Tag: 9-11

Britain’s high-debt, low-productivity economy spells long-term disaster

By Daniel Margrain

The collapse of the Berlin Wall which was the trigger that brought the totalitarian dictatorships of the former Soviet Union and those of its satellite states to their knees, came to symbolize for many the triumph of capitalist free market democracy over tyranny and oppression. An adviser to the US State Department, Francis Fukuyama, received international acclaim in 1989 when he reiterated this message by declaring, no less, that the collapse of communism was ‘the end of history‘. Great social conflicts and great ideological struggles were said to have been a thing of the past. Numerous newspaper editors and television presenters agreed.

A little over a decade after Fukuyama made his famous declaration, Islamist terrorists attacked the Twin Towers in New York. The attack was, in part, the result of Wahhabism’s ideological opposition to Western imperialist hegemony. Numerous imperial wars have been launched against Muslim countries since. Thus, Fukuyama’s thesis was trounced on a single day back in September 11, 2001. Anthony Giddens, the former director of the London School of Economics and court sociologist to Britain’s then New Labour Prime Minister, Tony Blair, repeated a similar message to that outlined by Fukuyama in his 1998 book, The Third Way.

Giddens  said“We live in a world where there are no alternatives to capitalism.” He was accepting and repeating a widespread but unsustainable assumption. The earliest merchant-form of capitalism began to emerge in the 17th century and industrial forms of capitalist production developed from the late 18th century. The organizing of the whole production of a country by capitalist means is barely three centuries old. It only began to become a dominant feature in terms of the universal dependence on markets some 60 or 70 years ago. Yet modern humans evolved about 200,000 years ago. In other words, what Giddens argued is that a capitalist economic system which represents a tiny fraction of our species’ life-span is set to last for the remainder of it.

Leaving aside the possibility of global catastrophe resulting from climate change or nuclear war, the notion that capitalism will continue to exist indefinitely into the future, is highly improbable. As the saying goes, ‘forever is a long time in history’. In just under two decades following the publication of The Third Way, capitalism has transformed into a finance-based neoliberal variant predicated on a form of systemic corruption underpinned by booms that zap productivity. The reason why financial booms impact on productivity in this way is in part the result of too much capital being mis-allocated to low productivity sectors which crowds out real economic growth.

Company buybacks illustrate this practice. Take Viacom as an example. The company issued debts of £10 billion and then bought back the shares which had subsequently reduced in value by 55 per cent. Similarly, Amazon issued £5 billion of debt prior to announcing they would also engage in this highly unethical practice. Issuing debt in order to buy-back stock implies an inability to grow companies organically. Rather, increasingly, the approach seems to be to boost the stock price artificially by a process of financial engineering. The problem is that levels of industrial production, the latest figures of which indicate a 0.3 per cent fall from the previous month, are not sufficient to support these kinds of debts.

Another illustration of the mis-allocation of capital to a low productivity sector, is in the realm of housing. Essentially, the UK economy is based on speculative-based property booms that are sustained through zero interest rates. This means that banks have access to almost unlimited credit which enables them to finance enterprises risk-free, underwritten by the tax-payer. The Conservative government under PM David Cameron is not investing in the productive parts of the economy but in financial ‘bubbles’ of which housing plays a significant part.

UK Chancellor, Gideon Osborne’s ‘help to buy scheme’ in which the UK tax-payer provides 40 per cent of the deposit for first-time house buyers, is clearly a policy aimed at the potential Tory voter in London. Many of the properties purchased will be used for the rental market as speculative investments thus boosting the housing bubble. Meanwhile, people who are part of the productive economy and make London tick, are steadily being priced-out and socially cleansed from the city. This is contributing to the decline in UK industrial output which has seen its biggest fall since August 2013. More importantly, this has impacted negatively on the UK’s trade deficit figures which are one of the highest, as a percentage of GDP, of any country within the OECD.

To emphasize this point, the UK’s trade gap with the European Union increased to a record high of £8.6 billion. The government’s suppose aim of re-balancing the economy by allegedly supporting its productive parts, is contradicted by its creation of risk-free speculative property bubbles of the kind described. The concept of free-market capitalism is supposed to be predicated on incentives, not state sanctioned socialism for the wealthy as the means to prop-up unsustainable economic bubbles. Yet the corporate controlled media, with their lurid headlines, continuously promote the latter.

The government’s subsidizing of house purchases is unhealthy for the medium to long-term economic well-being of the country as a whole. The subsidized property speculation bubble outlined is part of a centrally-planned Tory policy, no different in principle, to the socialist planned economies of the former Soviet Union and its satellite states that ‘the end of history’ allegedly supplanted. Low productive sectors within the UK have a knock-on effect in terms of the broader economy which is destined to decline as a result. This is because more needs to be produced for the pound sterling in order to counteract the affects of subsidized speculation which adds no value to the economy.

This principle also applies under conditions in which global investors pour money into government bonds which currently result in negative yields to the tune of some $6 trillion and growing. The infusion of greater amounts of subsidized money into the London economy runs counter to the government’s stated argument that they intend to diversify the wider economy by spreading investment throughout the UK as a whole. As a consequence of the Tory policy of socialism for property speculators, house prices in London are the most over-valued of any major city in the world.

