Crisis? What Crisis? How to Save a Debt-Drowning Planet

In late 1979, with the public service unions on strike and with the national debt spiraling out of control, Britain began to resemble a toilet. Prime Minister Jim Callaghan returned from a ‘summit’ in Guadeloupe (they never seem to hold summits in Rotherham or Detroit). The Sun, one of Britain’s Murdoch tabloid newspapers, famed for their restraint and balance as well as the correct use of the telephone, suggested to sun-tanned Jim on his return that there might be just ever such a teeny tad of a problem. "Well”, Jim thundered, “that’s a judgment that you are making. I promise you that if you look at it from outside, and perhaps you're taking rather a parochial view at the moment, I don't think that other people in the world would share the view that there is mounting chaos." Next morning The Sun ran the now infamous headline, “Crisis? What Crisis?” Enter Margaret Thatcher stage right!

What crisis indeed. Thanks to utter political ineptitude by those we collectively employ to lead the mortgage crisis, banking crisis, sovereign and debt crisis, and probably climate change as well, have now merged into what looks like the great mega-collapse of the twenty-first century. Thought you had savings? Thought you had a pension? No, if you are a western European you will soon be offered the compulsory ‘chance’ to ‘invest’ in stellar sun-drenched opportunities in Italy, Greece, Spain via the new Euro-Debt. Not only will you have miraculously acquired this debt ‘opportunity’ but you will be reassured to know that your former savings will be administered by the incredibly open, honest and efficient European Onion. If you are American, leave now. You are about to discover true cost of pork in DC and it ain’t cheap.

So, where are our collective ‘leaders’ (I used the word advisedly because ‘leading’ they ain’t). Well, David Cameron is on holiday in Tuscany. Good idea! Italy is cheap at the moment and probably will be for the next millennium or so. He did at least have a chat with the Governor of the Bank-rupt of England, which did huge amounts to calm the ‘markets’. Meanwhile, his buddy, President Barack Obama has taken decisive action to reduce America’s debt, but not until after he has been re-elected in 2012. Well, this seems fair enough. By then in addition to America losing its triple AAA credit rating, the Dollar will no longer be the world’s reserve currency and the global financial structure will have collapsed. That will teach the Chinese a lesson they will never forget.

The good news is that the French and Italians have taken decisive action by together calling an emergency meeting of the finance ministers of the G7. The words ‘deckchairs’ and ‘Titanic’ come to mind. France has of course called the meeting because the French always like meetings. Italy has called the meeting because having cooked the book for years they are about to be found out and want to get their denials in first. So, how can we help the French and the Italians save the planet?

First, the G7 should consider its membership and turn itself into a consolidated debt. The Group of Seven today comprises the world’s leading seven debts; Britain (utterly broke but pretending not to be by talking loudly at others and showing the world a stiff upper lip), Canada (a mythical land somewhere near America which has huge natural resources, no people and therefore little value), France (soon-to-be broke but with big ideas they are keen for the Germans to pay for), Germany (not broke but terminally selfish and determined not to pay for the French, Italians and the rest of the southern Onionistas), Italy (don't even go there), Japan (destroyed by an earthquake and broke beyond repair), and, of course, the United States (the richest, biggest and most powerful debt on the planet). Noticeable by their absence are the Indians (noticeably not broke and being paid for by the British aid budget.  This is OK because the British Government is using its debt to fund everybody else but the British these days) and the Chinese (very noticeably not broke and buying everybody else’s debt so that they can still afford to attend G7 meetings).

Second, the so-called ‘market-movers’ should be shot. Did we really defeat communism to create this morally, politically and financially bankrupt chaos? Now, I am no Socialist – heaven forbid, but is the future of the world and its seven or so billion inhabitants really dependent upon a small bunch of headless and heartless chickens who apparently panic every time Mrs Ohio maxes out her credit card? Abolutism leads to mayhem – be it over-mighty states or under-regulated markets. Indeed, markets by their very nature exaggerate extremes – both positive and negative – because they screw the rest of us simply by moving the markets. Some form of control has to be re-asserted by states to prevent the currency speculators switching from one market to another to trigger runs on currencies. The so-called ‘money men’ should be left in no doubt that if they continue to threaten the financial futures of millions through short-term speculation they too will face consequences.

Third, political leaders of the greatly indebted and the greatly owed must agree a proper plan. They must now move decisively to put their financial houses in order even if this takes years and even if it means southern Europeans paying their taxes and working a little harder. Even working a bit would help. China can no longer be permitted to keep the Yuan artificially low simply to entrap others in debt. The West must together to get its debt under control.

