Flags and Fascism

If you want an indication of the madness into which British elite society has descended in the last few years, just consider its attitudes to two flags – the Ukrainian and the Palestinian.

Following the Russian invasion of Ukraine, the Ukrainian flag fluttered from public buildings across the land, alongside the Union Jack. It became almost treasonous – and a sign of a depraved fascistic mindset – not to unconditionally support Ukraine and the sending of whatever weapons it requested (including cluster bombs) for its fight against the indisputably evil Vladimir Putin.

Now, following the genocidal Israeli bombardment of Gaza, the completely opposite mentality reigns. Displaying the Palestinian flag is semi-illegal and a sign, according to our government and the ‘opposition’, of hate-filled venom and support for terrorism.

This is despite the fact that, in the words of British veteran Joe Glenton, the two cases, “they’re not exactly the same, but they are similar. There are people resisting an occupation.”

To explain the flagrant double standards, it’s easiest to look at Britain’s inveterate ‘how high’ Atlanticism, which means it automatically does whatever it thinks the US wants. But there are deeper, historical reasons – to do with Empire and who is considered worthy of support and who isn’t – onto which we should shine a light.

Universal human rights

In January 1941, when trying to get Congress to approve his lend-lease proposals, Franklin Roosevelt set out what would become war aims (even though it would be almost a year before the US entered WW2 and then explicitly because of Pearl Harbor). “Freedom,” he said “means the supremacy of human rights everywhere. Our support goes to those who struggle to gain those rights or to keep them.”

The speech formed the foundation of the famous Atlantic Charter (released in August 1941 still months before the US entered the war) whose third point emphasised self-determination to those deprived of it.

This set off a torrent of speculation that the right to self-determination should apply not only to those suffering under Nazi and Fascist tyranny but to the hundreds of millions of subjects of western empires across the world. Clearly they didn’t live under governments of their choosing. What about their freedom?

Winston Churchill, at that stage, in Orwell’s phrase “posing as a democrat”, went to great pains to make sure people didn’t lapse into error on this matter. The charter’s third point, he told the House of Commons, only pertained to the restoration of self-government to the states and nations of Europe “now under Nazi yoke”.

A lot of water has passed under the bridge since these words were uttered – including (often involuntary) decolonisation. But the attitude behind them, as shown by the black and white reactions to Gaza and Ukraine, has proved remarkably resilient.

Ukraine is an example of the unbearable sight of Europeans suffering from war crimes and human rights abuses. Gazans, clearly, don’t merit similar sympathy despite their plight being much worse. In fact, they are perpetrators, not really genuine victims at all. And to go back to the Churchillian distinction, you can’t restore self-determination to Palestinians because they’ve never actually enjoyed it – not under the British mandate, not under post-war Egyptian control, and certainly not under Israeli occupation since 1967.

People like us

This aliveness of this attitude can be seen in a myriad of ways. Ukrainian refugees are treated with the understanding due to people who we can, there but for fortune, imagine being. Refugees from the Middle East, by contrast, are seen as dangerous interlopers who we must keep out – either from Britain or continental Europe – by any means necessary. This ‘people like us’ mentality can even be discerned in something as apparently innocent as the inclusion of Israel and Australia in the Eurovision song contest.

In recent years, it has been common to suggest that post-Brexit Britain is in danger of “creeping fascism”. But the fascist temptation is, in my opinion, equally strong in both Britain and in the European Union from which it so tortuously parted company from just three years ago.  While pro-Palestinian demonstrations are denounced as “hate marchers” by Tory politicians in Britain, in Germany and France they are simply banned and Israeli Jews protesting against the slaughter are arrested.

Fascism is not Nazism

“Much against their will the British governing class have been forced into the anti-Hitler position,” George Orwell noted on the eve of the Second World War. These days, for the wealthy and powerful, the same impediments to realising your heart’s desire don’t exist. But I don’t want to suggest that a revitalised Nazism is the danger. The master race ideology, later annihilationist insanity, and the impulse to empire-build on the European continent, strictly limit its appeal. But classical Fascism – of the Italian vintage – is a different matter.

