California: land of the future

The sovereign debt crisis that threatens to sink the Greek economy and perhaps in time, the world economy should a default occur, is being regularly compared to the collapse of Lehman Brothers.  That incident brought about the crash and 'credit crunch' of 2008 when banks worldwide had to write-down (devalue) their assets and billions of pounds essentially disappeared from the world financial system, resulting in a lack of credit (the proverbial 'credit crunch').  Its effects are still being felt today as the UK economy bounces along the bottom, a full-blown recovery perpetually just around the corner.

But Lehman Brothers by itself did not cause the crash of 2008; it was merely the denouement of a property speculation bubble that would inevitably burst.  Its causes are complicated, but broadly speaking the search for (profit) growth  and the availability of cheap credit led to banks lending to all and sundry (whether they could afford repayments, such as the NINJAs) and packaging up the risks into financial instruments to be sold on to others, a bit like spreading disease via a contaminated bank note that gradually travelled around the world.

The source of cheap credit can be traced to the economic slowdown of 2001; the Dot Com bubble burst and 9/11 threatened to plunge the US economy into recession so interest rates were slashed, reducing the cost of borrowing.  The US Dollar is the primary currency of global trading and as a result the knock-on effects were felt worldwide, cheap credit flooded the global markets.  The availability of cheap commodities from China was also a large element, consumers had something on which to spend their goods and Dollars flooded into China (which is why it is technically the USAs biggest creditor).

The result was an overheated global economy in which Greece and its population had access to cheap credit that allowed them to grow through the boom.  When the house of cards fell, they were left badly exposed.  It then emerged that the Greeks had misled the European Central Bank in order to gain access to the Euro.  However these issues are not what have affected Spain, Portugal and Ireland, indicating a more systemic problem.

But despite the near collapse of the world economy nothing much has changed.  The wealthy get ever wealthier; the poor are faced with huge cuts to public services.  In Greece, taxpayers’ money has been poured in to the country but has simply disappeared back out again into the hands of private investors who have pulled their capital out of the country as it flirts with default.  Our economy is built on the same foundations as it was pre-crash and there is no attempt to alter this; indeed property speculators have returned to the drawing board to revise their plans ready for when the economy takes off once more.

But three years on we’re staring down the barrel of a gun once more; or if you belief the pessimists, staring down a cannon.  The collapse of the Greek economy could bring about the 1930s style depression we’ve all been pretending or hoping could never happen.  

The victims of that outcome are those that had little in the first place, such as the unemployed in Greece.  Arguments that they are the deserving poor because they didn’t pay enough tax are spurious; they were sold the capitalist dream and ran with it.  Further, tax avoidance is hardly the exclusive practice of the Greeks; many wealthy individuals and organisations in the UK continue to follow similar practices yet enjoy the trappings of affluence.  Before moralising on the Greek people, we should take a look in the mirror.  We should also asks who benefits from the 'us vs them' narrative.

In the UK those with the least are also the hardest hit; via cuts in benefits or lack a of jobs for those without formal qualifications.  To place blame on individuals is misleading; they are but one element of a society which we have all created.  If people are falling off the bottom we are all collectively responsible as we sustain the system that creates these disparities.  The same applies worldwide; the UK is a key element in a financial system that is helping to impoverish the Greek people.  On the other hand, some currency speculators and hedge funds are set to make a fortune should the worst happen.

The central problem is that since Lehman Brothers we – or our policy makers – have attempted to patch up the existing system in the hope that it would return to business as usual.  Bank bailouts that transferred the risk from the private to the public sector are a major symptom of this.  This approach has led to where we are today; the potential collapse of the Greek economy and huge drops in the standard of living across developed nations as the fundamental flaws in our system have returned to haunt us and dictate what action we can now take to remedy the situation.  This is before the parlous state of the US economy is taken into account; at some point the enormous national debt and deficit will have to be addressed with huge repercussions for the world economy.

There have been no concerted efforts to change the economy or society, to address huge disparities in wealth, opportunity or standards of living.  The wealthy are now more affluent than before the recession, the rest are growing poorer as inflation and commodity prices shrink real incomes.  By most estimates we have passed the point of peak oil and therefore its price will continue to raise regardless of short term factors such as the Libyan crisis.  There is little appetite for change outside of those nations worst affected; presumably we are all hoping it won’t affect us.

California offers a terrifying glimpse of the future.  By itself the state of California is the eight largest economy in the world, yet its government is essentially broke, unemployment is soaring, the prison population is the highest in the world and 15% of its inhabitants live below the poverty line.  As oil prices soar a city built for the car is impoverishing its commuters who spend their disposable incomes getting to and from work.  But it’s still home to Hollywood and Silicone Valley and a fantastic number of millionaires and profit making corporations, so the situation in which it finds itself is all the more disconcerting. 

California's problems don't arise exclusively from the credit crunch, they're part of a much wider issue.  Peak Oil came arrived in 2005 and would always harm a city so betrothed to the car.  The housing speculation bubble that has impoverished thousands was an inevitable consequence of the capitalist system; the Dot Com bubble burst as speculators piled in to make a quick profit and to stave off collapse the housing bubble was born. 

