A moral (and strategic) collapse

 

The collective West’s inability to respond to the deepening genocide in Gaza, now replete with mass executions and the deliberate killing of aid workers, is deeply troubling. It betrays a stunning moral degeneration that the British government, supported by His Majesty’s Loyal Opposition, cannot even propose stopping arms sales to the Israeli regime.

But this is not just a moral collapse, it is also a political and strategic one. This will not end well. Part of the West’s legitimacy, however much honoured in the breach, relied on projecting ‘soft power’ based on human rights and ‘a rules-based international order’. This is being shredded in real time. It is an insult to our intelligence to insist that Israel is merely trying to release the hostages as it blows up hospitals, universities, and apartment buildings and kills thousands of children.

It is frequently pointed out, with validity, that the US and Britain don’t support Israel because of the malign influence of the Israeli lobby, but because Israel is a strategic ally. It is the ‘unsinkable aircraft carrier’, in the description of ’80s secretary of state Alexander Haig, and a nuclear armed US surrogate in a vital region of the world. According to current president Joe Biden, if Israel didn’t exist, it would have to be invented by the US. Hence the mind boggling weapons sales (from mainly the US but also Britain and Germany).

But I can’t be the first to notice that unconditional support for Israel as it commits genocide in full view of the world is not a very clever strategy. Long-term, or even short-term, the result will not be a ‘Greater Israel’ but a moral, and subsequently physical, collapse of the Zionist project. Already, the normalisation agreement with Saudi Arabia – the Islamist but pro-Western power in the region – based on erasing Palestine from the map (as Netanyahu showed the UN), has been scuppered because of Gaza.

If Israel is left unhindered, more unbelievable Palestinian suffering will happen. But after that, all bets are off. According to the Israeli historian Ilan Pappé, “the more oppressive the eliminatory policies are (and it’s terrible to say but it’s true) the less they are able to be covered up as a ‘response’ or ‘retaliation’ and the more they are seen as a brutal genocide policy. Thus, it is less likely that the immunity that Israel enjoys today would continue in the future.”

“On the basis of sober professional examination,” he says. “I am stating that we are witnessing the end of the Zionist project, there’s no doubt about it.

In the past, the US was able to see Israel as a strategic ally but one that occasionally needed to be restrained. In 1957, threatening behind the scenes the withdrawal of aid and the imposition of sanctions, the US (in the person of Dwight Eisenhower) persuaded Israel to withdraw from the Sinai Peninsula it had occupied during the invasion of Egypt. In 1982, Reagan demanded, and got, a ceasefire after Israel had invaded Lebanon. Both these inhibiting actions were carried out by Republican presidents by the way.

But now, beyond bleating and transparent PR exercises, the US government appears powerless to do anything. Despite the presence of legions of strategists, it seems totally beholden to a regime that traces its ideological lineage back to Benito Mussolini, shoots 5 year old children with sniper bullets, and is unable to see the fatal long-term consequences of its actions.

Even if I was a thoroughly amoral Kissingerian national security strategist, I’d see the looming disaster ahead and rationally take steps to avert it.

But maybe the world isn’t rational anymore.

Drag Me to Hell – Why are we so right-wing?

 

Margaret Thatcher is known for many things – declaring war on trade unions, initiating the mass privatisation of publicly-owned utilities, selling off council houses, deregulating the City of London, cutting taxes on the rich, to name a few. But one thing she is not famous for is being on the Left.

Nonetheless, in 1982, she did something which, in today’s climate, would be seen as left-wing, even ‘far left’. She suspended arms sales to Israel. This was in response to the Israeli invasion of Lebanon, which was prompted by the fact that the Palestinian Liberation Organisation had relocated there.

Many civilians were killed and Thatcher’s government took immediate action. An invitation to Israel to attend the British Army Equipment Exhibition was withdrawn and arms sales were stopped. One Foreign Office memo stated, “It would be odd if we were now to conduct bilateral business with the Israelis as though nothing had happened”.