Above all, it is time for the real political leaders to get off their well-upholstered back-sides in their well-upholstered villas to demonstrate a collective will to deal once and for all with what is now meltdown financial contagion.

Fail and the ensuing disaster would not only destroy bank accounts. This is the stuff world wars are made of.

We do not need G7s or G20s, just G bloody do something! Crisis? What crisis?

Julian Lindley-French

The Lamps Are Going Out All Over Europe

The German-Belgian border. 3 August, 2011. Ninety-seven years ago to the day Sir Edward Grey, the British Foreign Secretary, looked out of his palatial, imperial London office and said, “The lamps are going out all over Europe. We shall not see them lit again in our time”. A few hours later two German armies smashed into Belgium. The First World War had begun. 8 August, 1918, four years and millions of dead later on what German generalissimo Ludendorff called “the black day of the German Army” the British Army crushed the Germans at the Battle of Amiens. At the spearhead of the Allied thrust the British Army battered Germany into such a comprehensive defeat that in November 1918 the British held a victory parade in Cologne. Britain and France had prevailed but at a cost evident even to this day in every town and village across both countries.

Even as the British and French seemed to be at the very peak of their power those four years of struggle had in fact begun Europe’s long decline. Indeed, Grey was looking down on the apogee of British and European power in the world. And yet, even Grey could not have understood that his fears would not only come true but mark the beginning of a century of European retreat, much of it self-inflicted.

For many years following that ‘war to end all wars’ Europeans of various persuasions rallied to ideologies and nationalisms to mask the fact of decline. America rapidly retreated into isolationism from its brief and belated foray into the struggle between democracy and authoritarianism that was the essence of the First World War. Britain and France were left to soldier on as the great hollowed out world leaders. For Europeans the Second World War and the Cold War only hastened the decline and the further retreat into a myth deemed ever more central by elites unable to bridge the gap between power and paucity - paucity of strategy, paucity of capability, and paucity of ambition.

With Europeans effectively denuded of financial power the myth that has sustained European democracies these hundred years past is now revealed for what it is – a theatre de l’absurde. Europe and Europeans are thus faced with the most profound of choices.  Does Europe accept its precipitate retreat from influence and enslave itself to the policies and strategies of the newly enriched but less ‘enlightened’? Or, does Europe finally, collectively and realistically take stock of its perilous strategic position and begin the slow and purposeful return to a credible ability to shape the twenty-first century?

Diplomatic and military power are today no less important than in Grey’s day. And yet, the great European defence depression is apparent across the length and breadth of the Old Continent, whatever the strategically-challenged or insanely optimistic like to pretend.

Today, the UK House of Commons Defence Committee has just published a damning report to which I gave evidence (http://www.publications.parliament.uk/pa/cm201012//cmselect/cmdfence/761/76102.htm) on the relationship (or rather lack of it) between stated British national strategy and Britain’s ability to realise such a strategy given the swingeing cuts taking place in London's diplomatic and military instruments of power. Britain is not alone.  Such folly is evident across a Europe that continues to treat strategy like a No 8 London double-decker bus of old – something slow moving that one can hop on and off at will.

There are a range of solutions being offered by the think-wonk community to close the gap between strategic myth and defence reality, all of which are well-meaning, but all of which essentially miss the essential point: one can never create strategy through management. Some call for more effective and streamlined institutions. I am all for streamlining both NATO and the Onion, both of which too often resemble armed pensions, but the solution will not be found there. Some call for more pooling of equipment and specialisation of effort. This is all well and good but in the absence of a shared strategy and strategic culture such initiatives will fail. Indeed, it is precisely the absence of shared strategy that neuters the trust upon which such ideas flourish.  Can European solidarity survive danger? The evidence of the past decade would suggest not.

Equally, the status quo ante is no option either. The nature and pace of change in the world as we enter the instable Asian century reveals to the strategically insightful three verities that politicians on both sides of the Atlantic seem unable to grasp. Strategic, i.e. global, influence will be dependent on a) more of the transatlantic West; b) much more and closer European collaboration; and c) new partnerships with the likes of Australia, India and Japan. All three of which demand strategy and leadership.

Back to Britain and France. A European defence strategy worthy of the name and credible in this dangerous century will only be realised if America gets over its sulk about European ineptitude and Britain and France begin to take real steps towards creating a European defence strategic cluster. Leadership informed by strategy won the First World War. In 1914 the Entente between Britain and France was the key to victory. In 2011 the Franco-British Security and Defence Treaty is equally important as a down-payment on a strategic future for Europe, but only if it is imbued on both sides of the Channel with strategy and leadership, as opposed to spin and pretence.