But the huge disparities in wealth - a major problem in itself - have amplified these issues.  Those at the bottom have even less than before thanks to job losses, the cost of fuel and mortgage defaults.  The prison population soars as the wealthy become ever fearful of those with nothing.

It is essentially, a society of extremes of wealth and opportunity and the UK is on a similar path.  The crash of 2008 did not amplify these problems in the UK to such an extreme as the underlying problems are less acute, but government cuts will soon see to that.  The fallout of the last crisis is not only that worst-off feeling the greatest pain and the old way of doing business continuing unchallenged, but the tax payer propping up a clearly flawed system.  The result is another crisis in which the same is likely to occur again; Greece is experiencing more austerity than any other developed nation ever has done and more is being demanded.

The UK and California are very different places, but we should ask if the situation in which the it finds itself is one we would like to draw anywhere near to.  If not then new answers to the same old questions need to be found; preferably before the next collapse occurs. 

The polarisation of American Politics

It’s easy to forgot that the United States is exactly what its name suggests; fifty independent, sovereign states, united together.  It’s ambitious to imagine there exists a single narrative or illustration that comprehensively describes the USA, though many attempt exactly this.  To brand nearly 300 million people as ‘brash’ is inaccurate and hypocritical.  It’s a big place and its complicated.  You can’t look down your nose at any nation if you’re going to pigeon-hole its entire society that quickly. 

That said, anyone describing the American political discourse of recent years may well find their observations taking on the form of sweeping generalisations; and it’s easy to see why.  American politics has become incredibly polarised.  The rightwing Tea Party has not emerged within a robust and pluralistic discourse; one may have expected its rise to be a reaction to the occupation of the centre ground by the traditional parties, filling the gap for those disenfranchised members on the American Right. 

Instead the Tea Party and the New Right has emerged within an already heavily polarised landscape in which the two traditional parties have been putting ever greater distance between themselves.  I don’t wish to conflate the New Right and the Tea Party, but both represent strong right-wing views of one sort or another.  The Tea Party subscribe to the right-wing economic liberalism of minimal tax and regulation; the New Right have adopted an anti-immigration, anti-state, anti-Obama rhetoric coupled with Confederacy fetishism.

The Republican response to those stockpiling arms, quoting the second amendment and invoking the spirit of the American Civil War has been to vacillate between a shift to the centre-ground and a shift even further right to embrace the momentum of the Tea Party and other assorted groups.  Though the Democrats are invariably centrist, many on the right consider them socialist.  The result has been the entrenching of diametrically opposed positions, the adoption of  an adversarial stance between the left and right in American politics, forcing everyone into a with-us-or-against-us position.

No society is perfect and harmonious, the pluralist nature of democracy will always grant political breathing space to those with extreme or bigoted viewpoints.  That such groups are allowed political breathing space, such as the British National Party in the UK, is a testament not only to the strength of the political system but also the common sense of its constituent members; in Britain greater exposure has brought ever diminishing returns for the BNP.

That particular case aside there is always the danger that extreme viewpoints will give rise to extreme actions.  In particular the chances of this are increased when extreme ideas and beliefs become an accepted part of the mainstream, espoused openly by those infallible mediums that never mislead such as television, radio and the print media.  

Beyond the sarcasm the ethnic bigotry that has reared its ugly head in Europe on numerous occasions during the 19^th and 20^th centuries has always been accompanied by extremist messages from the mainstream; Jewish pogroms, ethnic cleansing in the Balkans and the obvious example of Nazi Germany all illustrate how reprehensible racial hatred can become a legitimate part of the common discourse.  This is not to suggest a strict causality; does the media lead the people, the people the media or does the political class lead both?  The relationship is symbiotic, all three influence each other.

It is therefore misleading to separate the shooting of Congresswoman Giffords from the extreme messages emanating from the American political mainstream.  There can be little doubt that the context in which political debate now takes place had no role to play in this recent tragedy.  To argue that the shooting was not politically motivated is also somewhat difficult; a politician has been attacked who happened to adopt policy positions (on abortion, healthcare and immigration) that are anathema to right-wing Americans; the very same people who choose to adopt Civil War rhetoric when discussing these subjects.  The branding of a democratically elected politician as an anti-American traitor and using the language of armed conflict to label them a legitimate target was never likely to encourage a sensible or measured response.

That no single politician or commentator can be blamed should be emphasised; those that wish to place responsibility at the door of Sarah Palin alone are missing the bigger picture.  Responsibility for the bellicose approach to politics in the United States appears largely Republican, it is their supporters and members placing their messages within the context of armed aggression.  However we should not forget the attitude adopted by many on the left to the presidency of George W Bush; his depiction as a simpleton and a buffoon, his supporters as intolerant Christian Fundamentalists and the personal attacks attached to these caricatures hardly engendered an atmosphere ripe for serious debate. 

The attacks on Obama’s place of birth and accusations that he is not a Christian (and therefore, un-American) may hint at a discreet racism in the mindset of some of his opponents. But these personal attacks, aimed at discrediting his character, fit within the long established narrative of using personal attacks to undermine politicians; from Obama, to Bush, to Clinton, to Biden.  Worryingly we have now entered a new phase that blends personal attacks with the language of armed conflict, placed within the context of a polarised political discourse that encourages disagreement and animosity.

