaining and protesting. Instead of focusing attention on the gloomy horizon, it is better to think of ways to navigate away from it.

A good news is that Trump did not manage to win the popular vote, something that could have given him more political gravitas. Elsewhere, populist politicians have increased their influence, but are not strong enough yet to capture key political offices.

To reverse the further descent of politics, mainstream political parties will do well to do some sincere soul-searching. They have been living too long in their cozy world of make-believe, detached from the people they claim to serve, and uncritically swallowing the prescriptions of neoliberal economists. Have they for far too long been recruiting into their ranks ambitious people who take politics as an avenue for career advancement, just like their peers in the business world? Why have they failed to recruit those who are keen in their youth to take up politics as a calling? Why have they failed to fire up the enthusiasm of the youth in politics?  Have they been too nice in accommodating to the demands of big vested interests?

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At the level of ideas, there is a critical and urgent need to roll back the influence of market ideology in arenas that are patently not suitable for it, arenas such as healthcare and education. The political philosopher Michael Sandel has argued against the notion of the market society,2 and the political scientist Philip Bobbitt has written about the challenge of market state.3

At the level of the economy, there is an obvious need for reform. The US has the most enviable human resources and research infrastructure to conduct breakthrough scientific discoveries and technological innovations, which underpin high value-added economic activities. But somehow this great country has channeled its resources into financial engineering, which has inflicted destructive havoc on the real economy, and brought misery to millions of Americans and many more elsewhere in the world. The real enemy of America is Wall Street and other vested interests. Unless the value-destroying financial sector is tamed, with the rich sharing part of their wealth with the poor, and resources redirected to productive areas of research and development in the real economy, the once appealing American Dream will become more like an elusive dream, and to the most disadvantaged, a real nightmare.

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Perhaps the most challenging task is at the level of politics. How can the political class sink their petty quarrels in a genuine effort to make America great again? It calls for political reform that will demand a compromise from vested interests in both the economy and politics. History has provided many examples of how resistance by vested interests has resulted in the country experiencing economic difficulties and even demise, with vested interests buried with it. The challenge now, greater than ever before, confronts those politically conscious progressives to unite in their lofty project in order to pressure the elites to bow to economic and political reform.

At a philosophical level, here is a profound insight from Tao Te Ching by Laozi.4

Disaster is that on which good fortune depends.
Good fortune is that in which disaster’s concealed.
Who knows where it will end?

Notes

  1. Lie, C-I (2016, November 20). Private communications.
  1. Sandel, M. J. (2013). What Money Can’t Buy: The Moral Limits of Markets. Farrar, Straus and Giroux.
  1. Bobbitt, P. (2008). Terror and Consent: The Wars for the Twenty-first Century. A. A. Knopf.
  1. Henricks, R. G. trans. (1992). Tao Te Ching. New York: Random House, chapter 58.

Additional Reading:

http://www.politico.com/magazine/story/2016/03/donald-trump-the-perfect-populist-213697

2. Book Review: Theresa Gessler.

http://blogs.lse.ac.uk/politicsandpolicy/book-review-what-is-populism-by-jan-werner-muller/

Trump’s Unrealpolitik


January 7, 2017

Trump’s Unrealpolitik

by Shlomo Ben-Ami, a former Israeli foreign minister, is Vice President of the Toledo International Center for Peace. He is the author of Scars of War, Wounds of Peace: The Israeli-Arab Tragedy.–http://www.project-syndicate.org

Some in the United States have praised President-elect Donald Trump for his supposed realism. He will do what is right for America, they argue, without getting caught up in thorny moral dilemmas, or letting himself be carried away by some grand sense of responsibility for the rest of the world. By acting with the shrewd pragmatism of a businessman, he will make America stronger and more prosperous.

This view is, to be frank, delusional.

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It is certainly true that Trump will not be caught up in questions of morality. He is precisely what the Greek historian Thucydides defined as an immoral leader: one of “violent character” who “wins over the people by deceiving them” and by exploiting “their angry feelings and emotions.”

But immorality is neither desirable nor a necessary feature of realism. (Thucydides himself was an ethical realist.) And there is little to suggest that Trump has any of the other realist qualities that his supporters see. How could anyone expect the proudly unpredictable and deeply uninformed Trump to execute grand strategic designs, such as the Realpolitik recommended by Harvard’s Niall Ferguson, Henry Kissinger’s biographer, following the election?

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Ferguson, like Kissinger, believes that true Realpolitik under Trump should begin with an alliance among the US, China, and Russia, based on a mutual fear of Islamic extremism and a shared desire to exploit lesser powers to boost their own economies. These countries would agree to prevent Europe from attaining great-power status (by destroying the European Union), and to ensure that populist or authoritarian governments control the United Nations Security Council’s five permanent members.