Contrast this with the current British government’s reaction to the genocidal Israeli attack on Gaza, which has already killed far more civilians than the Lebanon War did. In fact, the official number of dead – 30,000 – will be swelled by so far unreported deaths – those dying at home and missing because they are buried under rubble.

Atrocities definitely happened in the 1982 war, most famously in refugee camp massacres. But, as far as I’m aware, deaths from malnutrition did not occur, as they are now. Nor were starving people deliberately massacred by the Israel Defense Force.

Nonetheless, this time Britain is definitely conducting business as though nothing had happened. Arms sales continue, and indeed the “defense relationship” and “growing Israel-UK partnership” is celebrated by the IDF.

Virtually the only person in the UK Parliament to object to this state of affairs is a propagator of ‘far left’ ‘socialism’ who has been cast into out darkness on the patently ridiculous grounds that he enabled antisemitism to flourish when he was leader of the Labour party.

I doubt somehow though that Thatcher is turning in her grave.  She regarded her greatest victory as compelling the Labour party to renounce its mixed economy, social democratic ideology in favour of her right-wing, corporate friendly, anti-worker economic world-view. Something Corbyn, all too briefly, reversed.

The Ultimate Compliment

Present leader Sir Keir Starmer is the perfect compliment to Thatcher’s legacy.  Despite being elected on a promise of upholding Corbyn’s economic policy, he has jettisoned every element of it, leaving a husk of Thatcherite nostrums impeccably attuned to the political and economic establishment which has grown to such dominance in her wake.

For example, in throwing overboard a pledge to spend £28 billion a year on green energy projects, Starmer and de facto deputy Rachel Reeves consciously aped the language of the Cameron-Osborne government employed to justify austerity. They accused the government of “maxing out on the nation’s credit card”. The same mind-numbing phrase cropped up in Starmer’s response to the Budget.

Reeves has, in redoubtably conservative fashion, promised to balance the nation’s books, despite, somewhat hilariously, having her own Parliamentary credit card taken away in 2015 for over-spending on expenses.  She has also promised not to reintroduce a cap on bankers’ bonuses abolished by the Conservatives, as this would mar the charm offensive with the City of London that she and Starmer have methodically deployed over the last few years.

A Different Country

The question that should then be asked is how did British politics get so sclerotically right-wing, especially when, in terms of social attitudes, the diametrically opposite trend has occurred?

Last autumn, for example, the researchers behind British Social Attitudes Survey (BSA) proclaimed that Britain had undergone “a near revolution” in terms of social attitudes over the last four decades:

One clear theme emerges. On many social issues, such as sexual relations or whether women with young children should go out to work, there has been a long-run secular change trend towards a more liberal climate of opinion. In what might be thought a near-revolution in the country’s cultural outlook and social norms, Britain has increasingly come to believe that what people do in the bedroom, what kinds of family they live in, and how they combine family life and paid work should be up to them. The job of government is to respect and facilitate the decisions they make rather than try and take those decision[s] for them. 

In 1983, half of all respondents said that same sex relationships were “always wrong” compared to just 9% two years ago. Over three quarters of people support a woman’s right to have an abortion, compared to just 37% 40 years ago.

Other seismic changes can be found in attitudes toward premarital sex, having children outside wedlock, and gender roles in the workplace and the home. In 1987, for example, 48% agreed that ‘a man’s job is to earn money, a woman’s job is to look after the home and family’. Now only 9% of people do.  Britain “now looks and feels like a different country from 40 years ago”, the BSA says.

These are all welcome changes but in terms of politics, and the attitudes underpinning it, Britain doesn’t “feel like a different country from 40 years ago”. It feels like a worse country.

To go back to the example that introduced this article, in 1982 – when dinosaurian attitudes on social issues held sway – Margaret Thatcher could, with minimal opposition it seems, suspend arms sales to Israel. It is inconceivable that such a policy would be enacted today and if, by some miracle it was, it would be instantly accompanied by howls of antisemitism. 