The caustic rhetoric of recent months has tragically reached its dénouement in the shooting of Senator Gifford.  Although it is sadly no new phenomenon it has entered a more radicalised phase.  The question that should be asked is not who is to blame, but why and how the mainstream political discourse arrived at this juncture.  But the most pertinent question is how it can extricate itself as soon as possible.

The spurious relationship

Role models play an essential role in everyday life.  When looking for new ideas, inspiration or best practice individuals and organisations often turn to others to guide them, or at the very least, provide a counter-point to their own approach.  But which to choose?  In any given situation there are a plethora of different role models from which to choose and it is this decision that is often more instructive than the behaviour or idea that is borrowed.  

It’s fair to say that if I chose to take as my role model an arrogant individual that believed in the universality of their opinions, that the principal of an eye for an eye was a legitimate practice in the 21^st century, that poor people wouldn’t be so if they worked harder, that extreme wealth inequality is desirable, that providing healthcare to the most vulnerable is evil, that institutional racism and homophobia should be quietly ignored, most of my peers would be quite alarmed.  They would be especially concerned if the individual from whom I was seeking advice also had a higher than average likely hood of developing mental illness, was more likely to be obese and live a shorter life than the majority of people in the West, was more likely to commit a sexual offence or commit murder than everyone else around them .  If such a person did exist, they would be a truly terrible role model for us all.

Unfortunately in the United Kingdom this type of role model is viewed as the ideal candidate.  Successive governments and now the incumbent administration have turned to the United States for policy inspiration irrespective of the sad truth that for all its wealth the USA is ranked absolute or nearly bottom of every index of wellbeing, health and equality in the Western World.  That Scandinavia, France and Germany gravitate toward the top of all these indexes, that they sit on our doorstep as positive, functioning role models, is sadly inconsequential to the policy makers of the United Kingdom.  That the United States is a largely conservative nation in which its most progressive party sits to the right of centre, sadly failed to deter those on the mainstream of the British Left from imitating it as a legitimate route back to power.   

There are two truths in modern wealthy societies; the first that more equal societies (irrespective of overall wealth) rank much higher in terms of wellbeing (this includes mental health, stress, physical health, education rates, equality of opportunity) and are generally less consumed by major public health issues such as teenage pregnancy and alcoholism.

The second is that the law of diminishing returns applies to the growing wealth of Western economies such as the United States and the UK.  In fact, as overall wealth increases the benefits it delivers grow progressively smaller.  At the same time the number of major public health issues has continued to increase.  It does not take a genius to spot the problem; as the US and the UK have become wealthier the benefits have shrunk to the point that wealth is creating as many problems as it solves.  To exacerbate this problem further the UK and US have concentrated their growing wealth at the top of society, it has not ‘trickled down’ to the wider population.  The growth in inequality has sent both nations plunging to the bottom of almost every meaningful measure of a decent society available (most of this also applies to Australia, a fellow ‘Anglo-Saxon’ nation).
 

Three things to note; firstly there are two forces both working in tandem, both detrimental.  Secondly many of our European neighbours are wealthier and healthier than the UK, so the current situation is not an inevitable consequence of wealth.  Third; in the post war period the UK has followed where the US has led. 

There are a number of reasons why the UK and its policy makers have pursued this masochistic path, best summed up as the rather spurious ‘special relationship’.  This apparent bond is far greater than that which concerns foreign policy, it also encapsulates the feeling that the UK is a kindred spirit of the United States both culturally and socially.  There is the idea of the Protestant work ethic, a shared and fundamental element in the nature of both nations.  Then there is laughable propaganda that is the ‘American Dream’, the idea that in the US wealth, fame and a better life are just a bit of hard work away.  Why should we not seek to be more like the wonderful land of opportunity across the Atlantic?  Conspicuous consumption and better standards of living looked so much fun to those in austere 50s Britain; there was seemingly no time or desire to ask where it may take us.  That much of the American dream that we pursue, like Hollywood, is actually an empty illusion has been ignored.

The post-colonial hangover has also fuelled close ties with the US as those in power in Britain sought to keep up with their predecessors, no longer possessing their own strategic clout they simply hung onto the coat tails of the new world power regardless of where it took them.  This original ‘special relationship’ continues to direct foreign policy to this day as policy makers live out their West Wing fantasies of walking Washington’s corridors of power. 

The United States is a vast place full of neuroses and contradictory forces and to caricature it as an out and out basked case is a little glib.  It is in theory and reality fifty different states, not just one nation.  But the fundamental point remains; the United States provides a terrible role model.  

The central issue is that the very problems we attempt to tackle are the result of chasing the United States down the path of deindustrialisation, of retail and service led economic growth constructed on cheap consumer credit and vast, damaging, inequality.  To think that the solution is essentially more of the same is to ignore the root cause of the challenges we face; until the US is able to adopt a radically different approach to tackling its own problems the spurious relationship should be ignored at all costs.