Budapest, 23 May 2018. Wearing a jacket a bit big for him and a purple shirt, Steve Bannon addressed an audience of prominent and starchy Hungarians: ‘The fuse that lit the Trump revolution started September 15 at nine in the morning [in 2008, when] Lehman Brothers was kicked into bankruptcy.’ Bannon, former chief strategist to Donald Trump, had also been an investment banker at Goldman Sachs, and knew that the crisis had hit Hungary hard: ‘The elites bailed themselves out, totally socialised the risk. Did the average person get a bail-out like that?’ Even though many of his current political activities have been paid for by hedge funds, he berates a ‘socialism for the rich’ that provoked ‘a really populist revolt’ around the world. ‘In 2010 Viktor Orbán was voted back into power in Hungary’: Orbán was ‘Trump before Trump.’
A decade after 2008’s financial storm, the global economic collapse and Europe’s public debt crisis have disappeared from the Bloomberg terminals that monitor capitalism’s vital signs. But their shockwaves have amplified two major political upheavals.
The first of these was the upset of the post-cold war neoliberal international order, which had been founded on NATO, western financial institutions and the liberalisation of global trade. Even if the east wind has not yet prevailed over the west, as Mao promised it would, a geopolitical reconfiguration is under way: nearly 30 years after the fall of the Berlin Wall, the influence of Chinese state capitalism is growing; the future of China’s socialist market economy, bolstered by the prosperity of a rising middle class, is linked to the ongoing globalisation of trade, which has damaged most western countries’ manufacturing bases. This includes the US, which Trump promised to save from such ‘carnage’ in his inaugural address.
The shocks and aftershocks of 2008 also upset the political order, which regarded market democracy as the culmination of history. The arrogance of smooth-talking technocrats in New York or Brussels, who imposed unpopular measures in the name of expertise and modernity, has opened the way for bombastic, conservative politicians. In Washington, Warsaw and Budapest, Trump, Jaroslaw Kaczyński and Orbán claim to be just as capitalist as Barack Obama, Angela Merkel, Justin Trudeau and Emmanuel Macron, but their brand of capitalism is spread by a different culture: one which is ‘illiberal’, national and authoritarian, and champions the values of the hinterland over the metropolis.
A fault line now divides the political class, and it is dramatised and amplified by the media, reducing the range of political choices to two warring siblings. The camp of political newcomers is just as intent as its predecessors were on making the rich richer, but seeks to do so by exploiting the feeling that neoliberalism and social democracy inspire in most of the working class, which is disgust mixed with anger.
Challenges to the old order
The response to the 2008 crisis exposed, and removed the possibility of ignoring, things that contradict the sanctimonious preaching on good government which has come from centre-right and centre-left politicians since the break-up of the USSR. Neither globalisation, nor democracy, nor liberalism emerged from the crisis unscathed.
First, it was revealed that the internationalisation of the world’s economy is not good for every country, and not good even for most wage earners in the West. The election of Trump delivered a new US president, one who had long been convinced that globalisation, far from profiting the US, had hastened its decline and guaranteed the ascent of its strategic competitors. With Trump, the proposal ‘America First’ beat the free-traders’ ‘win-win’ slogan. At a rally on 4 August in Ohio, an industrial swing state where Trump won an eight-point lead over Hillary Clinton, he spoke about the huge (and growing) US trade deficit: ‘$817bn a year … Look, I don’t blame China. They can’t believe themselves they got away with it. We have really rebuilt China, and it’s time that we rebuild our own country now, OK? Ohio alone lost over 200,000 manufacturing jobs since China joined the WTO. The World Trade Organisation is a total disaster. For decades our politicians allowed other countries to steal our jobs, plunder our wealth and loot our economy.’
China is by far the biggest challenge to the narrative of the ‘end of history’ since it has modernised economically while remaining a dictatorship Francis Fukuyama
In the early 20th century, protectionism powered the industrial rise of the US and many other countries. Import tariffs filled public coffers, since there was no income tax before the first world war. In Ohio, Trump invoked William McKinley, Republican president 1897-1901, who was later assassinated by an anarchist: ‘He understood the crucial importance of tariffs in maintaining a very strong country.’ The White House now resorts to tariffs unhesitatingly, and without worrying about the WTO. Each week brings new sanctions against other states that Trump has targeted, including allies: Turkey, Russia, Iran, the EU, Canada, China. By invoking ‘national security’, he can dispense with the approval of Congress, whose members remain wedded to free trade, as do the lobbyists who fund their campaigns.
