Obama6 – Open Economic War

Obama6: Open Economic War – The Loss of a Uniting Metanarrative 06.02.13

by

Howard Adelman

I call it “war” deliberately. For Obama has come to recognize that the enemy has to and can be defeated; the Republican Party has intimidated its moderates too much so that they cannot be won over. The question is whether he recognizes that the Republicans can only be divided and turned against itself as part of victory strategy. The defeat may require dissemblance and continuation of the rhetoric of willingness to work with the other side. But the recognition has to be clear and unequivocal that the other side represents a dead end not simply as a negotiating partner but for America.

First it is important to establish why the economic republicans have adapted the same strategies as die hard ideological socialists did in the 1940s who backed themselves into a losing corner. The Republicans are the British socialists of the 1940s. The left was only saved by the abandonment of socialism and the adoption of social democracy as it went to bed with capitalism and with globalization. They had to adopt austerism to save themselves and Britain. The Americans do not have to become austerists. If they do it is only at their peril.

My last blog on Tony Judt included a brief summary of his depiction in The Memory Chalet of the austerity Britain introduced after WWII in order to allow Britain to pay the enormous debt the country had built up in fighting the war. Clement Atlee was the iconic expression of that austerity. As Michael Marrus noted in his excellent discussion of the book, Tony Judt was nostalgic for a period in which the total society, the whole community, shared in an austerian belief. That belief trumped individual desires. Even the Churchill household practiced austerity. Austerity united rather than divided the country for six years after the war. (See, for example, David Kyaston (2008) Austerity Britain: 1945-1951) Atlee had to adopt austerity and surrender British leadership to the Americans in order to bond with the British conservatives in a common metanarrative. That option is no longer possible for the Republican Party today. It was possible under George W. Bush. It is not possible under Barack Obama. The weak Obama supporters who merely concede that Obama is OK and still think that, though the republicans act crazy, they are still owed respect and recognition as His Presidency’s loyal opposition, simply refuse to recognize the reality of total war.

For the Department of History at the University of British Columbia, David James Gossen wrote “Winston Churchill’s The Second World War: Metanarrative, Markets, and the Politics of Memory” (Courtesy National Library of Canada) in 2001 as his a PhD thesis on Winston Churchill’s memoir on WWII amplified by the British press. The thesis focused on the intersection of memory and history and focused on how Churchill’s memoirs not only provided historians with insights into the character, motives and influence of political leaders, but Churchill’s narrative of legitimation also provided the political discourse of the immediate postwar period with a metanarrative that linked the recent past and the emerging professional historiography. Those memoires not only helped to shape how history was recollected but influenced history itself. It was a message of sacrifice in the present as a result of the war against past totalitarian regimes for a common noble cause, the greatest battle of all against the formidable forces of Eastern European communism. The whole community was enlisted in saving the nation through national unity and redemption by means of that sacrifice, a message that carried right though the entire Cold War and allowed Britain and America to be united as partners in a common battle as Britain was forced to surrender its position as lead partner to the Americans.

The proto-pop postwar artists in Britain were, on the other hand, not committed to sacrifice but preoccupied with the pleasures (and miseries) of everyday life. In this period of austerity, they were invading every home with popular culture and consumerism, initially through magazines and later through television that brought the brightness, variety and affluence of America into a colour-starved bleak and drab austere Britain. The seeds were being planted of a new consumer culture built on the American model through America’s fifth column of pop-artists and the new technologies of mass communication.

The undercutting of its own program of austerism was facilitated by the Labour Party in Britain that had given up any belief in common ownership and had capitulated to capitalism. The Labour Party was just that, no longer a socialist party. It was left with only ad hoc responses to crises and no coherent platform or even long range policies. The one uniting idea was to deal with the pre-eminent social question, the need to counteract two twin evils – poverty and unemployment – largely through palliative measures. Rather than confronting capitalism, the Labour Party believed that increasing the minimum wage would help capitalism since healthy workers would lose far fewer days to illness. Further, between the mechanism of regulating financial institutions and banks and ensuring that surplus wealth served the common good, a new society would arise from the wreckage of the old. Thus, the principle that the nation’s industry undermined by individual profiteering was to be re-organized on the basis of Common Ownership in Sydney Webb’s 1918 manifesto of social democracy, Labour and the New Social, was abandoned, but the rest of the manifesto which reinforced and allowed capitalism to survive and thrive was alive and not only kicking but had become he preeminent belief on the Left.

The shift from socialism to social democracy that had been emerging over the previous quarter century was consolidated in the postwar years and crystallized in the rise to supremacy of Keynesianism, in counter-cyclical principles of state debt, in the rhetoric of giving primacy of place to the reduction of unemployment while abandoning the goal of full employment as the most important domestic goal, and the construction of a safety net that would allow the working class to become a prosperous class of home owners and consumers. Along with those measures went efforts to counteract the barriers to trade that had grown up in the autarkic policies of the 1930s and to dredge the channels of exchange that had become choked and congested in that period. Progressive and mutual reduction of tariffs became the new mantra of international trade. Bretton Woods as developed by the leadership of the Canadian economist and future governor of the Bank of Canada, Louis Rasminsky, was endorsed.