Churchill writing of France at the end of World War One could have been writing of Europe today. “Worn down, doubly decimated, but undisputed masters of the hour, the French nation peered into the future in thankful wonder and haunting dread. Where then was that security without which all that had been gained seemed valueless, and life itself, amidst the rejoicing of victory, was almost unendurable”?

Sir Edward is still looking for a lamp that will lead Europe out of the trench into which it has fallen.

Requiescat in Pace.

Julian Lindley-French

Fiddling Whilst the West Fails: The Great Globalisation Disaster

“Forget these frivolous demands which strike a terror to my fading soul”. So Mephistopheles beseeches Marlowe’s Dr Faustus. With American politicians not so much debating whether or not to sell America’s soul, but for what price, the most profound of strategic questions is now apparent. For how long does the West support a system of globalisation that is clearly no longer working in its favour?

The United States has a budget deficit of $14.3 trillion. 9.2% of the workforce is unemployed and for every dollar the US Government spends 43 cents is borrowed. Much of southern and eastern Europe is mired in debt with states being propped up either by a small group of western European taxpayers or selling their indebted souls to China for who knows what future strategic price.

The West fought a long and just struggle to defeat the extreme statism of Soviet communism. Now the West must face up to one of the uncomfortable consequences of its victory; extreme free marketism allied to sovereign capital is rapidly destroying Western influence. The system is in crisis and the West is trapped in a rapid spiral of self-induced decline.

For too long Western leaders have stuck to the mantra that globalisation is westernisation. This is now patently wrong. Globalisation has no inherent values and eschews structure. There is patently no inherent link to the open, liberal model of government and governance the West espouses. No, globalisation simply enables those with the most (and most liquid) financial clout to access and influence societies. In that sense extreme globalisation works much likes a computer virus.

Furthermore, globalisation might indeed work as once envisaged as a vehicle for the promotion of wealth and freedom if all the key actor played by the same rules on a level playing field. That is clearly not the case. Asian powers such as China are manipulating the naïve openness of many Western states by demanding access to markets that they deny others. By such an approach China is constructing a huge network of sovereign influence over Western states. Put simply, the trade imbalance between China and the West is leading to a power imbalance that unless addressed soon will permanently eclipse the West.

Unfortunately, it is a mark of the shallowness of political leaders on both sides of the Atlantic that they cannot see beyond their immediate and respective debt crises to the bottom-line strategic reality. The real question is thus not how much is owed, but rather to whom and at what price? The current debt crisis is the symptom not the cause.

To some extent America‘s debt is a deterrent to China as an American default would be devastating for those holding the dollar, even though such a move would effectively destroy the Bretton Woods system of global financial governance. Europe has no such Armageddon option.

But perhaps the most pernicious aspect of this disaster is the steps taken by Western political leaders to mask their own incompetence. The consequences of extreme globalisation are explained away either by pretending to deal with the symptoms (they are not), either by ignoring the problem all together, or by pretending it is a good thing. In fact, Western governments lost in the vacuum between ideology and impotence have effectively lost control over all borders – informational, financial, economic and even physical. They simply cannot bring themselves to admit that extreme openness is as dangerous as extreme protectionism or statism. As such they have lost any sense of the balance in and of government needed to manage international relations in all is forms.

History is full of many lessons but one of the most consistent is that when governments give up their power and responsibilities the results are as dangerous as when governments attempt to control everything.

Since the end of the Cold War there has been a collective dereliction of duty by Western leaders – American and European alike. They have collectively failed to see either the implications or dangers of extreme globalisation. They have collectively demonstrated mind-boggling complacency about the implications of extreme globalisation. Prevailed upon by too many narrow vested business interests they have collectively failed to realise that they have lost control of globalisation and in so doing we the people are now vulnerable to the savagely acquisitorial – both states and businesses.

Balance is the key. Western governments must move collectively to re-assess globalisation and begin to re-assert control over money, markets and mayhem. Indeed, globalisation in its purest form is mayhem and anarchy. The whole point of government is to prevent such. Otherwise, life will indeed become as Hobbes would have it “nasty, brutish and short”. If that means some form of macro-protectionism whilst new rules are established then so be it. But to continue with the current system of wilful vulnerability would be to damn the West to destruction and far more quickly than feared.

Western politicians are fiddling whilst the West fails. At least something unites American and European politicians. A plague on both their houses.

Julian Lindley-French