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To this end, Trump could work with Russian President Vladimir Putin to help Marine Le Pen, the leader of France’s anti-EU nationalist right, win April’s presidential election. Moreover, in order to consolidate a post-EU Anglo-Atlantic sphere, Trump could transform the North American Free-Trade Agreement into a North Atlantic arrangement, replacing Mexico with the United Kingdom. Finally, he could put pressure on NATO members to pay more for defense – a move that would surely undermine the security of the Baltic states and Ukraine.

Achieving these goals would require more than an ability to avoid moral impediments. Like all statecraft, it would require an aptitude for careful diplomatic engineering, respect for facts and truth, historical knowledge, and a capacity for cautious examination of complex situations when formulating (or revising) policies.

Yet Trump is the most anarchic, capricious, and inconsistent individual ever to occupy the White House, and all he has to help guide him is a cabinet full of billionaire deal-makers like him, preoccupied with calculable immediate interests. For them, casting off allies might seem like an easy way to streamline decision-making (and boost share prices).

But repudiating America’s role as a global beacon – and thus the idea of American exceptionalism – is a bad bet for the future. Scrapping free-trade deals with Asia and Latin America, for example, could provide a short-term gain for the US economy; but doing so would ultimately undercut the projection of American power there, paving the way for penetration by China.

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The US should be aiming to curtail China’s influence without incurring its wrath. Another lesson from Thucydides – reinforced by historical experience – is that rising, not established, powers tend to upset the international order.

Protecting that order requires the main global power to uphold the institutions that underpin it, in order to prevent revolutionary behavior by lesser powers. Yet Trump has criticized and disregarded international institutions to such an extent that it is now China that is defending global governance – including the Paris agreement on climate change and the nuclear deal with Iran – from a revolutionary US.

Worse, Trump has seemingly abandoned all caution with regard to China. On the diplomatic front, by speaking directly with the president of Taiwan after the election, he violated a protocol maintained for four decades, by Democratic and Republican presidents alike. On the economic front, he has leveled reckless (and plainly wrong) accusations that China is manipulating its currency to gain an unfair trade advantage.

Provoking China, doubting NATO, and threatening trade wars is nihilism, not strategy. At this point, Trump seems set to do on a global scale what former President George W. Bush did to the Middle East – intentionally destabilize the old order, and then fail to create a new one. The first step would be a deal with Putin on Syria – a move that, like Bush’s defeat of Saddam Hussein in Iraq, would amount to handing a victory to Iran.

This is not to say that none of the Realpolitik envisioned by Ferguson will come to fruition. But what elements of it do emerge will likely be driven more by Putin than by Trump – with dangerous outcomes. Already, Putin has begun work on dismantling the EU. After Le Pen was refused credit from French banks, Russian banks saved her campaign. And Russian state-sponsored propaganda is helping to drive former Soviet republics away from the EU.

Trump, a vocal Putin fan, is unlikely to redress the tilting balance of power as part of, let alone as a condition for, a diplomatic “reset” with Russia. What kind of a realist would not use a united Western alliance to limit a Russia that is trying to engineer a return to Cold War spheres of influence?

And, for that matter, what kind of a realist sends to Israel an Ambassador whose pro-settlement rhetoric threatens to inflame the entire Muslim world against the US? What is so realistic about a war of annihilation against the Islamic State that is not backed by a plan for engagement with the broader Middle East?

Trump might have some realistic instincts. But they will not be enough to ensure measured responses to even the slightest provocation, much less to underpin a sweeping and consistent strategy.

Farewell to the West


December 7, 2016

Farewell to the West

by Joschka Fisher@Project Syndicate

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Now that Donald Trump has been elected President of the United States, the end of what was heretofore termed the “West” has become all but certain. That term described a transatlantic world that emerged from the twentieth century’s two world wars, redefined the international order during the four-decade Cold War, and dominated the globe – until now.

The West shouldn’t be confused with the “Occident.” While the West’s culture, norms, and predominant religion are broadly Occidental in origin, it evolved into something different over time. The Occident’s basic character was shaped over centuries by the Mediterranean region (though parts of Europe north of the Alps made many important contributions to its development). The West, by contrast, is transatlantic, and it is a child of the twentieth century.

When World War I began, it was a European conflict between the Central Powers and the Entente of Britain, France, and Russia. It became a true world war only in 1917, when the US entered the fray. This is the moment when what we now call the West began to take form.