Jobs gone, pay down
US opinion is less divided over China; but here the consensus is clearly hostile, and not just for commercial reasons. China is seen as the US’s major strategic rival. It arouses mistrust because of its might (its economy is eight times larger than Russia’s) and its expansionist ambitions in Asia, and because its authoritarian political model defies the US. Political scientist Francis Fukuyama, though maintaining that his 1989 theory on the irreversible and universal triumph of neoliberal capitalism is still valid, has a caveat: ‘China is by far the biggest challenge to the narrative of the “end of history” since it has modernised economically while remaining a dictatorship … If in the course of the next few years its growth continues and it maintains its position as the world’s biggest economic power, I will admit that my theory has definitively been refuted’ (1). Ultimately, Trump and his US political adversaries share common ground on at least one point: he thinks the international neoliberal order costs the US too much, while his enemies believe China’s successes threaten to bring it down.
It’s a short step from geopolitics to politics. Globalisation has destroyed jobs and eroded western salaries; in the past 10 years the US wage bill has fallen from 64% of GDP to 58%, an average annual loss of $7,500 per worker (2).
US workers have veered furthest to the right politically in recent years in precisely those industrial regions devastated by Chinese competition. This shift could be attributed to cultural factors (sexism, racism, gun culture, hostility to abortion and gay marriage). But that would be to ignore an economic explanation at least as convincing: the number of US counties where more than 25% of workers depend on the manufacturing sector collapsed between 1992 and 2016, dropping from 862 to 323; and the share of votes between Democrats and Republicans changed dramatically. Votes were split almost evenly between the parties, roughly 400 counties each, 25 years ago; in 2016, 306 of the remaining manufacturing counties voted for Trump and just 17 for Hillary Clinton (3). China’s WTO membership, backed by President Bill Clinton, a Democrat, was supposed to accelerate China’s transformation into a liberal capitalist society. Instead it has left American workers disgusted with globalisation, liberalism and the Democrats.
Shortly before Lehman Brothers collapsed, the former chairman of the US Federal Reserve, Alan Greenspan, explained: ‘[We] are fortunate that, thanks to globalisation, policy decisions in the US have been largely replaced by global market forces. National security aside, it hardly makes any difference who will be the next president’ (4). It would be hard to find support for that view now.
In Eastern Europe, where economic expansion still depends on exports, any questioning of globalisation excludes trade. But the ‘strongmen’ in power there condemn the EU’s imposition of western values, because they think such ideas are weak and decadent for encouraging immigration, homosexuality, atheism, feminism, environmentalism and the breakup of the family. These strongmen also challenge the democratic character of neoliberal capitalism, and not without cause. Because when it comes to equality of political and civic rights, the question of whether the same rules apply to all was again made clear following 2008. ‘There were no prosecutions of anyone at the higher levels of the financial system,’ wrote John Lanchester. ‘Contrast that with the savings and loan scandal of the 1980s in which 1,100 were prosecuted’ (5). As French prisoners once used to jeer, ‘Steal an egg and go to prison; steal an ox and go to the [governmental] Palais Bourbon.’
The eurozone, through wilful policy choices, drove tens of millions of its citizens into the depths of a 1930s-style depression. It is one of the worst self-inflicted economic disasters on record Adam Tooze
The people may choose, but capital decides. Neoliberal leaders on both right and left, in failing to keep their electoral promises, have made credible the suspicions that follow almost every election. Obama, elected to end the conservative policies of his predecessors, reduced public deficits, squeezed welfare budgets and, instead of imposing social security, insisted Americans bought medical insurance from a private cartel. In France, Nicolas Sarkozy increased the retirement age by two years despite promising not to change it; just as casually, François Hollande passed an EU stability pact that he had promised to renegotiate. In the UK, Nick Clegg led his Liberal Democrat MPs into a coalition government with the Conservatives, and as deputy prime minister accepted a tripling of the university tuition fees he had pledged to abolish.