 

It’s little remembered that liberals, when forced in the 1920s to choose between Mussolini’s black-shirts and the workers’ movement they physically smashed, enthusiastically plumped for the former. And once in power, Mussolini’s economic policy, in its initial years, followed some eerily familiar patterns:

·        Fascism embraced austerity in the form of cuts to welfare spending and slimming down the civil service (reduced by 65,000 in 1923 alone). Just as in 21^st century Britain and Europe, austerity has been imposed for more than a decade with the exception of – just as with Mussolini – skyrocketing military spending.

·        Fascism increased VAT, a regressive tax because everyone – billionaire and disability claimant – pays the same. In Britain, VAT stood at 8% in 1979. Now it is 20%. Since 2008 around 80% of the member-states of the EU have increased their VAT rates. Mussolini also reduced tax on corporations. In Britain corporation tax stands at 25%. It was 51% in 1981. ‘Social Democrats’ in Europe have likewise sought to ‘stimulate’ growth through corporate tax cuts.

·        Fascism put technocrats in full charge of economic policy. In its first three years of power, liberal economist Alberto de Stefani, formerly of the Centre party, was granted “unprecedented  authority” as minister of finance. Today, the European Central Bank now oversees EU economic policy, ensuring the debt of member-states doesn’t rise above acceptable levels.  And the ECB and the European Commission have no compunction about imposing technocratic governors like Mario Draghi on recalcitrant countries. In non-EU Britain, the central bank – the Bank of England – is now ‘independent of political control’. In fact, a key neo-liberal reform across the world has been to remove economic decision-making from the hands of politicians and give it to unelected technocrats.

·        Fascism privatised state enterprises. Between 1922 and 1925, the fascist government implemented a “large-scale privatisation policy”, selling most of Italy’s state-owned telephone networks, for example. The aim was to balance the budget, a “core objective of fascist economic policy in its first phase”. Privatisation of utilities such as telephones and water was a signature policy of Thatcher in Britain and embraced by her successors. Since the 1980s, the privatisation mania has spread around the world, including to Europe.

·        Fascism was not initially anti-Semitic or at least no more so than other western ‘democracies’. It implemented policies of confiscating Jewish property and rounding up Jews as a result of its alliance with Nazi Germany but this attitude was not home-grown.  At first, being Jewish and Fascist was not some kind of hideous non-sequitur.  Fascism was, however, inherently racist towards non-white people from the get-go, employing poison gas on a wide scale in its 1936 invasion of Ethiopia, for example.

This indicates that elite liberalism of the kind represented by both Britain and the EU (which means liberties for the elite) is not, in principle, incompatible with Fascism. This is not to say everyone to the Right of Jeremy Corbyn is a Fascist itching to remove the mask, but many people will tolerate it if the only alternative is seen as worse  – for example some sort of socialism, which is regarded as far more inimical to freedom.

For instance, the election of the far-right Georgia Meloni in Italy – in her youth a member of a neo-Fascist party – was seen was by many as the trigger for a period of unbridled conflict with the EU. But it hasn’t turned out that way. Her “relatively conservative 2023 Budget law,” notes one assessment of Meloni’s first year in office, “quelled investors’ fears.” Maybe, in truth, if you are an investor (or a CEO, or someone of ‘high net worth’), there isn’t much to be afraid of.

The danger of Europeanism

Much-vaunted Europeanism is not an antidote to this. It can easily degenerate into the idea that we must protect our European culture and freedoms from outsiders, usually of a darker skin tone, who seek to destroy it. And, when all is said and done, the EU is a trading bloc for Europe. If you’re not lucky enough to live there – and the vast majority of the world’s population obviously aren’t – well, that’s tough luck.

Culture can easily serve as a synonym for the way race was used in decades gone by. For example, justifying the invasion of Abyssinia in 1936, Mussolini said he was putting an end to slavery in a “barbaric pseudo-state” and bringing the benefits of western civilisation. And slavery certainly existed under Haile Selassie. Naturally this civilising mission entailed wide-scale extermination of the native population.