For the new ruling Labour Party had crashed into the wall of the debt crisis. For with the defeat of Japan, America’s financing of Britain through Lend-Lease ended. Lend-Lease had allowed Britain to pay 60% of the cost of its trade deficit. How was Britain to pay for the imports of the new consumer society that was emerging when its manufacturing capacity had been so depleted that it could scarcely afford to produce quality products or pay for imported ones? Britain had to gradually surrender its regime of preferential tariffs, much to the benefit of freeing Canada from its mother’s apron strings, but with the loss of the privileges of the Sterling area that would gradually disintegrate under the weight and power of the rising American economic and military power and its new ideology.

Globalization was off and running with the foundations of the World Trade Organization and the International Monetary Fund. The institutions for international welfare capitalism were being put in place by the Americans and British Labour had to accede to them to survive. In return, Britain only had to repay the US $650 million for Lend-Lease and received an additional fifty year loan of $3.5billion at 2% over fifty years. America had saved Britain financially as well as militarily in exchange for sacrificing its socialist soul and buying into globalization. The myth of the market regulated by American dominated international institutions would now reign supreme. Britain also had to agree to allow the British pound to float and be freely converted into American dollars, the most important concession that necessitated the adoption of austerism as the new secular religion of Britain. The radical drop in buying power and the replacement of the British pound by the American dollar as the premier international currency and the loss of sterling as a world currency had to be paid for by the sacrifice of each and every British citizen. Keynes had to sell Britain to the Americans and to abandon the goal of full employment in order to make Keynsianism the foundation of the new international economic order. Efficiency not greater equality was to be the new Zeus ruling over all the other gods.

CF. Jim Tomlinson (1997) Democratic socialism and economic policy: The Atlee years 1945-1951 on which I have relied so much for a great part of the above analysis. See also his latest book co-authored with Carlo Morelli and Valerie Wright published last year: The Decline of Jute: Managing Industrial Decline. It offers an analysis of a single industry in Dundee (Winston Churchill had represented Dundee in Parliament) and tracks the economic, social and economic forces at work in the decades after WWII and the devastating impact of globalization that Atlee, to save Britain, had to buy into. The book provides a template for how manufacturing in the West, not just in Britain, was hollowed out and how it affected the new working middle class. Rather than offering a critique of the original sell-out and its subsequent effects as a bargain with the devil, the book is a positive credit card to those who managed the process so well by forcing the industry (both employers and workers) to consolidate and modernize with the goal of saving the community, at least up until the Thatcher years (1979-1990) and the policies the neo-cons of Britain put in place as doppelgangers to the American Reagonites when markets became totally unfettered, welfare capitalism was undermined on the alter of the new idol that had been elevated, “free markets”. The jute industry was allowed to totally evaporate in the 1990s and cooperative capitalism was sacrificed. But the real victims were the poor and the marginalized as the well-being of the working middle class also declined.

In the immediate Post War period, socialists and conservatives were joined in homage to that fundamental myth (in Britain, and I suggest, through variations in that metanarrative, in other western nation states as well) whatever divisions separated the contending right and left on specific disagreements over state policy. If that metanarrative helped link the past to the developing present and immediate future, the competitive Marxist metanarrative was much more prophetic in the long run. After all, in the metanarrative described above, it was the nation state that was redeemed while in the Marxist adumbration of the future, globalization increasingly subsumed the state beneath the constant and cascading need of capitalism to expand over the whole globe. In the left-right metanarrative of the west, it is not technology or communications that powers this redemption but self-sacrifice and service to the higher cause of the nation. Though the Canadians, Harold Innis and Marshall McLuhan, were initially outliers to this western myth that united left and right, both Innis and McLuhan shared with Marx the prescient vision that technology and communications served to pull everyone in the world into a common “civilization” as they moved from rural areas into mega-cities. The process entailed progressive political centralization. However, the message of Marxism had to be delivered by capitalism and not through a Leninist political totalitarian elite.

The result was the paradox that capitalism became the means to defeat communism to achieve the Marxist vision, but at the sacrifice of the supremacy of the nation to which so much blood, sweat and tears had been sacrificed for its redemption. As I will try to show in a subsequent blog, the economic and community conservatives are united in upholding the myth of the absolute supremacy of the nation-state. This obsolete metanarrative that unites the economic and the cultural conservatives is made possible by the economic conservatives allowing the worship of the supremacy of the market to slip into the status of a lesser god before the divine right of America. It is also made possible because the community conservatives need the state and raise it onto the highest pedestal to achieve their social agenda as they fight a rear-guard battle against creeping social globalization. So while the power of a metanarrative built around the nations unites the right, the power of the western metanarrative was lost as a uniting force between the left and the right before the pounding forces of capitalism. The metanarrative saved capitalism and that capitalism eventually consumed the metanarrative as a binding force.