The West can be said to have received its birth certificate during World War II. In August 1941, after Nazi Germany had invaded the Soviet Union, British Prime Minister Winston Churchill and US President Franklin D. Roosevelt met on a warship off the coast of Newfoundland and signed the Atlantic Charter. That agreement would later develop into NATO, which, for four decades, enabled an alliance of independent democracies with shared values and market economies to withstand the Soviet threat – and which has safeguarded Europe to this day.

More fundamentally, the West was founded on an American commitment to come to its allies’ defense. The Western order cannot exist without the US playing this crucial role, which it may now abnegate under Trump. As a result, the future of the West itself is now at stake.

No one can be certain what Trump’s election will mean for American democracy, or what he will do when he takes office. But we can already make two reasonable assumptions. First, his presidency will be highly disruptive to American domestic and foreign policy. Trump won the presidency by flouting virtually every unwritten rule of American politics. He beat not only Hillary Clinton, but also the Republican Party establishment. There is little reason to think that he will suddenly abandon this winning strategy come January 20.

We can also safely assume that Trump will stick firmly to his pledge to “Make America great again”; this will be the foundation for his presidency, come what may. Former President Ronald Reagan also promised this, but he did so while the US, still engaged in the Cold War, could take an imperial approach. Thus, Reagan pursued rearmament on such a large scale that it ultimately led to the Soviet Union’s collapse; and he paved the way for an American economic boom with a massive increase in the national debt.

Trump does not have the luxury of an imperial approach. On the contrary, during the campaign, he heaped criticism on America’s senseless wars in the Middle East; and his supporters want nothing more than for the US to abandon its global leadership role and retreat from the world. A US that moves toward isolationist nationalism will remain the world’s most powerful country by a wide margin; but it will no longer guarantee Western countries’ security or defend an international order based on free trade and globalization.

The only remaining questions now concern how quickly US policy will change, and how radical those changes will be. Trump has already pledged to scrap the 12-country Trans-Pacific Partnership – a decision that amounts to a gift to China, whether he realizes it or not. He could also bestow upon China another gift: reducing US engagement in the South China Sea. China might soon find itself the new guarantor of global free trade – and probably the new global leader in combating climate change, too.

With respect to the war in Syria, Trump might simply hand that devastated country over to Russian President Vladimir Putin and Iran. Practically speaking, this would overturn the balance of power in the Middle East, with grave consequences well beyond the region; morally, it would be a cruel betrayal of the Syrian opposition and a boon to Syrian President Bashar al-Assad.

And if Trump defers to Putin in the Middle East, one wonders what he will do with respect to Ukraine, Eastern Europe, and the Caucasus. Should we expect a Yalta Conference 2.0 to recognize Putin’s new de facto sphere of influence?

The new course Trump will chart for the US is already discernible; we just don’t know how quickly the ship will sail. Much will depend on the opposition (Democrats and Republicans alike) that Trump encounters in the US Congress, and on pushback from the majority of Americans who did not vote for him.

But we should not harbor any illusions: Europe is far too weak and divided to stand in for the US strategically; and, without US leadership, the West cannot survive. Thus, the Western world as virtually everyone alive today has known it will almost certainly perish before our eyes.

So what comes next? China, we can be certain, is preparing to fill America’s shoes. And in Europe, the crypts of nationalism have been opened; in time, they will once again release their demons upon the continent – and the world.

https://www.project-syndicate.org/commentary/goodbye-to-american-global-leadership-by-joschka-fischer-2016-12

Joseph Stiglitz: ‘The EU’s monetary union was the mistake’


September 17, 2016

Joseph Stiglitz: ‘The EU’s monetary union was the mistake’

by Jeremy Warner

I’m on my way to interview Joseph Stiglitz, economic guru of the political left, about his latest book, The Euro and its Threat to The Future of Europe.

Waiting in the reception of Penguin Books, I notice on display an early, Penguin “classic” edition of George Orwell’s 1984. Orwell is one of those authors who is claimed as their own by both right and left – the left because of his writings on social deprivation, but the right too because of his deep aversion, depicted in Animal Farm and 1984, to totalitarian communism.

I’m not sure Stiglitz, a Nobel prize winning economist who has advised the Scottish government on independence, the Far Left Syriza government in Greece, and very briefly sat on Jeremy Corbyn’s now disbanded economic advisory panel, crosses the boundaries in quite the same way, but there is no doubt that as a critique of the euro, his new book will appeal as much to a right as to the left.

I put this point to Stiglitz at the start of our interview.

It is the absence of any proper economic adjustment mechanism which is the over-riding failure in Europe–Joseph Stiglitz.

“Yes, it’s a fair summary”, he says, “except for one thing. One of the arguments I make for the failure of the euro is that at the time it was being constructed there was a “neo-liberal” ideology which said that all we need to do to make this thing work is to get deficits low, keep inflation low and take down barriers and then everything would be fine.