Looking at the way the war on terror has been prosecuted in places like Iraq, Syria and Libya there are clear echoes in the way the immense cost to the indigenous populations of imposing allegedly morally superior regimes – or in the case of Libya no regime at all – is downplayed in a manner that simply wouldn’t happen if they were white and European.

All this is supremely relevant because the government our governments are giving carte blanche – and weapons – to, to bomb hospitals and commit ethnic cleansing is basically Fascist. In a letter to the New York Times in 1948, Albert Einstein and Hannah Arendt, among others, claimed that Tnat Haherut (the Freedom party) in the newly-created state of Israel was “closely akin in its organisation, methods, political philosophy and social appeal to the Nazi and Fascist parties”. Tnat Haherut was the forerunner of Benjamin Netanyahu’s Likud party. He is unquestionably “nationalist, genocidal, chauvinistic” and his coalition government, the most right-wing in the country’s history, contains out and out Fascists. One, Bezalel Smotrich, identifies as a “fascist homophobe”, lives in an illegal settlement, and denies that the Palestinian people even exist. Another, national security minister Ben-Gvir, was convicted in Israel of inciting racism and supporting a terrorist organisation.

Netanyahu’s government is, in classic fascist style, attacking the independence of the judiciary and is brutally cracking down on free speech among Israelis.

There are internal conflicts. The government contains a self-confessed “fascist homophobe” but the Israeli Defence Force, which is leading the attack on Gaza, proclaims a progressive attitude to LGBTQIA+ people unusual among the world’s militaries. But just as in the Ukraine, where the support for the Nazi Azov Battalion has gone hand in hand with allegedly advancing the rights of sexual minorities, these apparently intractable contradictions are not insurmountable.

Bringing it all Back Home

The classic ingredients of fascism – extra-parliamentary violence against the Left, cracking down on free speech, corporate-friendly economic policies, war preparation, and blatant racism – are already present in the UK and Europe, ready to be assembled into a coherent whole. Anyone who doesn’t the see connection between support for genocide abroad what happens domestically is engaging a fatal delusion.

The inability to make half an argument

The startling thing about the death spiral currently engulfing the UK economy is that the medicine prescribed to deal with it – austerity and tax rises on ordinary people – will only make the economic pain worse. And yet they are seen as the only conceivable option.

Jeremy Hunt soberly tells us we must “pay our way in the world” as he ordains £30 billion in spending cuts and £24 billion in tax rises. Meanwhile the ‘Labour’ opposition rules out taking “risks with public finances” and or “getting its big government cheque book out”. Given that Hunt’s public spending cuts will take place in 2025 – after the next general election – and that the Labour party will almost definitely, following Blair’s example in 1997, not dare deviate from Tory spending plans in a bid to appear economically ‘credible’, it is an odds on certainty that austerity mark 2 will happen regardless of which party is in power.

That that party is the Conservatives, is dependent, we are told, on the unlikely event of them recovering their reputation for “sound money and sound public finances” lost in the Liz Truss debacle. But the incredible thing is that following the Cameron/Osborne years they had it in the first place.

The twin disasters of Austerity Mark One

It is established, if not universally known, that the original version of austerity was a disaster in social terms. The 40 per cent cut in funding for public services, most apparent in huge reductions in local authority social care budgets (for home visits, help with dressing, washing etc.), translated to 335,000 excess deaths and falling life expectancy .

But austerity was also a disaster economically.  GDP per head only reached an average of 1.2% between 2010 and 2018, lower than the previous decade (which was already low). Despite a mania for selling off public assets, which raises revenue in the short-term, public debt rose from 65% of GDP in 2010 to 79.1% in February 2020, and then mushroomed further because of the Covid lockdown.

Under ‘Osbornomics’ all this pain for masses of people was accompanied by an unconditional bounty for the super-rich in the form of quantitative easing, a state subsidy which raised the value of financial assets like shares. In the Eurozone, a mirror-image – ‘Draghinomics’ (after Mario Draghi former head of the European Central Bank) – likewise dispensed the suffering and largesse to, respectively, the undeserving poor and the undeserving rich, resulting in similarly comatose economic growth.