Paul Krugman in an op-ed piece in The New York Times (“Looking for Mister Goodpin”, 31, 01, 2013) began with a discussion of prioritizing the unemployment issue versus reducing the debt by practicing austerity. He noted that the austerians (the economic conservatives in the Republican Party in the USA and more generally economic conservatives around the globe) advocated that austerity would “both avert crisis and lead to prosperity”. Krugman challenged them to offer just one case anywhere where austerity had worked. They have spent years, he asserted, looking for Mr. Goodpain with no luck.

In Krugman’s account, in 2010, Alan Reynolds of the Cato Institute and Jean-Claude Trichet of the European Central Bank in March of 2010 offered Ireland as an example of emerging success. At the time, Ireland’s unemployment rate was 13.3 percent. Last month, three years after the austerian pied piper played that tune, the unemployment rate was 14.6 percent. As a result of the policy of austerity, Britain is entering its triple-dip recession even though Britain at the beginning of this application of the austerian dogma had no need to practice austerity; it could still borrow at historically very low interest rates. Latvia, another country offered up on the altar to the god of austerity, has a current unemployment rate of 14%. In contrast to these states, Iceland, which was possibly one of the worst basket cases as a result of its overwhelming banking crisis, ignored the austerians and took another route and has today almost fully recovered. As Krugman concludes, “the doctrine that has dominated elite economic discourse for the past three years is wrong on all fronts. Not only have we been ruled by fear of nonexistent threats, we’ve been promised rewards that haven’t arrived and never will.”

Richard Longworth sent me a summary of Paul Krugman’s recent address to The Chicago Council on Global Affairs attended by 2000 people. It had the same message. So does Krugman’s current book End This Depression Now! Austerity efforts combined with other bad polices, such as the premature expansion of risk taking and the continuing lax regulations especially with respect to the financial sector, need to be introduced to avoid the even more dire political consequences that face the world if the policies of the economic conservatives are not abandoned and strenuous efforts to reduce unemployment are not urgently adopted to get unemployment in the USA down to 6%.

The issue is not that a fundamental division over economic policy and how to manage the economy divides Republicans and the Democrats, for that is a given now. The issue is that the two parties no longer share a larger metanarrative with the end of the Cold War. Bill Clinton succeeded as a moderate Republican president in democratic clothes, and, as I will try to show in a subsequent blog, as a hip Black leader, while George W. Bush dragged the country into the doldrums by trying to substitute Islamo-fascists for the old communist bugbear to keep the dead but not yet buried metanarrative alive. By combining those efforts with a neo-imperialist expansionist policy while pushing the payment for his military policies onto future generations, George W. Bush hawked the future of America to pawnbrokers, but principally the rising new economic power, China, just as Britain had to fight WWII by going into deep debt to America.

The first decade of the twenty-first century witnessed the emerging positions of two implacable parties without an overarching metanarrative to unite them. Just as the pro- and anti-slavery, states rights and the increasing power of a centralized state, divided America into two solitudes in the 1860s, now differences over economic doctrine reified into two warring camps but without a common myth of a more fundamental union. Anyone who expected cooperation and compromise between these warring factions had to be naive. The principles of social democracy, of counter-cyclical debt, of attacking unemployment without aspiring to full employment, of regulating and enhancing capitalism rather than replacing it, of a globalised and regulated international economic order, had already proven itself over and over, but those forces had to continually fight the myths of the absolute supremacy of the market place, the absolute supremacy of a military culture represented by the gun lobby, the absolute freedom of the individual who was independent of the need of the state to borrow and tax to build the necessary infrastructure. And they were myths with no basis in fact or reality and immune to falsification through analysis.

This was no longer merely a battle for voters between two rival sets of options but had morphed into an existential battle between the belief system that had been set in place in 1945 that brought America into its position as not simply the leader of the free world but as the leader of the whole world. Those who now held obsolete and dysfunctional myths were in the same position as those who believed in states’ rights and slavery in the 1850s. George W. Bush had the chance to do for the American right what Clement Atlee did on the British left in the 1950s. Atlee sold out the ideology of socialism on the best terms possible and forged a common metanarrative with the Tories that allowed the sell out of his party to social democracy and the supremacy of capitalism to take place. It permitted the sell out of Britain to the supremacy of the United States and the future of globalization.

George W. Bush did not do it. And Barack Obama, who built a reputation as a mediator and conciliator, is cast in the roll of having to defeat the dragon from without that George W. Bush failed to defeat from within. Romney offered a last hurrah for those who would economically unite the economic neo-cons and the community conservatives. When he claimed that Obama “takes his political inspiration from Europe, and from the socialist democrats in Europe,” he was not only correct but signalled Obama’s “otherness” and suggested that Obama’s liberalism is in conflict with a uniquely American strain of individualism. “The Republicans continue to insist on the ‘Atlas Shrugged’ fantasy of the solitary entrepreneurial genius who creates jobs and wealth with no assistance at all from government or society.”

Tomorrow: How the economic neo-cons stay potent as spoilers and dangerous through their alliance with the community conservatives.

[tags economic conservatives, Obama, Presdident, USA, politics]

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