“That was a very conservative ideology,  that if you did those things the markets would on their own adjust and everything else would come right. Not all right wing conservatives thought that, but a lot of what I call ‘market fundamentalism’ did go into the thinking on the euro.”

 

But most of those in Britain who thought the euro a mad idea were on the political right, I point out.

Stiglitz says that he is not really talking about the issues of national sovereignty raised by the euro. “I was thinking more in terms of the macro-economic adjustment. It is the absence of any proper economic adjustment mechanism which is the over-riding failure in Europe. Where the left and right would agree – and this speaks to the whole Brexit debate – is that Europe needs economic arrangement that work well for a very diverse group of countries.

“This requires a balance between flexibility and harmonisation, and in opting for monetary union they didn’t get that balance right. We see the lack of it particularly in the rigidity that Germany imposes on the eurozone’s crisis hit countries”.

The theme of Stiglitz’s book is that monetary union was basically where it all went wrong for the European Union. A project that was meant to bring countries together has succeeded only in tearing them apart in a manner which now threatens wider European economic and social stability.

“There have been other things that Europe got wrong, but monetary union was the overarching macro economic mistake. We can see this most clearly in the fact that some countries not in the euro but with the same regulatory framework, such as the UK and Sweden, did much better.”

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So what, fundamentally, is the problem with the euro?

“For the first nine years up until 2008 there were no symptoms, or no obvious ones, of how dysfunctional things really were. But actually the euro was already creating its own problems.

“When the financial crisis hit, it was roundly blamed on the US, but in fact a very large part of Europe’s crisis was created by the euro.

“The single currency gave markets this excessive confidence. They began to confuse the absence of exchange rate risk with the absence of risk per se. Monetary union had taken away the ability of individual governments to curb domestic inflationary pressures, which led to an increase in price levels relative to Germany. Real exchange rates became out of line.

“One of the key points of the book is that it is easy to create these imbalances, made possible by the easy flow of money between countries under  the euro, but with a rigid exchange rate it is very hard to undo them.

“There are only two ways of doing it. Have Germany inflate, or have the others deflate. Germany was unwilling to inflate. But deflation doesn’t work easily either because your debts are still owed, and that means that in forcing countries to deflate you make them even more fragile”.

We move onto the issue that most puzzles Anglo-Saxon commentators such as myself; if the euro is so bad, how come it has lasted so long?

“Well, you have to take account of the eight or nine years before the problem became apparent. Then there was ‘oh it has worked for nine years’ – even though it hadn’t – ‘so the crisis will be over quickly and we can make it work again’. When you have already invested heavily in something, it is very difficult to cut your losses. There is always a tendency to think that with just a little more investment, it can be made to work.

“So the politicians said, just accept a little bit of temporary pain and everything will be OK again. After two years that wasn’t true. And time and again it turns out not to be true. Good money is constantly thrown after bad.

“Imagine yourself in the position of a Greek politician, with 25pc unemployment and an escalating financial commitment as a result of the fight to stay in the euro. As things go more and more wrong, you become ever more committed to the policy that got you there because to admit you are wrong is to say we have suffered all this pain for nothing”.

Joseph Stiglitz

Does this mean Europe is essentially damned, I ask?

“The most likely scenario is a continued muddling through, which is what they have been doing to date. But neither Frankfurt nor Brussels controls events, as the Brexit referendum vote shows, so what you see – and this is not for sure but almost predictable – is growing alienation.

“This is already apparent in electoral outcomes. More than 60pc of people in Spain, Greece and Portugal voted against austerity parties. The same thing with Brexit, which was also a rebellion against the political centre.

“The only thing that saves the centre ground is that the anti-establishment movement is divided between left and right. So you get a stalemate which is also not at all good for anyone, and out of that who knows what happens.

“Getting a political coalition in any country large enough to leave the euro is therefore difficult. What’s so troubling is that it is also proving impossible for Europe to agree on policies to fix the euro, so you have neither one thing or the other. Despite his apparent pessimism, Stiglitz is not short on suggested solutions.

“If you had a group of people sitting around a table rationally discussing the future of Europe, these are the sort of things they might come up with.

“One is to say let’s finish the job. The US shares a common currency among 50 diverse states, so what are the institutions and rules needed to make the single currency work.

“As a bare minimum, you need common deposit insurance, a banking union, Eurobonds, maybe industrial policies to allow those at the bottom to catch up, you need to move away from just inflation targeting, and you need some way of adjusting real exchange rate that doesn’t involve internal devaluation.

“Germany has to perform its role of allowing its economy to inflate relative to others. So those are the minimum to make a euro that works.