Victory of the ‘free world’
Some western European communist parties suggested in the 1970s that if they were voted into power, it would be a one-way journey, since the project of building socialism, once begun, could not be subject to the vagaries of the electorate. The victory of the ‘free world’ over the Soviet hydra adapted this principle, but with more cunning: the right to vote was not withdrawn, but it now comes with an obligation to confirm the preferences of the ruling classes, or else to be made to repeat the voting process. French journalist Jack Dion summed it up: ‘In 1992 the Danes voted against the Maastricht Treaty; they were forced to go back to the ballot box. In 2001 the Irish voted against the Nice Treaty; they were forced to go back to the ballot box. In 2005 the French and the Dutch voted against the European Constitutional Treaty (ECT); they had it imposed on them under the Lisbon Treaty. In 2008 the Irish voted against the Lisbon Treaty; they had to vote again. In 2015, 61.3% of Greeks voted against Brussels’ cost-cutting plan, but it was inflicted on them anyway’ (6).
That year the German finance minister Wolfgang Schäuble, addressing a recently elected leftwing government in Athens that was constrained to administer more neoliberal shock treatment to the Germans, summed up his respect for the democratic circus: ‘The elections should not permit a change in economic policy’ (7). Pierre Moscovici, the EU Commissioner for Economic and Financial Affairs, recently admitted: ‘Just 23 people and their deputies, take — or do not take — fundamental decisions for millions of others, Greeks in this case, based on extraordinarily technical criteria, decisions which are exempt from any democratic control. The Eurogroup [made up of eurozone finance ministers] is not accountable to any government, any parliament, and certainly not to the European Parliament’ (8). Yet Moscovici still aspires to join this powerless assembly next year.
This disdain for popular sovereignty, which is authoritarian and ‘illiberal’ in its own way, drives one of the most powerful campaign arguments of conservative politicians on both sides of the Atlantic. Trump and Orbán, along with Kaczyński in Poland and Matteo Salvini in Italy, take into account the dying of democracy, unlike the centre-left and centre-right parties which attempt to reanimate it without allowing themselves the means to do so. The first group subscribes to the principle of the majority vote but rejects the rest: it counters the technocratic authoritarianism of Washington, Brussels and Wall Street with an unbuttoned style of nationalist authoritarianism, and presents this as a victory for the people.
The third contradiction to the dominant discourse of the preceding years revealed by the crisis concerns the economic role of the state: it can do anything, but not for everyone. Rarely has this principle been so clearly demonstrated as in the past decade. The survival of the whole system depended on the banks, and to save them, operations that had previously been decreed unthinkable were done on both sides of the Atlantic, and done unopposed, with no strings attached: there was massive quantitative easing, with nationalisations, international treaties flouted and special measures by politicians acting arbitrarily. This large-scale interventionism revealed strong states, capable of mobilising their power in a domain from which they seemed to have withdrawn (9).
I like chaos. Because I can build a new order from this chaos. An order that I want Viktor Orbán
But if the states are strong, this is principally to guarantee a stable framework for capital. Jean-Claude Trichet, president of the European Central Bank 2003-11, was inflexible about reducing Europe’s social spending to bring public deficits under the limit of 3% of GDP, but admitted that the financial commitments which heads of state had made to save the banking system in 2008 represented, within less than a year, ‘27% of GDP in Europe and the US’ (10). At the same time they had created countless unemployed, millions who lost their homes, thousands of sick people dumped in hospitals with inadequate medical supplies, as in Greece; none of these had had the good fortune to constitute a ‘systemic risk’. As historian Adam Tooze recently wrote, ‘the eurozone, through wilful policy choices, drove tens of millions of its citizens into the depths of a 1930s-style depression. It was one of the worst self-inflicted economic disasters on record’ (11).
