Excerpted from Michael Lind, originally posted at The Spectator [14],
The age of turboparalysis Why we haven’t had a revolution
More than half a decade has passed since the recession that triggered the financial panic and the Great Recession, but the condition of the world continues to be summed up by what The Spectator's Michael Lind [14] calls ‘turboparalysis’ - a prolonged condition of furious motion without movement in any particular direction, a situation in which the engine roars and the wheels spin but the vehicle refuses to move.
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The greatest economic crisis since the Great Depression might have been expected to produce revolutions in politics and the world of ideas alike. Outside of the Arab world, however, revolutions are hard to find. Mass unemployment and austerity policies have caused riots in Greece and Spain, but most developed nations are remarkably sedate.
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By now one might have expected the emergence of innovative and taboo-breaking schools of thought seeking to account for and respond to the global crisis. But to date there is no insurgent political and intellectual left, nor a new right, for that matter.
But why hasn't this occurred?
Why has a global calamity produced so little political change and, at the same time, so little rethinking? Part of the answer, I think, has to do with the collapse of the two-way transmission belt that linked the public to the political elite.
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But there is a deeper, structural reason for the persistence of turboparalysis. And that has to do with the power and wealth that incumbent elites accumulated during the decades of the global bubble economy.
How did they get that power?
In essence, the bubble economy was a dysfunctional marriage of export-driven economies like China, Japan and Germany and debt-addicted nations like the US and many of Germany’s European neighbours. As international trade imbalances built up, from the 1980s to the 2000s, so did the wealth and power of elites who profited from the system, from Chinese Communist princelings with a stake in overbuilt export industries to the financiers of Wall Street and the City of London.
And that broke...
A global economic system that relied on excessive borrowing by consumers, particularly in the US, was bound to grind to a halt when fearful consumers switched from borrowing to saving. But the crash was only the first stage of the adjustment. The second stage is rebalancing.
But...
these reform agendas, from the downsizing of the overbuilt industrial sectors of mercantilist Asian nations to the pruning of finance in the Anglo-American world, threaten the very interests that profited from the preceding bubble and now glare defensively at a changing world, like Fafnir crouched upon his hoard. In the US, the wealth of the bubble-swollen financial sector has been transmuted into political power via campaign contributions.
So why no uprising against the elites? THIS IS CRITICAL
For their part, the masses seldom unite against the classes in democracies because they are divided among themselves. When nations realise that they will be collectively poorer in the future than they had expected, the usual result is not solidarity but rather civil war, by means of ballots and sometimes bullets. Confronted by a crisis like the Great Recession, each section of society uses its political influence to try to maintain its share of the national wealth, while forcing the cost of economic adjustment to others. The rich try to shift adjustment costs to the middle class, who in turn try to pay for their own subsidies and entitlements by cutting the programmes of the poor.
But is it coming?
History is sobering, in this regard. The Great Recession, which continues despite a technical ‘recovery’, can be viewed as the third great economic collapse of the industrial era, following the ‘Long Depression’ of the 1870s-1890s and the Great Depression of the 1930s. The earlier two episodes of global economic crisis witnessed setbacks for liberalism, democracy and free trade and the flourishing of illiberal nationalism, racism, imperialism and beggar-thy-neighbour economics. While slow growth combined with national rivalries have not yet engendered anything like the autarkic economics of the earlier two crises, it would be premature to predict the survival of present levels of financial and economic integration in a world that wobbles between feeble recoveries and renewed recessions.
Nowhere is there greater potential for conflict than in the relationship between the two poles of the now-collapsed bubble economy — the US, which specialised in exporting debt to China, and China, which specialised in exporting manufactured goods to the US. Since the Great Recession began, American attitudes toward China have grown strikingly more negative.
Is war coming?
The last global depression was brought to an end by the second world war. This time a ‘hot’ war is extremely unlikely and a cold war merely possible. Nevertheless, geopolitics may do what domestic politics has failed so far to do and free the world’s leading countries from ongoing turboparalysis.
The various national systems from which today’s leading global elites benefit, from hyper-industrial Germany to financialised Britain, grew up under the Pax Americana of the late 20th century. The US offered free security, a global currency, and the world’s largest open consumer market to allies — and potential allies — who were encouraged to specialise in non-military roles including industrial production (first Japan and Germany, later China) or finance (Britain and the US). The world order that resulted was well suited to East Asian and German industrialists and American and British bankers.
But while the US will remain the leading global military power for some time, the Pax Americana cannot survive the disappearance of a common Soviet threat and the diffusion of wealth and power to rising giants like China, India and Brazil. If, as many believe, the US will adopt a policy of moderate inflation in the future to help melt away the icecap of its public and private debt, the dollar as a store of value will be less attractive to foreigners.
If not, then what?
In the long run, regional hegemons, including China and Germany, may be compelled to take on some of America’s duties, from bailing out bankrupt countries to providing regional security. But that would require their political elites to focus less on economic statistics and more on their people and the world. The equivalent in the US would be a rebalancing of economic power and prestige away from financiers towards others — perhaps leaders of the fracking-driven energy renaissance or advanced manufacturing.
In some form or another, profound shifts like these are coming, because, as Mrs Thatcher would have said, There Is No Alternative. Going back to the pre-2008 world is not an alternative. Neither is the present state of suspended animation in politics and policy.
Nothing lasts forever. At some point today’s extended intermission in domestic and world affairs will give way to a new act. But for now the vehicle remains stuck in the ditch, while the wheels continue furiously to spin. The age of turboparalysis goes on.