It may justifiably be pointed out that these changes in social attitudes did not just happen. According to journalist Ian Sinclair, reporting on the BSA survey curiously neglected mentioning the role of “groups like the Women’s Liberation Movement, Stonewall, the Gay Liberation Front and Outrage dealing with violence, threats and abuse in their struggle to win equal rights, changes in the law and shift public opinion.”

But there is no shortage of activist groups – on anti-austerity, public ownership, the rights of disabled claimants, inequality, and corporate taxation for example – trying to shift Britain’s economic policy and politics marginally to the Left. But in this case, barring minor victories on things like the municipalisation of bus services, they have just been banging their heads against a brick wall.

Why is this? Why did activists, admittedly after years of struggle, succeed in prising the door open on gender issues, gay rights, and sexual choice but in terms of politics and economics meet a defiant ‘No Pasaran!” from the elite?

1983 will never die!

I can’t give a definitive answer but one notable feature of British politics over the past four decades has been an innate conservatism in the worst sense of the word. Instead of taking on vested interests, it has opted to protect and preserve them.

In party political terms, we have one side fixated on a perpetual emulation of Thatcher’s epoch-changing 1983 victory facing off against the 1997 Reenactment Society. Rather than changing, as social attitudes obviously have, politics is frozen in aspic, like some endless rerun of Yes Minister (which for those who don’t know was a ‘comedic’ representation of the right-wing Public Choice Theory and obsessed with cutting government waste).

In 2008, our necrophile political system bailed out, with public money, a financial system that had imploded entirely due to its own inner workings. Not only was this an enormous transfer of wealth from poor to rich, it also rescued and further entrenched a sector of the economy that feeds off debt and thus loves conservative economics.  

Finance wants austerity because, as a result, wages are held down and people become even more susceptible to getting into debt and having to make interest payments. For the same reason, it has an aversion to trade unions. Finance is also a prime mover behind the privatisation of public assets, funding the Private Equity groups that often take over public services, like water or health, thus benefitting from the rising user fees that people are compelled to pay to gain access to basic services.

If ‘market failures’ exist and they aren’t being dealt with, you can bet that for some people, invariably extremely well-off, these aren’t failures at all but successes and the source of their wealth.

Hysterical Billionaires

And when the billionaires who run Britain’s mass media organisations ran into some turbulence after revelations of phone hacking, the obedient political class was on hold to limit the fall out. The initial enquiry into unlawful conduct by the newspapers, led by the judge Brian Leveson, was meant to be followed by a second part (‘Leveson 2’) that would have looked into “corporate governance issues”. But this was scrapped by Matt Hancock because of the “significant progress” that had apparently been made.

As a result, rather than clipping their wings, moguls like Rupert Murdoch were emboldened. His News UK launched the right-wing Talk TV station in 2022, emulating the hysterical Fox News in the US despite laws against broadcasting bias in the UK which didn’t seem to make much difference. The fact that Talk TV is soon to become a streaming only service does not denude from its intention to further lock British politics into a right-wing direction.

Its ‘rival’ GB News plays a similar role. The co-owner of the channel is hedge fund billionaire Sir Paul Marshall. In a previous incarnation he funded and edited the 2004 ‘Orange Book’, a collection of free market espousing essays by leading Liberal Democrats which set the tone for their role in the Cameron coalition after 2010.

Marshall, who has been outed for seeming endorsement of far right conspiracy theories, has previously lamented the fact that financiers like him ‘made out like bandits’ as a result of the government’s decade-long Quantitative Easing programme. But despite this honesty, he hasn’t been deterred from putting the money to effective use.

If you create a large coterie of billionaires, as our political system has, you shouldn’t be surprised when they use that enormous wealth to mould public opinion and protect their interests. 

Liberal and progressive opinion in this country has been profoundly shaped by the Whig theory of history, which is convinced that the British story exhibits a steady, if slow, progress towards more liberty and rights. However, the experience of the last 40 years does not bear this out. Progress and reaction can co-exist, each in their own separate sphere of influence. Reality, as opposed to the idealised narrative that exists in our heads, is frequently messy and may point in two contradictory directions at the same time.