“But Germany takes the view that we are not a transfer union and we won’t even take the risk of a banking union or of common deposit insurance. This is like New York saying we don’t want to have federal deposit insurance because there is a bank in Alabama which might go bankrupt.”

If completing the job proves impossible, says Stiglitz, that leaves the alternative of an “amicable divorce”.

“In the book I use the example of marriage councillors. In the past, the job of the marriage councillor was to keep the marriage together, but modern ones sometimes say you should never have got married in the first place.

“Once you have accepted the marriage can’t be made to work, then the only issue is how to make splitting up go as smoothly as possible.

“In the book, I describe some novel ways of doing this. The core of the idea is that you are going to have to allow redenomination of debt, and allow some form of bankruptcy.

“A third way is the flexible euro where you say lets try and consolidate the institutional advances we have made but recognise that we are not anywhere near a single currency yet. And then I describe some mechanisms that would allow the exchange rate to be operated flexibly and allow economic adjustment”.

So what are the chances of any of these “solutions” being adopted, I ask.“I’m hopeful”, Stiglitz says with a grin, which somewhat suggests he’s not.

The death of neoliberalism and the crisis in western politics


August 25, 2016

The death of neoliberalism and the crisis in western politics

By Marton Jacques

In the early 1980s the author was one of the first to herald the emerging dominance of neoliberalism in the west. Here he argues that this doctrine is now faltering. But what happens next?

 

Donald Trump seeks a return to 1950s America, well before the age of neoliberalism. Photograph: H. Armstrong Roberts/Retrofile/Getty Images

The western financial crisis of 2007-8 was the worst since 1931, yet its immediate repercussions were surprisingly modest. The crisis challenged the foundation stones of the long-dominant neoliberal ideology but it seemed to emerge largely unscathed. The banks were bailed out; hardly any bankers on either side of the Atlantic were prosecuted for their crimes; and the price of their behaviour was duly paid by the taxpayer. Subsequent economic policy, especially in the Anglo-Saxon world, has relied overwhelmingly on monetary policy, especially quantitative easing. It has failed. The western economy has stagnated and is now approaching its lost decade, with no end in sight.

After almost nine years, we are finally beginning to reap the political whirlwind of the financial crisis. But how did neoliberalism manage to survive virtually unscathed for so long? Although it failed the test of the real world, bequeathing the worst economic disaster for seven decades, politically and intellectually it remained the only show in town. Parties of the right, centre and left had all bought into its philosophy, New Labour a classic in point. They knew no other way of thinking or doing: it had become the common sense. It was, as Antonio Gramsci put it, hegemonic. But that hegemony cannot and will not survive the test of the real world.

But the causes of this political crisis, glaringly evident on both sides of the Atlantic, are much deeper than simply the financial crisis and the virtually stillborn recovery of the last decade. They go to the heart of the neoliberal project that dates from the late 70s and the political rise of Reagan and Thatcher, and embraced at its core the idea of a global free market in goods, services and capital. The depression-era system of bank regulation was dismantled, in the US in the 1990s and in Britain in 1986, thereby creating the conditions for the 2008 crisis. Equality was scorned, the idea of trickle-down economics lauded, government condemned as a fetter on the market and duly downsized, immigration encouraged, regulation cut to a minimum, taxes reduced and a blind eye turned to corporate evasion.

The first inkling of the wider political consequences was evident in the turn in public opinion against the banks, bankers and business leaders. For decades, they could do no wrong: they were feted as the role models of our age, the default troubleshooters of choice in education, health and seemingly everything else. Now, though, their star was in steep descent, along with that of the political class. The effect of the financial crisis was to undermine faith and trust in the competence of the governing elites. It marked the beginnings of a wider political crisis.

It should be noted that, by historical standards, the neoliberal era has not had a particularly good track record. The most dynamic period of postwar western growth was that between the end of the war and the early 70s, the era of welfare capitalism and Keynesianism, when the growth rate was double that of the neoliberal period from 1980 to the present.

Ronald Reagan and Margaret Thatcher, pictured in 1984, ushered in the era of neoliberalism.
Ronald Reagan and Margaret Thatcher, pictured in 1984, ushered in the era of neoliberalism. Photograph: Bettmann Archive

But by far the most disastrous feature of the neoliberal period has been the huge growth in inequality. Until very recently, this had been virtually ignored. With extraordinary speed, however, it has emerged as one of, if not the most important political issue on both sides of the Atlantic, most dramatically in the US. It is, bar none, the issue that is driving the political discontent that is now engulfing the west. Given the statistical evidence, it is puzzling, shocking even, that it has been disregarded for so long; the explanation can only lie in the sheer extent of the hegemony of neoliberalism and its values.

