Tuesday, June 19, 2012

The System, Part 2: There really is a class war, and the Right knows it

Yesterday, I attempted a jokey and simplified graphic to illustrate the result of "free trade" - the initial response from James Higham has been very sniffy, something to do with hats I gather (though he seems to have no similar objection to barrels or Chinese junks). Apparently it shows I'm a Leftist, even though I've never voted for Labour - or anything further left, before you ask. Or perhaps he's merely provoking me to greater effort, despite the sense that so many bloggers are getting now, of how they are wasting their time when they could instead "sport with Amaryllis in the shade ." Nevertheless...

The "System" graphic (see sidebar) is, of course, much too simple - where is the Federal Reserve, where are the bankers (NOT the banks) who make (extract*) money at every turn, including and especially when they receive government bailouts and organise the purchase of government securities?

But a striking aspect of this cartoon update of what is, in effect, a class war is that the conflict was identified and described in class terms by speakers for what one might loosely call the Right, 18 years ago. They anticipated our present economic crisis and the resulting social instability and they did not at all welcome the prospect, as I shall show. I'm not generally fond of embedding long videos, because I like to skim and scan for essential points, but I'd like to share a couple here and having watched them in full myself I recommend them to you. Neither of the speakers makes reference to the other, but in relation to GATT and untrammelled free trade generally they are saying the same prophetic things.

The first is a talk by Dr John Coleman (whose website is here); the occasion is not explicit but from the content and tenor of his remarks I think he is addressing a broadly Republican-supporting audience in New Mexico in 1994, at the time of the GATT talks. Think of this 100 minutes as an investment, saving you the trouble and expense of reading his several books, as much of his material appears to be summarised in this tour through Conspiracy Central: Guelphs, the Black Nobility of Venice, the coming New World Order etc. In the final 5 minutes, he predicts that the US economic system will collapse and destroy the American middle class, and the varied and extensive banking system will concentrate into five majors. I'm reluctant to accept the alleged motives of the alleged secret players, and think that short-sighted greed and venality are more plausible drivers of the process, but the end result is the same, with or without the comic-book villains.

Next is an interview (also in 1994) with billionaire Sir James Goldsmith, where he correctly sees that GATT will (as he says) tip the balance between labour and capital sharply in favour of the latter, and that it will cause social disruption in Western societies.

Goldsmith, like Dr Coleman, was emphatically anti-Communist and spent his cancer-riddled last energies campaigning for a referendum on the UK's membership of the EU; he describes himself in this interview as pro-free trade; but he is very clear on the destructive effects of putting our workforce in direct competition with foreign workers whose labour is dramatically cheaper in currency-adjusted terms. (Since then, we have seen the Chinese manipulate their currency so that this price advantage is maintained, whereas according to the idealised system described by classical economists the renminbi would rise against the dollar, certain US exports would be encouraged, certain Chinese exports discouraged and there would eventually be a new equilibrium).

The canal analogy I used in my graphic has two functions: first, it suggests that the removal of all barriers to international trade triggers financial flows and economic developments at a rate that neither side can properly cope with. Second, it illustrates a system that is indeed intended to foster trade, but with a series of control points (lock gates) that manage the rate of change.

Time is the key. Given more time to adjust, capital and labour in the West would be reallocated to relatively more competitive enterprises; education and training could mutate to support the required new skill sets. But certain individuals saw an opportunity to make massive personal fortunes by helping to dislocate the society that nurtured them, with the result that the West is experiencing growing disparities of income and wealth, as well as national accounts that can't achieve a balance, and the development of a kleptocratic and tyrannical overclass in government.

Well, it it so now, despite the best efforts of the Jeremiahs and Cassandras. Perfectly ordinary, stable, hard-working people that I meet as a financial adviser are saying, unprompted, that their government doesn't care for them, even that we are headed for a revolution. Some of it is jokey (a taxi driver I know wants to start a new political party called Dilligif, after the Oz saying "Do I look like I give a f***", to show we care as little for them as they do for us); some, less so.

And it wasn't just the Left then, or now, that was saying it.

* Jesse's discussion of Acemoglu and Robinson's "Why Nations Fail" is enlightening, with its polarised pair of terms "extractive" and "inclusive". 


Sobers said...

Yes but. Globalisation has increased the wealth of those in poor nations, as well as made some in the West poorer. Workers in a factory in the Philipines making cheap trainers for the West make more money and have easier lives than the ones they had before - subsistence farming. And people in the West have had cheaper goods, MUCH cheaper goods. I'm only 40 and I remember as a kid, new stuff was expensive. You didn't buy new, you bought secondhand whenever you could. Nowadays stuff is so cheap people throw it away when its still completely useable, just because they don't like it and want a new one.

While I don't necessarily disagree with the reversal (or tempering) of globalisation, be under no illusion, its not an easy change. There will be losers (immediate ones) on both sides, and the winners will take time to get any benefits. Its not easy to sell to your public the idea everything will get more expensive, because you can't import it from abroad any more. And I'd argue it could be considered immoral to put poor workers out of work in the Developing World, so people who are already wealthier (those on benefits in the West) can get even wealthier.

Sackerson said...

Yes, I think we're agreed the argument is about rate of change, not change per se.

Paddington said...

As I've said before, what use is money when you have collapsed society?

What the moneied class is pushing for is what they acheived in Argentina - get the government so poor that it sells off all resources to the private sector. Shades of the original Rollerball.

Sobers said...

The issue is - to what extent does the West deserve to be allowed to pull up the drawbridge and say 'We got wealthy on producing stuff and exporting it to the rest of the world, but now we're not going to allow you to do the same'?

To be honest I don't think the West deserves its current standard of living (on an objective appraisal of hard work vs rewards) so I don't really think its would be morally the right thing to do. It might be the best thing (long term) for the West, in pure selfish terms, but would it be the right ethical course of action to take?

Wildgoose said...

Would you vote for the board of a public company of which you were a shareholder if their openly declared aim was to help their competitors at your expense?

So why do we vote for the current political classes?

The whole point of Democracy is that you can Vote the Buggers Out.

It's time we started doing so.

Sackerson said...

Sobers, there are plenty of hard-working, deserving people here, but they're not the ones determining how things go. And the people doing best out of this debacle, aside from some very hard-working and entrepreneurial Chinese dollar billionaires, are the old crowd back in the West, controlling the 85% of the producer's receipts, so I understand. Also, the hard-working Chinese proletariat may be about to suffer a bust of their own, so this liberalisation will not have been all good for them, either.

Wildgoose, our "democracy" is FUBAR and my vote counts for nothing, even though I still go through the motions. It's all about the swing voter in the swing seats, plus massive party databases, computerised psephology, SpAds, a bent mass media and politicians who don't know what LOL means.