A line of barbed wire
The discrediting of the political class and the rehabilitation of state power inevitably opened the way for a new style of government. When asked in 2010 if he was worried about coming to power amid global financial turmoil, Orbán smiled : ‘No, I like chaos. Because I can build a new order from this chaos. An order that I want’ (12). Like Trump, Central Europe’s conservative leaders have been able to consolidate the popular legitimacy of a strong state in the service of the rich. But rather than guaranteeing social rights for all, which would be incompatible with the demands of the rich, the public authorities assert themselves by closing borders to migrants and declaring themselves guarantors of each nation’s cultural identity. In their view, the lines of barbed wire along the borders mark the return of the state.
This strategy, which uses a popular demand for state protection for its own ends, seems to be working for now. The causes of the 2008 financial crisis have not been mended, while political life in Italy, Hungary, Bavaria and other places, is haunted by the refugee issue. Part of the western left, radical or moderate, fed on the priorities of US campuses, loves challenging the right on this subject and has done so for 30 years (13).
Heads of government, in fighting the Great Recession, have revealed the sham of democracy, the strength of the state, the highly political basis of the economy, and the class bias of their strategy. As a result, their position has become fragile, as is shown by the electoral instability that has reshaped the political landscape. Most elections in the West since 2014 have suggested that traditional forces are weakening or disintegrating, while there has been a rise of previously marginal figures and trends that now challenge the dominant institutions, and often do so from opposite sides: Trump and Bernie Sanders both berate globalisation and the media. The same is true in Europe, where new figures on the right judge the European project as too liberal on social and immigration issues, while new voices on the left, such as Podemos in Spain, La France Insoumise in France, and the UK Labour Party’s leader Jeremy Corbyn, criticise its austerity policies.
A politics of enemies
Yet, the ‘strongmen’ can count on the support of part of the ruling class, because their aim is not to end the game, only to change the players. Orbán spelled things out during a significant speech in Romania in July 2014: ‘The new state that we are constructing in Hungary is an illiberal state, a non-liberal state.’ Contrary to what the mainstream media has usually reported, Orbán’s objective is not simply replacing multiculturalism and the open society with the promotion of Christian family values. He has also announced an economic plan, to make ‘a nation and a community internationally competitive in the great global race for decades to come.’ In his view, to do that ‘a democracy does not necessarily have to be liberal. Just because a state is not liberal, it can still be a democracy’. Taking China, Turkey and Singapore as his models, Orbán has repurposed Margaret Thatcher’s slogan ‘There is no alternative’, insofar as ‘societies that are built on the state organisation principle of liberal democracy will probably be incapable of maintaining their global competitiveness in the upcoming decades’ (14). This blueprint appeals to Polish and Czech leaders, and to far right parties in France and Germany.
Liberal thinkers, faced with the success of their competitors, have lost some of their arrogance and lustre. ‘This counter-revolution is driven by the polarisation of domestic politics, with a politics of enemies supplanting a politics of compromise,’ writes Michael Ignatieff, rector of the Central European University in Budapest, set up by neoliberal billionaire George Soros. ‘The counter-revolution is also targeting the liberal revolution and the gains made by minorities. It is clear that open society’s brief moment of dominance after 1989 has now ended’ (15). For Ignatieff, authoritarian leaders who target the rule of law, the separation of powers, the freedom of private media and minority rights are attacking the pillars of democracy.
The Economist, the global neoliberal elites’ UK-published weekly newsletter, shares this view. On 16 June it got in a flap over the ‘alarming deterioration [of democracy] since the financial crisis of 2007-08,’ but it did not attribute this to huge wealth inequalities, or the destruction of industrial jobs by free trade, or the disregard of voters’ wishes by ‘democratic’ leaders. Instead, it castigated ‘the strongmen [who] subvert democracy’. And it claimed that ‘independent judges and noisy journalists are democracy’s first line of defence.’ That’s a very thin, fragile line.
The ruling classes long took advantage of the electoral system because of convergent factors: the falling voting participation rate of the working class, tactical voting caused by distaste for ‘extremists’, and centrist parties’ claims to represent the interests of both the upper and middle classes. But the reactionary demagogues are now mobilising the abstainers, the Great Recession has made life more difficult for the middle class, and the political decisions of the ‘moderates’ and of their coterie of smart advisers actually caused the financial crisis of the century.