That there is a connection between falling real wages, lacklustre GDP growth, rising government debt, and austerity (which cuts the public sector workforce and reduces spending power and thus has ripple effects in the economy, and therefore on government revenue) can only be denied by an ideologically-induced blindness, which handily our government and its handmaidens in the media have in abundance.

Nonetheless, the barely contested response to projections that government revenue will be reduced in future, in the context of even larger falls in personal income, is to reintroduce austerity, the effect of which will be to further reduce government revenue.

It must have been this kind of iron-clad logic that earned the Conservatives their reputation for economic competence.

Don’t cut your cloth according to your measure

It shouldn’t take a PhD in economics to see through it. Despite the tenacity of home-spun wisdom that the government is like a household and must budget for hard times accordingly, cutting its outlays to take account of lower income, it isn’t and shouldn’t*.  The government’s spending – on for example enhanced salaries for nurses and other public servants – will multiply through the economy by being spent by individuals, and eventually turn into income for the government paid through tax. As economist Anne Pettifor points out:

Once earned, individuals, households and firms spend and invest their new, higher income. They spend on goods, on rent, on food, and on services provided by for example, football clubs, lawyers, accountants, musicians, artists etc. That spending generates additional tax revenues for government, this time paid by football clubs, firms, shops, landlords, farmers, lawyers, musicians etc.

This anti-austerity insight that the government is not like a household and shouldn’t behave like one essentially comes from John Maynard Keynes, who famously said in 1931, “You cannot balance the nation’s books by cutting its income”. That this perception, which comes from a man who explicitly wasn’t a socialist, is now indelibly associated with the Left and non-mainstream economists is an indication of how far to the Right politics and economics have shifted in the West in the last four decades.

The economic limits of shopping

Because in the context of 2023, not 90 or so years before, there’s something wrong with it. It, and its contemporary proponents, are making half an argument.

Resuscitating what economists call “effective demand” – a virtuous circle that ensures people have more disposal income so they go out and buy consumer goods, thus stimulating production to keep up and, through increased tax, shrinking government debt – is not the panacea for the economy because it doesn’t get to the root of what’s fundamentally wrong with it.

For decades the economy has become more dependent on profits from finance and speculation for the prosaic reason that more money can be made that way than from expanding production. This is despite unrelenting efforts to sustain demand in the form of escalating personal debt. And as a profits are made, more capital is inevitably produced, conditioned to seek profitable outlets of one sort or another. Curiously, governments in the West in the last decade responded to this surplus of capital but creating even more of it through Quantitative Easing.

There is no realistic way of expanding demand quickly enough to absorb this ever growing mass of capital. Even if the UK government miraculously saw the light and stopped suppressing demand through austerity and holding down public sector pay.

In this financialised economy, government progressively becomes more indebted as it has to support a weak private sector through bail-outs, tax cuts and subsidies to low pay. Meanwhile private sector debt escalates because being “highly leveraged”, in technical parlance, is seen as the way to increase exposure to financial products and thus bring in future profits.

Theoretically, the route out of this conundrum is strong economic growth which enables the gradual amelioration of debt, private and public. In its own rather pathetic way this is what the short-lived Truss administration was trying to do through its “investment zones” and scattergun tax cuts, which would supposedly have ‘paid off’ after a few years. That the ‘markets’ quickly pulled the rug from under Truss’s feet is an indication that no-one really believes revived economic growth is possible. With Sunak and Hunt, we’re back to stabilised misery.

Socially it is imperative that the RMT and others win their pay disputes. It is vital that the NHS is properly funded and re-nationalised. It is essential that Sunak’s attempts to force workers to continue working even if they want to go on strike – reminiscent of the Fascist regimes of the 1930s and one continuity with Liz Truss – are defeated. But we shouldn’t pretend that these victories – should they happen – will bring about an economically sustainable system.

*The idea that the government should ‘trim its sails’ in hard times, much like a sensible household, has proved to have a tenacious hold on public opinion, since it was first outlined by the conservatives and their allies in the media in the wake of the 2008 financial crisis. But not only is the analogy wrong, it is belied by the fact that most people don’t take any notice of it in their own lives, in that personal debt goes on rising year by year.

