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".