But now reality has upset the doctrinal apple cart. In the period 1948-1972, every section of the American population experienced very similar and sizable increases in their standard of living; between 1972-2013, the bottom 10% experienced falling real income while the top 10% did far better than everyone else. In the US, the median real income for full-time male workers is now lower than it was four decades ago: the income of the bottom 90% of the population hasstagnated for over 30 years.

A not so dissimilar picture is true of the UK. And the problem has grown more serious since the financial crisis. On average, between 65-70% of households in 25 high-income economies experienced stagnant or falling real incomes between 2005 and 2014.

The reasons are not difficult to explain. The hyper-globalisation era has been systematically stacked in favour of capital against labour: international trading agreements, drawn up in great secrecy, with business on the inside and the unions and citizens excluded, the Trans-Pacific Partnership (TPP) and theTransatlantic Trade and Investment Partnership (TTIP) being but the latest examples; the politico-legal attack on the unions; the encouragement of large-scale immigration in both the US and Europe that helped to undermine the bargaining power of the domestic workforce; and the failure to retrain displaced workers in any meaningful way.

As Thomas Piketty has shown, in the absence of countervailing pressures, capitalism naturally gravitates towards increasing inequality. In the period between 1945 and the late 70s, Cold War competition was arguably the biggest such constraint. Since the collapse of the Soviet Union, there have been none. As the popular backlash grows increasingly irresistible, however, such a winner-takes-all regime becomes politically unsustainable.

Large sections of the population in both the US and the UK are now in revolt against their lot, as graphically illustrated by the support for Trump and Sanders in the US and the Brexit vote in the UK. This popular revolt is often described, in a somewhat denigratory and dismissive fashion, as populism. Or, as Francis Fukuyama writes in a recent excellent essay in Foreign Affairs: “‘Populism’ is the label that political elites attach to policies supported by ordinary citizens that they don’t like.” Populism is a movement against the status quo. It represents the beginnings of something new, though it is generally much clearer about what it is against than what it is for. It can be progressive or reactionary, but more usually both.

Brexit is a classic example of such populism. It has overturned a fundamental cornerstone of UK policy since the early 1970s. Though ostensibly about Europe, it was in fact about much more: a cri de coeur from those who feel they have lost out and been left behind, whose living standards have stagnated or worse since the 1980s, who feel dislocated by large-scale immigration over which they have no control and who face an increasingly insecure and casualised labour market. Their revolt has paralysed the governing elite, already claimed one prime minister (David Cameron), and left the latest one fumbling around in the dark looking for divine inspiration (Theresa May).

The wave of populism marks the return of class as a central agency in politics, both in the UK and the US. This is particularly remarkable in the US. For many decades, the idea of the “working class” was marginal to American political discourse. Most Americans described themselves as middle class, a reflection of the aspirational pulse at the heart of American society. According to a Gallup poll, in 2000 only 33% of Americans called themselves working class; by 2015 the figure was 48%, almost half the population.

Brexit, too, was primarily a working-class revolt. Hitherto, on both sides of the Atlantic, the agency of class has been in retreat in the face of the emergence of a new range of identities and issues from gender and race to sexual orientation and the environment. The return of class, because of its sheer reach, has the potential, like no other issue, to redefine the political landscape.

The re-emergence of class should not be confused with the labour movement. They are not synonymous: this is obvious in the US and increasingly the case in the UK. Indeed, over the last half-century, there has been a growing separation between the two in Britain. The re-emergence of the working class as a political voice in Britain, most notably in the Brexit vote, can best be described as an inchoate expression of resentment and protest, with only a very weak sense of belonging to the labour movement.

Indeed, Ukip has been as important – in the form of immigration and Europe – in shaping its current attitudes as the Labour party. In the United States, both Trump and Sanders have given expression to the working-class revolt, the latter almost as much as the former. The working class belongs to no one: its orientation, far from predetermined, as the left liked to think, is a function of politics.

The neoliberal era is being undermined from two directions. First, if its record of economic growth has never been particularly strong, it is now dismal. Europe is barely larger than it was on the eve of the financial crisis in 2007; the United States has done better but even its growth has been anaemic. Economists such as Larry Summers believe that the prospect for the future is most likely one of secular stagnation.

Worse, because the recovery has been so weak and fragile, there is a widespread belief that another financial crisis may well beckon. In other words, the neoliberal era has delivered the west back into the kind of crisis-ridden world that we last experienced in the 1930s. With this background, it is hardly surprising that a majority in the west now believe their children will be worse off than they were. Second, those who have lost out in the neoliberal era are no longer prepared to acquiesce in their fate – they are increasingly in open revolt. We are witnessing the end of the neoliberal era. It is not dead, but it is in its early death throes, just as the social-democratic era was during the 1970s.