 

 

 

 

 

 

 

The Great Austerity Magic Trick

A Review of Austerity: The History of a Dangerous Idea, by Mark Blyth, part one

If there was an award for the dumbest yet most bizarrely effective political idea of recent years, one candidate would be an absolute shoo-in. The notion that debt racked up by the last Labour government in the UK caused the financial crisis, doesn’t seem to suffer in the least from endless repetition, despite being economically infantile. Expect it to play a possibly decisive role in the General Election campaign early next year.

As Mark Blyth observes in his book, Austerity: The History of a Dangerous Idea, this stems from “a wonderful confusion of cause and effect”. The state gets the blame for a “quintessentially private-sector crisis”. In the UK and US, privately funded housing bubbles imploded, rendering insolvent hugely leveraged (indebted) financial institutions. In Europe even more vastly leveraged banks (in 2008 Deutsche Bank had assets that were 80% of German GDP) were left high and dry by either, as in case of Ireland and Spain, the bursting of a similar house price bubble, or, as with Italy and Portugal, too much lending to governments that suddenly went sour.

In no case, apart from possibly Greece, did wild public spending have anything to do with it. Spain actually ran a budget surplus prior to the financial crisis. In 2007, Ireland had a debt to GDP ratio far better than Germany’s – 12% compared to 50%.

“The fiscal crisis in all these countries,” writes Blyth in a statement of the obvious that shouldn’t be, but evidently is, painfully necessary, “was the consequence of the financial crisis washing up on their shores, not its cause.”

But that is not the way our politics has been able to rationalise what happened. “What were essentially private-sector debt problems were rechristened as ‘the Debt’ generated by ‘out of control’ public spending,” says Blyth. Cue homilies about the penance we all have pay for partying like there was no tomorrow in the boom years. And that penance takes the form of huge public spending cuts – austerity, “a deserved doomsday for the borrowing way of life” 

Here is Mark Blyth (a Scottish professor at an American university) speaking:

But I think Blyth is so concerned to nail the patent deceit and injustice of this subterfuge that he neglects one thing. We don’t actually have austerity. We have public sector austerity in spades, sure. Disabled people in Britain, who clearly spent the years prior to 2007 downing endless bottles of Moёt, are paying a wholly justified penance through the withdrawal of the Independent Living Fund, the Bedroom tax, the work capability scandal, the limiting of contribution-based Employment and Support Allowance to one year and the abolition of the disabled worker element of Working Tax Credit.

But private sector austerity, a penance for the sector of society that actually caused the problems in the first place? I must have missed that one. After the taxpayer funded bail-out that caused the debt to mount initially (£1.5 trillion in Britain and $7.7 trillion in the US), the private sector has been suitably chastised by successive bouts of Quantitative Easing, a subsidy to banks and other financial institutions that has amounted to £357 billion in Britain, all under the watchful eye a government run by the austerity evangelising Conservatives. Banks in the UK have also had to deal with the crushing blow of the £80 billion Funding for Lending programme, and a state guarantee of 15% of the value of mortgage loans made under the Help to Buy Scheme. All this has taken place in the context of near zero interest rates which makes borrowing money incredibly cheap and saving it kind of pointless. And the tough medicine has been topped off with a cut of corporate income tax from 28% to 20% (by 2015). I really don’t know how they cope.

It’s not as if you can say that debt isn’t a problem for the private sector and it is for the public sector. As Blyth says, we are dealing with “weaknesses internal to the private sector” and weaknesses that was transferred to the state’s books. According to a report by the consultants McKinsey in 2011, overall debt in the UK was 507% of GDP, making Britain the second most indebted country in the world, behind Japan. Government debt (and this is post-bailout remember) was the smallest component, at 81%. The debt of financial institutions made up a huge 219%, non-financial institutions 109% and households 98%. Overall debt is now down to 484% of GDP but it’s still enormous.

In November 2013, household debt in the UK reached a record level of £1.43 trillion.