The bitterness of ‘open society’ advocates is worsened by disenchantment over the promised utopia of new technology. The Democrat boss-class of Silicon Valley, until recently celebrated as the prophets of a liberal-libertarian civilisation, have built a surveillance and social control machine so powerful that the Chinese government is copying it. The original hope of a virtual global town square powered by universal connectivity is collapsing. To such an extent that some former believers are very displeased: ‘Technology, through the manipulations it permits, through fake news, but even more because it transmits emotion rather than reason, further strengthens cynics and dictators,’ one columnist moaned (16).
Next year’s 30th anniversary of the fall of the Berlin Wall is likely to be a somewhat gloomy celebration for the advocates of the ‘free world’. Fukuyama acknowledged that much: ‘A lot of that turn toward liberal democracy in the early days, after the fall of the Berlin Wall, really was driven by a kind of educated, very pro-western elite.’ But the less educated ‘didn’t really buy into liberalism, this idea that you could actually have a multiracial, multi-ethnic society where all these traditional communal values would have to give way to gay marriage and immigrants and all this stuff’ (17). Who does Fukuyama blame for this failure to respond to training by the enlightened minority? Indolent middle-class youth, who he fears ‘are content to sit at home and congratulate themselves on their open-mindedness and their absence of fanaticism … They only mobilise against the enemy by going to sit on a café terrace with a mojito in their hand’ (18).
‘You can’t change the frame’
That is not going to be enough, and neither will be flooding media or social networks with outraged comments, for the benefit of friends similarly outraged by similar things. Obama knows that, and on 17 July, in South Africa, he delivered a speech with a detailed, often lucid analysis of the past few decades. But he couldn’t help himself taking up the idée fixe of the neoliberal left since it embraced the capitalist model, an idea thus summed up by former centre-left Italian prime minister Paolo Gentiloni as he lectured Trump in January 2018 in Davos: ‘You can correct the frame, but you can’t change it.’
Obama conceded that there had been mistakes and greed in globalisation, which had weakened the power of unions: ‘It’s made it easier for capital to avoid tax laws and the regulations of nation-states; [it] can just move billions, trillions of dollars with a tap of a computer key.’ His only answer to such a daunting challenge was ‘inclusive capitalism’, enlightened by capitalists’ humanist morality.
Obama did not deny that the 2008 crisis and poor responses to it, presumably including his own, encouraged the spread of ‘a politics of fear and resentment and retrenchment’, ‘strongman politics’ and the popularity of what he called ‘China’s model of authoritarian control combined with mercantilist capitalism as preferable to the messiness of democracy.’ But he attributed the key responsibility for these disturbances to the populists, who had seized upon insecurities and threatened the world with a return to ‘an older, a more dangerous, a more brutal way of doing business.’ That attribution gave a free pass to the social and intellectual elites, Obama’s peers, who created the conditions of the crisis and often profited from it.
Read also G M Tamás, “Hungary without safety nets”, Le Monde diplomatique, February 2012. Such an analysis has many advantages for them. Invoking the threat of dictatorship makes people believe that democracy currently prevails, even if it may need a few tweaks. More fundamentally, Obama’s idea (and Macron’s identical one) in which ‘two very different visions of humanity’s future compete for the hearts and the minds of citizens around the world’ makes it possible to gloss over what these visions have in common, which is the mode of production and ownership, or to use Obama’s own words, ‘the disproportionate economic clout of those at the top’. By this analysis, there is nothing to distinguish Macron from Trump, as demonstrated by their shared eagerness to reduce taxation on investment income after they took office.
An insistence on reducing political life in the near future to the clashes between ‘democracy’ and ‘populism’, ‘openness’ and ‘nationalism’ will bring no relief to the growing part of the working class which is disillusioned with a democracy that has abandoned it, and a left that has everywhere turned into the political party of the educated middle class. Ten years after the financial crisis, any successful fight against a ‘brutal way of doing business’ demands something different. To start with, it needs the development of a political force capable of simultaneously fighting the ‘enlightened technocrats’ and the ‘resentful billionaires’ (19)), so that it does not play a supporting role to either of the current blocks, which, in their separate ways, are a danger to humanity.
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