Image result for Jeffrey D. Sachs

The Earth Institute@Columbia University’s Jeffery Sachs

A sure sign of the declining influence of neoliberalism is the rising chorus of intellectual voices raised against it. From the mid-70s through the 80s, the economic debate was increasingly dominated by monetarists and free marketeers. But since the western financial crisis, the centre of gravity of the intellectual debate has shifted profoundly. This is most obvious in the United States, with economists such as Joseph Stiglitz, Paul Krugman, Dani Rodrik and Jeffrey Sachs becoming increasingly influential. Thomas Piketty’s Capital in the Twenty-First Century has been a massive seller. His work and that of Tony Atkinson and Angus Deaton have pushed the question of the inequality to the top of the political agenda. In the UK, Ha-Joon Chang, for long isolated within the economics profession, has gained a following far greater than those who think economics is a branch of mathematics.

 Meanwhile, some of those who were previously strong advocates of a neoliberal approach, such as Larry Summers and the Financial Times’s Martin Wolf, have become extremely critical. The wind is in the sails of the critics of neoliberalism; the neoliberals and monetarists are in retreat. In the UK, the media and political worlds are well behind the curve. Few recognise that we are at the end of an era. Old attitudes and assumptions still predominate, whether on the BBC’s Today programme, in the rightwing press or the parliamentary Labour party.

Following Ed Miliband’s resignation as Labour leader, virtually no one foresaw the triumph of Jeremy Corbyn in the subsequent leadership election. The assumption had been more of the same, a Blairite or a halfway house like Miliband, certainly not anyone like Corbyn. But the zeitgeist had changed. The membership, especially the young who had joined the party on an unprecedented scale, wanted a complete break with New Labour. One of the reasons why the left has failed to emerge as the leader of the new mood of working-class disillusionment is that most social democratic parties became, in varying degrees, disciples of neoliberalism and uber-globalisation. The most extreme forms of this phenomenon were New Labour and the Democrats, who in the late 90s and 00s became its advance guard, personified by Tony Blair and Bill Clinton, triangulation and the third way.

But as David Marquand observed in a review for the New Statesman, what is the point of a social democratic party if it doesn’t represent the less fortunate, the underprivileged and the losers? New Labour deserted those who needed them, who historically they were supposed to represent. Is it surprising that large sections have now deserted the party who deserted them? Blair, in his reincarnation as a money-obsessed consultant to a shady bunch of presidents and dictators, is a fitting testament to the demise of New Labour.

‘Virtually no one foresaw the triumph of Jeremy Corbyn’, pictured at a rally in north London last week.

‘Virtually no one foresaw the triumph of Jeremy Corbyn’, pictured at rally in north London last week. Photograph: Daniel Leal-Olivas/AFP/Getty Images

The rival contenders – Burnham, Cooper and Kendall – represented continuity. They were swept away by Corbyn (pic above), who won nearly 60% of the votes. New Labour was over, as dead as Monty Python’s parrot. Few grasped the meaning of what had happened. A Guardian leader welcomed the surge in membership and then, lo and behold, urged support for Yvette Cooper, the very antithesis of the reason for the enthusiasm. The PLP refused to accept the result and ever since has tried with might and main to remove Corbyn.

Just as the Labour party took far too long to come to terms with the rise of Thatcherism and the birth of a new era at the end of the 70s, now it could not grasp that the Thatcherite paradigm, which they eventually came to embrace in the form of New Labour, had finally run its course. Labour, like everyone else, is obliged to think anew. The membership in their antipathy to New Labour turned to someone who had never accepted the latter, who was the polar opposite in almost every respect of Blair, and embodying an authenticity and decency which Blair patently did not.

Labour may be in intensive care, but the condition of the Conservatives is not a great deal better.

Corbyn is not a product of the new times, he is a throwback to the late 70s and early 80s. That is both his strength and also his weakness. He is uncontaminated by the New Labour legacy because he has never accepted it. But nor, it would seem, does he understand the nature of the new era. The danger is that he is possessed of feet of clay in what is a highly fluid and unpredictable political environment, devoid of any certainties of almost any kind, in which Labour finds itself dangerously divided and weakened.

Labour may be in intensive care, but the condition of the Conservatives is not a great deal better. David Cameron was guilty of a huge and irresponsible miscalculation over Brexit. He was forced to resign in the most ignominious of circumstances. The party is hopelessly divided. It has no idea in which direction to move after Brexit. The Brexiters painted an optimistic picture of turning away from the declining European market and embracing the expanding markets of the world, albeit barely mentioning by name which countries it had in mind. It looks as if the new prime minister may have an anachronistic hostility towards China and a willingness to undo the good work of George Osborne. If the government turns its back on China, by far the fastest growing market in the world, where are they going to turn?