But when confronted with a two decades-long bout of financial incontinence by the private sector, governments in the UK, US and Europe, in contrast to the unbending sternness with which they have imposed public sector austerity, have responded by … prescribing laxatives.

They certainly don’t make austerity like they used to in the old days. One of the attributes of Blyth’s book is that he delves into the intellectual antecedents of austerity, as well as critiquing its contemporary application. And here you get a rather different kind of austerity. Adam Smith, the father of market economics, was against “easy money” and thought merchants, unlike governments, were by nature savers. Early nineteenth century economist David Ricardo was adamant that states shouldn’t “cushion market adjustments.” Into the 20^th century and the ultra-free market Austrian school believed austerity meant “a flight into real values”. “The thing to do” wrote Austrian free marketeer Ludwig von Mises, “is to curtail consumption … the economy must adapt itself to these losses”. Another “austerity enabler”, late twentieth century right-wing economist, Milton Friedman, believed in controlling the money supply.

According to Blyth, Austrians like Von Mises and Friedrich Von Hayek (Margaret Thatcher’s favourite economist) thought that “the very worst thing that can happen is for the government to get involved. By flooding the market with liquidity, keeping the rate of interest low when credit is scarce, or attempting to stimulate the economy to smooth out the cycle, government intervention simply prolongs the recession”.

This is practically an instruction sheet of how our austerity-preaching governments have reacted. First of all they “got involved” from the outset through massive bail-outs of banks in the US, UK and also Europe (the difference with the European Central Bank is that they haven’t taken on toxic bank assets but there have been huge bail outs in Ireland and Spain and the ongoing suffering inflicted on Greece is to ensure that French and German banks never have to face up to their bad debts).

Next we have the mistake of “flooding the market with liquidity” which is the definition of Quantitative Easing, practiced by austerian Conservatives in Britain as well as the austerity-sceptics of the Obama administration. And the unwavering, government-toppling autocrats of the European Central Bank are not averse to a spot of Quantitative Easing, either. The Long-term Refinancing Operation undertaken for still massively indebted banks in 2011 and 2012 was, in Blyth’s words, “an unorthodox policy of quasi-quantitative easing.” Then there is keeping the rate of interest low when credit is scarce (like after a credit crunch). British interest rates are stuck at 0.25% and there is paranoia about what will ensue if they are raised. European, ECB, interest rates are also at a record low of 0.25%. The last thing any government wants to do is “curtail consumption” even if it is rooted, as the value of real wages fall, in borrowing. And as for Milton Friedman and controlling the money supply, as David Coleman once said, “if he were alive today, he’d been turning in his grave.”

In the real-world austerity experiments of the 1920 and ‘30s, we find governments not only slashed what public spending there was but also let busts run their natural course, an eventuality our governments desperately stopped from happening. The ‘liquidationist’ doctrine of the US government of the early ‘30s turned the Wall Street Crash and a series of bank failures from a “relatively minor budget deficit into a full-blown financial crisis and depression,” writes Blyth. Both the US and Britain aggressively raised interest rates, rather than sinking them to below the rate of inflation as current policy dictates. Japan’s civilian government of the early ‘30s, we read, raised interest rates into the teeth of the depression, paving the way for a Fascist military takeover that radically reversed course. In all cases, austerity was applied with the same vigour to the private sector, as the public.

Marxian economist Andrew Kliman has pointed out that the destruction engendered by the laissez-faire approach of the 1930s was far greater than governments had expected and led to momentous changes such as World War Two. “Policymakers have not wanted this to happen again, so now they intervene with monetary and fiscal policies in order to prevent the full-scale destruction of capital value,” he writes in his book, The Failure of Capitalist Production. “This explains why subsequent downturns have not been nearly as severe as the Depression.”

It also explains the special kind of austerity we have, which is only applied to the public sector. The private sector is treated with the utmost permissiveness and government intervention.

In the second part of this review, I want to discuss how Keynesianism, which Blyth says returned for a brief twelve month reunion tour, in fact never went away. And how Blyth’s conclusion – that we should, in retrospect, have let the banks fail – is a version of liquidationism the Left should embrace.