Nevertheless, as long as potential property buyers and those already on the ladder in London have a perception that their homes are worth more than is actually the case, they will more likely be inclined to vote for the kinds of politicians who will perpetuate the bubble by continuing to offer some first-time buyers an injection of a huge cash-free gift as part of their deposit. If this was indeed the Tory plan prior to the London Mayoral election in order to assist the Tory candidate, Zac Goldsmith, then the strategy failed miserably. Whether Labour’s newly elected Mayor, Sadiq Khan, will attempt to scupper any moves by Jeremy Corbyn to put a break on the Tory’s high debt-low productivity economy policy, in order to further his broader opportunistic political ambitions, remains to be seen.

The Paris postmortem.

By Daniel Margrain

President Hollande’s declaration yesterday (November 16) that France is on a war footing is an almost seamless continuation of his rhetorical flourishes that followed the Charlie Hebdo attacks in January. This time, though, they have intensified and are clearly intended to give a signal to Syria’s President Assad that he can expect more bombs to be dropped on his country.

Something similar happened after 9-11 when President Bush announced to the American public, and hence the world, that the price to be paid for the deaths of over 3,000 people on American soil would be the spilling of the blood of Islamist terrorists, which of course, turned out to be a euphemism for the deaths of a million Iraqi civilians. Although the countries’ and time-frames are different, the magnitude of the grandstanding rhetoric and the upcoming violent retributive responses are not.

Hollande said that the terrorist attacks were “orchestrated from abroad”. But so too have been the attacks on Syria by NATO over the last four and a half years. The dropping of Western imperialist bombs under the umbrella of a war based on the responsibility to protect doctrine, is far more deadly and destructive than the collateral damage caused by a handful of psychopathic killers and sadists under the epithet, “terrorism”. The intended aim of the latter was to cause a lasting sense of disorientation and fear among the masses while the purpose of the former is the destabilization of a country as the precursor to the eventual domination of an entire region by a Western elite.

The leaders of the great imperial powers whose whirlwind of destruction throughout the middle east has resulted in the debris blowing back into the symbolic and literal foundations of Parisian culture have, in so doing, struck at the heart of enlightened modernity and bohemian excess. A city whose decadent charms could be best discovered by walking it’s streets in the manner of the flaneur is rapidly becoming a pastime that is out of step with these increasingly coarse times.

What the impact of creeping globalization has managed to do to the cultural landscape of the city is to diminish its collective sense of unity and resistance to the vagaries of market forces that typify many other cities. The political consequences that will almost certainly arise from the terrorism witnessed on the streets of Paris will be a further crackdown on civil liberties, growing suspicion of the “other”, a rising tide of chauvinist nationalism, and the implementation of a strategy of divide and rule.

The panic and fear witnessed on the streets of the city shown on the mainstream news channels in the aftermath of the attacks will, I suspect, be an illustration of what is to come in the future. The fear will likely be whipped up by the French mainstream media and leading politician’s who, as the investigative journalist Gearoid O’Colmain has pointed out, will almost certainly focus their campaigns on undermining attempts by dissidents who publicly question the established order.

For all of the fighting talk by Hollande of how the war will be taken to the terrorists and how they cannot hope to succeed with their strategy of violence, is not borne out by the resulting panic that ensued. The uncomfortable truth is the terrorists are winning. We now live in an era of eternal war fought on the absurd premise that a corresponding everlasting peace is just around the corner. This circular illogicality is underpinned by numerous ongoing conflicts which are being fought on unlimited battlefronts on a global scale.

This scenario isn’t lost on the elite 1 per cent who regard the end game as the emergence of a “peace” predicated on continued injustice and the creation of a wilderness starved of hope and aspiration for the remaining 99 per cent. The combination of an Hobbesian world and the kind of future of the science fiction of Huxley and Orwell  is in truth a mark of the present that somehow we have let happen as though having stepped blindfolded and hypnotized into the pages of the novels of their creators’.

The people of the world are caught in the middle in this disaster while the elite look down on the chaos and carnage from their ivory towers and from the luxurious comfort of their gated communities. The connections between the environmental degradation of our planet which is crumbling around us, and the limits of a system predicated on the unsustainable concept of unlimited economic growth and warfare are clear.

The propaganda that the leading politicians and their mouthpieces in the mainstream media present to the public is the notion that state violence is the default position to counter the terrorism of which the chaos and carnage described is implicit. The BBCs political editor Laura Kuenssberg, for example, constantly gives the impression of being baffled about peace over violence.

In a high-profile piece on the BBC’s flagship News at Ten programme on September 30, Kuenssberg featured in an almost comically biased, at times openly scornful, attack on Jeremy Corbyn’s stance on nuclear weapons.  The overall narrative is that violence is the answer to violence which is presented as normal while diplomacy and peace is regarded as radical and “off message”.

Rarely do the media point out the truth that violence against an ideology can never in practice be a winning strategy or that neoliberal socioeconomic fundamentalism is as extreme as its politically-inspired violent offshoot. One of the causes that has laid waste to alienation and radicalism in Paris is the kind of socioeconomic discord that the racially segregated Muslim ghettos at its periphery and its sterile hollowed out core reflect.

What underpins this socioeconomic discord is the history of French imperialism and colonialism. The root cause of the despair and terrorist depravity that the world witnessed last Friday is not located in the bazaars of Damascus or the cafes of Algiers but in the boardrooms and plush offices of metropolitan cities like London, Paris and Washington.