Brexit has left the country fragmented and deeply divided, with the very real prospect that Scotland might choose independence. Meanwhile, the Conservatives seem to have little understanding that the neoliberal era is in its death throes.

‘Put America first’: Donald Trump in Cleveland last month. Photograph: Joe Raedle/Getty Images

Dramatic as events have been in the UK, they cannot compare with those in the United States. Almost from nowhere, Donald Trump rose to capture the Republican nomination and confound virtually all the pundits and not least his own party. His message was straightforwardly anti-globalisation. He believes that the interests of the working class have been sacrificed in favour of the big corporations that have been encouraged to invest around the world and thereby deprive American workers of their jobs. Further, he argues that large-scale immigration has weakened the bargaining power of American workers and served to lower their wages.

He proposes that US corporations should be required to invest their cash reserves in the US. He believes that the North American Free Trade Agreement (Nafta) has had the effect of exporting American jobs to Mexico. On similar grounds, he is opposed to the TPP and the TTIP. And he also accuses China of stealing American jobs, threatening to impose a 45% tariff on Chinese imports.

To globalisation Trump counterposes economic nationalism: “Put America first”. His appeal, above all, is to the white working class who, until Trump’s (and Bernie Sander’s) arrival on the political scene, had been ignored and largely unrepresented since the 1980s. Given that their wages have been falling for most of the last 40 years, it is extraordinary how their interests have been neglected by the political class. Increasingly, they have voted Republican, but the Republicans have long been captured by the super-rich and Wall Street, whose interests, as hyper-globalisers, have run directly counter to those of the white working class. With the arrival of Trump they finally found a representative: they won Trump the Republican nomination.

The economic nationalist argument has also been vigorously pursued by Bernie Sanders, who ran Hillary Clinton extremely close for the Democratic nomination and would probably have won but for more than 700 so-called super-delegates, who were effectively chosen by the Democratic machine and overwhelmingly supported Clinton. As in the case of the Republicans, the Democrats have long supported a neoliberal, pro-globalisation strategy, notwithstanding the concerns of its trade union base. Both the Republicans and the Democrats now find themselves deeply polarised between the pro- and anti-globalisers, an entirely new development not witnessed since the shift towards neoliberalism under Reagan almost 40 years ago.

Another plank of Trump’s nationalist appeal – “Make America great again” – is his position on foreign policy. He believes that America’s pursuit of great power status has squandered the nation’s resources. He argues that the country’s alliance system is unfair, with America bearing most of the cost and its allies contributing far too little. He points to Japan and South Korea, and Nato’s European members as prime examples.He seeks to rebalance these relationships and, failing that, to exit from them.

As a country in decline, he argues that America can no longer afford to carry this kind of financial burden. Rather than putting the world to rights, he believes the money should be invested at home, pointing to the dilapidated state of America’s infrastructure. Trump’s position represents a major critique of America as the world’s hegemon. His arguments mark a radical break with the neoliberal, hyper-globalisation ideology that has reigned since the early 1980s and with the foreign policy orthodoxy of most of the postwar period. These arguments must be taken seriously. They should not be lightly dismissed just because of their authorship. But Trump is no man of the left. He is a populist of the right. He has launched a racist and xenophobic attack on Muslims and on Mexicans. Trump’s appeal is to a white working class that feels it has been cheated by the big corporations, undermined by Hispanic immigration, and often resentful towards African-Americans who for long too many have viewed as their inferior.

A Trump America would mark a descent into authoritarianism characterised by abuse, scapegoating, discrimination, racism, arbitrariness and violence; America would become a deeply polarised and divided society. His threat to impose 45% tariffs on China, if implemented, would certainly provoke retaliation by the Chinese and herald the beginnings of a new era of protectionism.

Trump may well lose the presidential election just as Sanders failed in his bid for the Democrat nomination. But this does not mean that the forces opposed to hyper-globalisation – unrestricted immigration, TPP and TTIP, the free movement of capital and much else – will have lost the argument and are set to decline. In little more than 12 months, Trump and Sanders have transformed the nature and terms of the argument. Far from being on the wane, the arguments of the critics of hyper-globalisation are steadily gaining ground. Roughly two-thirds of Americans agree that “we should not think so much in international terms but concentrate more on our own national problems”. And, above all else, what will continue to drive opposition to the hyper-globalisers is inequality.

 https://www.theguardian.com/commentisfree/2016/aug/21/death-of-neoliberalism-crisis-in-western-politics