 

 

Inflation – what a Hout!

As I write, Britain is bombing a former colony – one of the poorest countries on earth, the scene recently of the “world’s worst humanitarian crisis” according to the UN, which was caused by a war inflicted by the medieval limb-severing Saudi Arabian regime with British weapons. But trying to stop the genocide in Palestine is crime enough to resume the sorties. And they want ordinary people to actively help out with this never-ending war for civilisation!

But pause for a minute and consider the reason for ‘Operation Prosperity Guardian’. The fear is that any continued obstruction to shipping routes in the Red Sea, which accounts for 15% of global sea trade, will reignite inflation, the bogeyman western governments and central banks have been trying to slay for the past two years or more.

I don’t want to minimise the problem of consumer inflation, to give it its proper name, which given that it causes massive rises in the cost of essentials like food involves real misery. This is exacerbated in an era when collective bargaining has been reduced to a rump of the economy so that wages can’t keep up with the price rises.

However, consumer inflation is not the only kind of inflation. Over many years, western countries have also been subject to asset price inflation – basically huge rises in the prices of shares and houses. In Britain, house prices have risen by about 1,000% since the early 1980s. And despite some ups and downs, the stock market across the western world keeps hitting record highs. In America it has enjoyed some of its best returns since the 1880s.

It is a basic axiom of our Thatcherite political mind-set that, in total contrast to consumer inflation, asset-price inflation is not something to dread. Quite the opposite, it is positively benign.

But, as we are now seeing, this is a travesty of the truth.

The inflation we like

So, unlike consumer inflation, the authorities have not tried to fight asset-price inflation. They have, by contrast, endeavoured to boost it at every turn and, if it seems to be flagging, to rekindle it with blatant forms of state intervention (despite the propaganda we don’t live in a ‘free’ market economy).

House prices in Britain have been deliberately stoked by restricting supply. It is a basic law of economics that if the supply of any good is suppressed, its price will increase.  This happened first through Thatcher’s ‘Right to Buy’ policy and was then reinforced by simply banning local councils from building new council houses. More recently, more direct forms of buttressing house prices have been necessary, for example the government’s ‘Help to Buy’ policy which is a simple subsidy to housebuilders.

The rise in share prices was first underpinned by legalising the process of share buy backs, banned in the aftermath of the Wall Street Crash of 1929. This has led to an internally-generated rise in share prices, caused by companies being pressured by their shareholders to ‘retire’ some of their shares, thus increasing the share price and the dividend payments to existing stock-holders. This practice has now become routine in the corporate world – according to economist Michael Hudson, publicly-listed American companies have, since 1985, retired more stock than they have issued.

Since the 2008 financial crisis, share prices have also been massively boosted by the artificial method of (electronic) money printing known as Quantitative Easing (QE). QE works by creating a huge mass of money, and by reducing the yield on government bonds, ‘incentivising’ investors to place it in the stock market or with other assets such as housing, or financing corporate mergers. According to investment manager, Kate Rogers, at venerable asset manager Cazenove, “Quantitative easing certainly stimulated asset markets. The billions that went from the banks to investors to buy the bonds was soon recycled into more attractively valued equities and property-boosting prices.”

This flagrant state intervention, practiced simultaneously in Britain, America, and Europe, is what lies behind the thriving stock market performance of the last decade or more (15% returns compared to an average of 9%). It is nothing to do with a healthy economy pushing up share prices. GDP growth, as we know, has been consistently poor for many years.

Of course, central banks are now pursuing the opposite policy to Quantitative Easing. ‘Quantitative Tightening’ involves selling assets to reduce liquidity in the financial system. This hasn’t (as yet but more on that later) produced a collapse in share prices. The conventional interpretation is that large companies are finally able to stand on their own two feet. But possibly QE under Covid was so huge – the creation of $834 million per hour – that the subsidy is still having an effect.

This is how it feels

The only way in which this asset-price inflation is commonly seen to have a downside is in terms of housing. The enormous rise in house prices – from an average of £26,000 in 1983 to £280,000 today – is regarded as a boon for the majority of people who already ‘own’ houses (or have mortgages on them). They can sit back and see their asset rise in value without having to do anything. But for young people who want to buy their first house – to ‘get on the housing ladder’ in common parlance – it’s a disaster. They frequently can’t even afford the deposit and are forced into permanent renting which, for those who have experienced it, is a distinctly unpleasant and insecure existence, apart from the fact that it soaks up most of your disposable income.

The last time houses were this unaffordable in Britain Benjamin Disraeli was Prime Minster.

However, with the resumption of consumer inflation and the central banks’ response of raising interest rates, the majority are no longer so content. They are, belatedly, seeing at first hand the malevolent side of asset-price inflation. Because house prices, with official blessing, have risen exponentially for decades, mortgages are a lot more expensive. And when interest rates rise above the minute level they have occupied for years, so do mortgage interest payments. This has resulted in huge increases in mortgage payments for many people. More than anything else, this lies behind the haemorrhaging of Conservative support in Britain. The private renting experience is going viral.

The share-owing oligarchy

What has happened to house prices might have its downsides, a defender of the status quo might argue, but surely there is little to object to in shares rising in value, the other main form of asset-price inflation? In fact there is. Undoubtedly some people benefit but the windfall accrues to a very small minority of share owners, including corporate executives who, these days, are all partially paid in share options. The original Thatcherite promise of a ‘share-owning democracy’ is now just a bad joke.

We now live in a resolutely two-track economy in which the stock market prospers while the real economy flounders. But given that rich people, who own shares, largely control the manufacture of public opinion, this experience doesn’t truly hit home. Thus the official opposition can come out with ludicrous non sequiturs like “when business profits, we all do” and are taken seriously.

The share price boom also comes at the cost of spiralling inequality. Since 2009, as the stock market has enjoyed nearly unprecedented gains, the wealth of the top billionaires in Britain has grown by 281%. In 2021, as actual economic activity was mothballed but massive amounts of QE ensured asset prices went skywards, the planet’s wealthiest people saw their balance sheets swell by $5 trillion. In Britain, since the pandemic, in the midst of the cost of living crisis, the number of billionaires has risen by a fifth.

Another trusted method of ensuring share prices go on rising – share buy backs – also damages the real economy. Because often the money companies use to buy back their shares (thus decreasing their number and raising their price) comes from funds that could otherwise be spent on business investment, they work to enrich their shareholder owners at the expense of wider economic health. Anaemic investment in production is a problem all over the western world.

The share price boom is not a win-win situation. It’s more like they win, you lose.

The economic trapeze

Central bankers – those who twiddle the dials of the world economy – are in a real quandary because of the actions of the Houthis. They believed they had, through historically moderate interest rates rises, solved the problem of the re-emergence of consumer inflation, as prices were heading downwards. They could then return to their prime function – ensuring that asset prices go on rising.

However, if global trade is impaired because of attacks on shipping in the Middle East, consumer inflation may return with a vengeance. If that happens, central bankers might feel they have no choice but to increase interest rates again, risking pricking the multi-asset bubble they have so carefully cultivated for the last decade or more.

It is a little appreciated fact that the 2008 Global Financial Crisis was sparked after a rise in interest rates. In America, they rose, incrementally, from 1 per cent in 2003 to 5.25% in 2007. Really large rises in interest rates do cause recessions, as evidenced by the experience of Britain and America in the early 1980s when, to prepare the ground for the Thatcher and Reagan ‘revolutions’, rates were increased to 17/18% in full knowledge of the carnage that would – and did – follow.

Given that western economies are much more indebted than they ever were when John Lennon was murdered, much more modest rises could have a catastrophic effect. 

According to economist Radhika Desai, if the Federal Reserve raises interest rates to “required levels, the US can expect a recession that will make that of the 1980s seem like a boom”. The alternative to not doing so is, if the projected effect on world trade comes to pass, the return of chronic (consumer) inflation. “Both paths,” she says “will damage working class incomes and wellbeing”.